<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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,
301 Commerce Street, Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 332-6020
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
---- ----
PART I. 1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II. 5. Market for Registrant's Common Equity and
Related Stockholder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
8. Financial Statements and Supplementary Data 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 38
PART III. 10. Directors and Executive Officers of the Registrant 38
11. Executive Compensation 40
12. Security Ownership of Certain Beneficial Owners and
Management 45
13. Certain Relationships and Related Transactions 46
PART IV. 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 48
2
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PART I.
ITEM 1. BUSINESS
OVERVIEW
AmeriTruck Distribution Corp. ("AmeriTruck" or the "Company") is one of
the largest specialized trucking companies in the United States. The Company's
services include time-sensitive delivery (for example, mail, inventory for
customers with just-in-time programs), special handling (for example, medical
lab supplies, furniture), specific temperature control (for example, processed
foods, laboratory supplies), dedicated fleets and logistics services.
AmeriTruck was formed in August 1995 to effect the combination of six regional
trucking lines in November 1995 (the "Founding Companies"): 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 related company ("Scales") and CBS Express,
Inc. ("CBS").
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."
In February 1996, the Company, through CMS (which subsequently changed its
corporate name to AmeriTruck Refrigerated Transport, Inc.), purchased certain
assets of Freymiller Trucking Inc. ("the Freymiller Assets"), from the
bankruptcy estate of Freymiller Trucking Inc., a refrigerated carrier.
Additionally, in July 1996, AmeriTruck completed its purchase of KTL, Inc.
("KTL"), a carrier of refrigerated and non-refrigerated products operating
primarily in Florida, New Jersey and Indiana.
The Company's principal subsidiaries currently are W&L, TBI, Bangerter,
CMS, Scales, ART and KTL (the "Operating Companies"). Unless the context
requires otherwise, references in this Annual Report to "AmeriTruck" or the
"Company" are to AmeriTruck Distribution Corp. and its consolidated subsidiaries
after giving effect to the acquisitions and restructuring described above.
STRATEGY
The Company's strategy is to earn superior returns on invested capital by
being the leader in selected segments of specialized transportation and
logistics. The carriers acquired by AmeriTruck provide custom services at higher
than average pricing, which has historically enabled the small carriers to earn
superior profits even though they have not achieved economies of scale. Because
more than 70 percent of aggregate specialized freight revenue in the U.S. is
still generated by thousands of small carriers, competitive pressure from
deregulation and consolidation have only marginally effected the profits of
AmeriTruck's small carriers. However, Ameritruck believes that customers will
eventually be able to choose specialized carriers that offer the market both
customized service and pricing that reflects the advantages of economies of
scale.
It is AmeriTruck's short-term objective to be the first company to provide
this "best of both worlds" option in the temperature control, new furniture and
medical supplies specialized trucking segments. The Company believes that
future acquisitions are vital steps toward achieving this objective in
temperature control. Through W&L and CMS, respectively, the Company believes
that it is well positioned in the new furniture and medical supplies segment.
The Company is actively pursuing acquisitions in the temperature controlled
segment that would establish AmeriTruck as the leader in that segment. By
managing the Company's operations on a decentralized basis, AmeriTruck intends
to preserve the entrepreneurial drive and customer and driver relationships of
the regional Operating Companies, while benefiting from the critical mass of a
larger, national company.
3
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Specialized Service in Defensible Market Groups
By providing specialized services for customers with complex distribution
requirements, the Company reduces its exposure to the intense price competition
that is common in the general freight segment of the trucking industry.
Moreover, because often the Company's operations are integrated with its
customers' inventory and distribution systems, AmeriTruck's services often
cannot be easily or quickly replaced. For example, the Company's dedicated
services (i.e., dedicated, specialized equipment and employees) enable customers
to rely on AmeriTruck and eliminate or reduce their in-house distribution
operations and trucking fleets. In such cases, customers are often heavily
dependent on the Company. The Company also provides just-in-time distribution
services that enable customers to eliminate or minimize inventory. Timing
errors can force production shutdowns or otherwise be extremely costly for
customers with operations that depend on just-in-time deliveries, so service
reliability is critical.
Decentralized Operations Management
The Company manages its operations and marketing on a decentralized basis.
Management believes this strategy enables AmeriTruck to maintain the high-
quality service and close customer relationships that are more typical of
smaller carriers. Management also believes this approach is critical to
maintaining low driver turnover rates, which contribute to its ability to
provide high-quality service and to minimize costs.
Administrative/Purchasing Savings and Freight Network Coordination
The Company currently commands negotiating strength greater than the
Operating Companies have recognized independently in such areas as equipment and
parts, fuel, insurance and financing. Additionally, the Company is also
beginning to benefit from cross-marketing and backhaul opportunities among the
Operating Companies' respective geographic regions. The Company believes that
freight network coordination will enable it to improve equipment utilization,
decrease the frequency of brokered loads, and create a network that better
allows the Company to consistently haul higher-rate loads with a lower
percentage of empty miles and reduced downtime between loads.
Opportunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into the
specialized trucking segments. Through acquisitions, the Company can capture
additional market share and increase its driver base without adopting a growth
strategy based on widespread rate discounting and driver recruitment, which the
Company believes would be less successful. The trucking industry is extremely
fragmented, with over 40,000 carriers. The Company believes that most of these
companies are undercapitalized, regional operators that lack both the balanced
freight networks required to maintain high utilization and the regional density
needed to fully satisfy customer equipment requirements. The Company believes
its large size relative to many other potential acquirers could afford it
greater access to acquisition financing sources such as banks and capital
markets.
MARKET GROUPS
The Company's market focus is in specialized freight services. W&L
specializes in outbound services to furniture manufacturers located in the North
Carolina and southern Virginia markets and to shippers of refrigerated products
for backhaul to North Carolina. TBI operates as a specialized, regional
truckload carrier for various shippers throughout the United States, primarily
for the United States Postal Service and dedicated logistics services for
packaged food processors. Bangerter operates as a specialized, regional
truckload carrier serving the grocery store and processed food industries in the
West. CMS provides dedicated transportation and logistics services to customers
with highly individualized freight requirements, primarily refrigerated fleet
services for customers in the hospital and medical laboratory industries.
Scales specializes in hauling insulation products and providing just-in-time
services for the retail, container and packaging industries. ART has been
operating with the Freymiller Assets to supplement the Company's existing
temperature-controlled operations. KTL specializes in the truckload
transportation of refrigerated commodities and less-than-truckload shipments
requiring expedited, timed-delivery services.
4
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For each of the Operating Companies, the functions of marketing, customer
service and fleet management are managed on a decentralized basis with overall
network design and coordination provided by the Company.
Customer Service and Marketing
The Operating Companies have approximately 140 employees that work in sales
and marketing. At each of the Operating Companies, the President's primary
responsibility is marketing and maintaining close relationships with major
customers. In addition, each terminal manager functions as both a marketing
executive and an operations executive.
The customer service representatives spend most of their time on the phone
with customers discussing equipment requirements in various regions. In
addition, they coordinate with fleet managers to match available units and
customer demand. In many instances, both the customer service representative
and the driver have worked with the specific customer for several years, which
creates a strong relationship between the Operating Company and the customer.
The Operating Companies will also cross-market the services offered by the other
Operating Companies, with the intent of creating substantial freight networking
advantages and improving the Operating Companies operating efficiencies as a
whole.
Fleet Management
The primary purpose of fleet management is to promote a productive
relationship between a carrier and its drivers and to optimize the service
performance and productivity of its tractor and trailer fleet. Each of the
Operating Company's fleet managers works with between 40 and 80 drivers and
tractors and is responsible for overseeing and improving driver turnover, driver
productivity, tractor utilization, safety, fuel efficiency, service reliability
and performance and compliance with tractor preventive maintenance requirements.
The Company believes that the relatively small size and personalized management
philosophy at each of the Operating Companies significantly improves the fleet
managers' ability to communicate with and motivate drivers.
The fleet manager's primary role is to communicate with drivers on the road
concerning work assignments, customer needs and driver needs. Fleet managers
also review performance reports for the fleet as a whole and each driver and
tractor within the fleet, reward good drivers, counsel underperforming drivers
and terminate chronically underperforming drivers.
The fleet managers for each of the Operating Companies provide assistance
to drivers from other Operating Companies operating in their geographic region.
For example, a TBI driver operating in North Carolina will be able to get help
from W&L. The Company believes that this will improve overall operating
efficiencies and driver morale. In addition, through its management information
systems the Company intends to monitor the relative performance of each fleet
manager, with respect to both his or her own drivers and with respect to drivers
from other Operating Companies.
Mobile Communications
In October 1996, AmeriTruck entered into an agreement with HighwayMaster to
purchase 2,000 mobile communication units, 800 of which will be installed by
May, 1997. HighwayMaster's mobile units have voice technology. Drivers can make
calls directly from their truck without having to stop the truck, which saves
costs. Besides voice, the intelligence in the HighwayMaster mobile unit coupled
with the intelligent network complex will allow the Company to provide better
service to its customers and better manage its fleet. The Company will be able
to download routes and dispatches into the mobile unit and the mobile unit will
automatically tell the Company when the truck is late or out of route. This
technology will allow the Company to cut communications expense, stop needless
messaging that the computer has to process and will let the Company deal with
important loads so it can prevent service failures.
CUSTOMERS
For the year ended December 31, 1996, the Company's largest customers were
Smith's Food & Drug, Curtin Matheson Scientific, now a part of Fisher
Scientific, and the U.S. Postal Service, which accounted for approximately 7
percent, 6 percent and 5 percent of its combined revenues, respectively. No
other customers accounted for more than 3 percent of the Company's combined
revenues for 1996.
5
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SEASONALITY
The Company's operations are subject to seasonal trends common to the
trucking industry. Results of operations are generally lower in the winter
months due to reduced shipments and higher operating costs.
RISK MANAGEMENT AND INSURANCE
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation and cargo loss and damage. The Operating
Companies currently maintain insurance against these risks and are subject to
liability as a self-insurer to the extent of the deductible under each policy.
The Company maintains liability insurance for bodily injury and property damage
of at least $25 million per incident, with a deductible for bodily injury and
property damage of $300,000 per incident. The current deductible for workers'
compensation in states where most of the Company's drivers are domiciled ranges
from $250,000 to $350,000 per claim. The Company is self-insured as to damage
or loss to the property and equipment they own or lease. In addition, the
Company maintains cargo loss and damage insurance of between $100,000 and $1
million per incident with a deductible ranging from $5,000 to $15,000 per
incident.
PERSONNEL AND SAFETY
At December 31, 1996 the Company had approximately 2,200 employees of whom
1,366 were drivers. In addition, the Company contracted with 573 owner
operators. As with most trucking operations, the Company experiences turnover
of its company-employed drivers and contract operators and, as a result, is
continuously seeking qualified individuals to handle the transportation of
shipments. Safety and dependability of all drivers are of great importance to
the Company's operations. Driver applicants are required to have a combination
of training and experience, and to pass a drug test. The Company's employees
are not represented by unions.
For the year ended December 31, 1996 the Operating Companies combined
reported 0.5 accidents per million miles. An accident, as defined by the U.S.
Department of Transportation ("DOT"), involves death, personal injury with
treatment sought immediately, away from the accident, or a disabled vehicle
requiring towing. The industry average, as reported by the American Trucking
Association, for DOT reportable accidents in 1994 (the most recent year for
which such information is publicly available) was 0.9 accidents per million
miles. In addition to following DOT regulations requiring random drug testing
and post-accident drug testing, the Operating Companies rigorously enforce their
accident and incident reporting and follow-up standards.
The Company employs safety specialists and maintains safety programs
designed to meet its specific needs. In addition, the Company employs
specialists to perform compliance checks and conduct safety tests throughout its
operations. The Company conducts a number of safety programs designed to promote
compliance with rules and regulations, and to reduce accidents and cargo claims.
These programs include an incentive pay program for accident and claim-free
driving, driver safety meetings, distribution of safety bulletins to drivers and
participation in national safety associations.
FUEL AVAILABILITY AND COST
Over half of the Company's fuel purchases occur at commercial fuel
stations with the remainder being obtained at Company facilities where fuel is
stored in bulk. The Company expects that the volumes of fuel purchased by the
Operating Companies, in the aggregate, will create substantially more
negotiating leverage with fuel vendors than the Operating Companies had
individually prior to their acquisition by AmeriTruck. Furthermore, the Company
expects that fuel efficiency will improve as older equipment is replaced with
tractors with more sophisticated engines. The Company believes that a
significant portion of the increase in fuel cost or fuel taxes generally may be
recoverable from its customers in the form of higher rates, although a time lag
usually occurs in passing these costs along.
6
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COMPETITION
The Company competes with many other truckload and less-than-truckload
carriers of various sizes, including divisions or subsidiaries of larger
companies, and to a lesser extent railroads, on the basis of price, service and
the ability to supply capacity to customers in a timely manner. The competition
has created downward pressure on the trucking industry's pricing structure.
Several trucking companies with which AmeriTruck competes have greater financial
resources and more revenue equipment than does the Company.
REGULATION
Interstate and intrastate motor carriage has been substantially deregulated
as a result of the enactment of the Motor Carrier Act of 1980, the Trucking
Industry Regulatory Reform Act of 1994, and the ICC Termination Act of 1995.
Carriers can now readily enter the trucking industry and rates and services are
largely free from regulatory controls. However, interstate for-hire carriers do
remain subject to certain regulatory controls imposed by the DOT. The trucking
industry remains subject to regulation by the states with respect to certain
safety and insurance requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances and
wastes. In order to comply with such regulations and to be consistent with the
Company's environmental policy, normal operating procedures include practices to
protect the environment. Amounts expended related to such practices are
contained in the normal day-to-day costs of the Operating Companies' business
operations.
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's operations are also subject to laws and regulations governing
air emissions, including the 1990 amendments to the Clean Air Act. The Company
expects that it, together with the rest of the trucking industry, will in the
future become subject to stricter air emission standards, including requirements
that manufacturers produce cleaner-running tractors and that fleet operators
perform more rigorous inspection and maintenance procedures.
7
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ITEM 2. PROPERTIES
FACILITIES
The Company's facilities consist principally of terminals and shops. Some
of these are full service terminals, which typically include administrative
facilities and customer service personnel and complete facilities to perform
both routine and heavy maintenance and to service all equipment based there.
Certain terminals have facilities in which freight is consolidated. Other
terminals are limited service terminals, which may include some customer service
personnel but do not have complete maintenance facilities. The Company also has
a number of drop yards, which are used primarily for the short-term storage of
trailers. The Company maintains its principal executive and administrative
offices in Fort Worth, Texas.
Set forth below is certain information relating to the terminals and office
facilities of the Operating Companies at December 31, 1996:
<TABLE>
<CAPTION>
Administrative
Operating Company Location Owned/Leased Acreage Terminal Maintenance Offices Trailer Yard
- ----------------- -------- ------------ ------- -------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W&L Conover, NC Leased 55 X X X X
Thomasville, NC Owned 3.1 X X
TBI Kansas City, KS Owned 4 X X X
Grand Island, NE Owned 4.3 X X X
Fargo, ND Owned 4.5 X X X
Sioux Falls, SD Owned 4 X X X X
Bangerter Phoenix, AZ Owned 9.5 X X X
Fontana, CA Leased 2.8 X
Layton, UT Owned 6.4 X X X X
CMS Yorba Linda, CA * * X
Denver, CO * * X
Homestead, FL Leased 1 X X
Homestead, FL * * X X
Jacksonville, FL * * X X
Orlando, FL * * X
Atlanta, GA Leased 1 X
Kennesaw, GA * * X
Ft. Wentworth, GA * * X
Peachtree City, GA Leased 1 X
Chicago, IL * * X
Evansville, In * * X X
Florence, KY * * X
Jefferson, LA * * X
New Orleans, LA * * X X
Agawam, MA * * X
Wilmington, MA * * X
Jessup, MD * * X
Plymouth, MI * * X X
Morris Plains, NJ * * X
Eden, NY Leased 1 X
Delco, NC Leased 1 X
Broadview Hts., OH * * X
Delaware, OH * * X X
Charleston, SC Leased 1 X
Charleston, SC * * X X
Houston, TX * * X
Scales Mobile, AL Leased 4 X X
Tampa, FL Leased 2.5 X X X
Athens, GA Leased 3 X X
Gainesville, GA Leased 5 X X X
Homer, GA Leased 2 X X
Tifton, GA Leased 5 X X X
Valdosta, GA Leased 3 X X X
Winston-Salem, NC Leased 4 X X
ART Liberal, KS Leased 1 X
Oklahoma City, OK Owned 1 X
Oklahoma City, OK Leased 6 X X X
KTL Largo, FL Leased 10 X X X X
Highland, IN Leased 2 X X
Cherry Hill, NJ Leased 5 X X
</TABLE>
* Facility located on customer's property
8
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REVENUE EQUIPMENT AND MAINTENANCE
The Company's equipment fleet at December 31, 1996 was comprised of the
following:
<TABLE>
<S> <C>
Line-haul tractors:
Tractors........................................ 1,797
Straight-line trucks............................ 30
Local tractors.................................... 112
-----
Total tractors.................................. 1,939
=====
Trailers:
Temperature-controlled.......................... 1,791
Dry van and other............................... 1,552
-----
Total trailers................................ 3,343
=====
</TABLE>
During 1997, the Company intends to replace approximately 300 existing
tractors with new tractors. As the Company replaces older equipment and trades
tractors and trailers out of the fleet before they could become severe
maintenance problems, the Company believes that downtime as well as operating
and maintenance expenses should be reduced. The Company also believes that it
can purchase tires and parts on more favorable terms, thereby reducing
maintenance costs. Late model trucks and components in general are more
reliable and have better warranties. In addition, the Company believes that it
can negotiate better warranty terms because of the negotiating strength of the
combined Operating Companies. Finally, the Company intends to purchase more
tractors with standard specifications for components such as engines, axles and
brakes, thereby reducing the complexity of maintenance parts inventory.
The Operating Companies have comprehensive preventive maintenance programs
for their tractors and trailers to minimize equipment downtime and prolong
equipment life. These programs include regular safety checks when a tractor
returns to the terminal, regular preventive maintenance including oil and filter
changes, lubrication, cooling system and tire checks every 15,000 to 20,000
miles, and more extensive maintenance procedures at 120,000 miles.
Repairs and maintenance are performed regularly at the Company's 8 full-
service maintenance facilities and at outside shops. The Company has
approximately 150 maintenance personnel. Less than one-third of the Company's
maintenance costs were incurred at outside shops during the year ended December
31, 1996. The Company has begun to share certain maintenance facilities and
personnel among the Operating Companies. Combined with the advantages of a
newer fleet, the Company expects this will result in a decrease in the
percentage of maintenance costs incurred at outside shops.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matters were submitted to a vote of
security holders.
9
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PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is not publicly traded.
In connection with the acquisition of KTL, Inc. in the third quarter of
1996, as part of the purchase price the Company issued to Ronald N. Damico
225,000 restricted shares of the Company's Class A Common Stock, valued at
$900,000. The issuance of these shares was exempt under Section 4(2) of the
Securities Act of 1933, as amended, as a transaction not involving any public
offering.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for W&L and TBI on a
combined basis as the "Predecessor Company" for the entire 1996 and prior
periods. The results for Bangerter are included since August 1, 1995, the
results for the CMS distribution business and Scales (including the CBS Express
business) are included since November 1, 1995, and the results for ART, as it
relates to the Freymiller Assets, and KTL are included since February 5, 1996
and July 1, 1996, respectively.
The following data should be read in conjunction with Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Item 8 - "Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996* 1995* 1994* 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues(1).................................. $224,257 $102,846 $80,087 $72,783 $69,516
Operating expenses
Salaries, wages, and fringe benefits..... 71,996 32,463 23,639 21,590 20,414
Purchased transportation cost............. 57,413 26,564 23,504 21,236 23,330
Depreciation and amortization(2).......... 15,341 7,882 6,471 5,816 4,501
Claims and insurance...................... 8,806 4,471 3,169 3,000 3,115
Subsidiary closing(1)..................... -- -- -- -- 2,024
Other operating expenses.................. 55,882 21,181 14,656 14,168 14,383
-------- -------- ------- ------- -------
Total operating expenses............... 209,438 92,561 71,439 65,810 67,767
Operating income(1)(2)....................... 14,819 10,285 8,648 6,973 1,749
Interest expense, net of interest income..... (16,242) (4,634) (3,233) (3,486) (3,075)
Other, net................................... (469) 26 16 64 44
-------- -------- ------- ------- -------
Income (loss) before income taxes
and extraordinary items..................... (1,892) 5,677 5,431 3,551 (1,282)
Income tax expense........................... 340 2,496 2,317 1,249 108
-------- -------- ------- ------- -------
Income (loss) before extraordinary items..... (2,232) 3,181 3,114 2,302 (1,390)
Extraordinary items(3)....................... (230) (23) -- -- --
-------- -------- ------- ------- -------
Net income (loss)(1)......................... $ (2,462) $ 3,158 $ 3,114 $ 2,302 $(1,390)
======== ======== ======= ======= =======
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.................... $ 734 $ 15,286 $ 1,617 $ 1,629 $ 1,619
Total assets................................. 192,648 140,535 54,245 52,974 47,638
Long-term debt (including current portion)... 169,326 118,335 29,449 33,936 31,320
Redeemable preferred stock(4)................ -- -- 2,000 11,322 11,056
Total stockholders' equity (deficiency)(4)... (3,824) (1,817) 10,488 (2,409) (3,690)
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2 of the
Financial Statements.
10
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C>
CERTAIN OTHER DATA:
EBITDA (1)(5)........................... $ 30,160 $18,167 $15,136 $12,853 $ 6,294
EBITDAR(6).............................. 35,135 19,885 16,063 13,772 8,773
Depreciation and amortization(2)........ 15,341 7,882 6,471 5,816 4,501
Rents................................... 4,975 1,718 927 919 2,479
Capital expenditures, net of cash
proceeds from dispositions............. 10,893 11,879 1,619 194 (55)
Interest expense, net................... 16,242 4,634 3,233 3,486 3,075
Ratio of EBITDA to interest expense(5).. 1.86x 3.92x 4.68x 3.69x 2.05x
Ratio of earnings to fixed charges(7)... -- 1.99x 2.04x 1.67x --
CERTAIN OPERATING DATA:
Operating ratio(8)...................... 93.4% 90.0% 89.2% 90.4% 92.5%
Total miles (in thousands)(9)........... 188,782 81,683 66,028 60,915 55,961
Revenue per total mile(10).............. $ 1.180 $ 1.249 $ 1.213 $ 1.195 $ 1.186
Daily revenue per tractor(11)........... $ 542 $ 518 $ 567 $ 547 $ 493
At period end, number of
Line haul tractors(12)................ 1,827 1,126 556 520 528
Trailers.............................. 3,343 2,344 1,084 979 901
Employees and owner operators
Drivers(13)......................... 1,366 938 349 337 314
Non-drivers......................... 838 584 287 249 231
Owner operators..................... 573 374 252 236 251
</TABLE>
(dollars in thousands)
(1) During May 1992, CAS Transportation, Inc. ("CAS"), a subsidiary of W&L,
ceased operations. The closing of CAS cost W&L $924. These costs included
salaries and fringe benefits, operating and general supplies, operating
taxes, insurance and claims, property and equipment rents and other
miscellaneous expenses. In conjunction with the closing of CAS, W&L also
incurred a loss of $1,100 due to certain fixed asset transactions.
Excluding the CAS operations, the Company had revenues, operating income,
net income (loss) and EBITDA of $66,407, $5,015, $1,833 and $9,492 in 1992.
(2) During 1994, W&L changed its estimate of the useful lives and salvage
values of certain revenue equipment. This change had the effect of
decreasing depreciation and increasing operating income for the year ended
December 31, 1994 by $155. During 1995, TBI changed its estimate of the
useful lives and salvage values of certain revenue equipment. This change
had the effect of decreasing depreciation and increasing operating income
for the year ended December 31, 1995 by $360.
(3) The extraordinary items in 1996 and 1995 consists of an extraordinary loss
on early retirement of debt, net of taxes.
(4) During 1994, all shares of W&L's outstanding redeemable preferred stock
were converted into shares of W&L's common stock. During 1995, all
remaining shares of TBI's outstanding redeemable preferred stock were
redeemed for approximately $2 million.
(5) EBITDA represents earnings (loss) before interest expense, net, income
taxes, depreciation and amortization. The Company believes EBITDA provides
useful information regarding the Company's ability to service its debt;
however, EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles, and should not be considered as a
substitute for net income as an indicator of the Company's operating
performance or for cash flow as a measure of liquidity. For purposes of
calculating the ratio of EBITDA to interest, interest represents total
interest expense, net of interest income.
(6) EBITDAR represents earnings before interest expense, net, income taxes,
depreciation, amortization and rents.
(7) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest. The Company's earnings
were insufficient to cover fixed charges by $1,892 and $1,282 for the years
ended December 31, 1996 and 1992 respectively.
(8) Operating ratio represents the Company's combined operating expenses, less
those of CAS (see footnote (1) above), divided by the Company's combined
revenues less CAS revenues.
(9) Excludes CAS miles (see footnote (1) above).
(10) Freight revenues (excluding CAS revenues), which excludes brokerage and
other revenues, divided by total miles (excluding CAS miles).
(11) Daily revenue per tractor represents freight revenue divided by number of
working days and further divided by number of line haul tractors at period
end. Calculating daily revenue per tractor based on the average number of
line haul tractors during each monthly period would produce more accurate
daily revenue per tractor information. However, this information was not
available for all Operating Companies. CAS revenues and line haul tractors
have been excluded (See footnote (1) above). In June 1995 W&L purchased 35
line haul tractors that were not fully placed in service until the middle
of the third quarter; therefore, for comparability purposes these tractors
were included in the daily revenue per tractor calculations on a pro rata
basis by number of days outstanding in 1995. Results for Bangerter, the
CMS distribution business, Scales (including the CBS Express business),
ART, as it relates to the Freymiller Assets, and KTL were also included on
a pro rata basis by number of days outstanding in 1995 and 1996,
respectively.
(12) The number of line haul tractors includes owned, leased and independent
contractor units.
(13) Represents line haul drivers only. Local drivers of 138, 69, 55, 53, and
58 have been excluded from this count for the years ended December 31,
1996, 1995, 1994, 1993 and 1992, respectively, which is consistent with the
presentation of line haul tractors.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results for the year ended December 31, 1995 for the Company include W&L
and TBI results on a combined basis as the "Predecessor Company" for the entire
1995 period. The results for Bangerter since August 1, 1995 and the results for
the CMS distribution business and Scales (including the CBS Express business)
are included since November 1, 1995. Results for the year ended December 31,
1996 include the results of W&L, TBI, Bangerter, the CMS distribution business
and Scales (including the CBS Express business) for the entire 1996 period and
of ART, as it relates to the Freymiller Assets, and KTL since February 5, 1996
and July 1, 1996, respectively. Bangerter, CMS, Scales, ART and KTL are
collectively referred to below as the "Acquired Companies."
The following analysis should be read in conjunction with the consolidated
financial statements included in Item 8 - "Financial Statements and
Supplementary Data."
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net Income
For the year ended December 31,1996, the Company had a net loss of $2.5
million compared with net income of $3.2 million for 1995. The additional
operating income from the Acquired Companies in 1996 was offset by additional
interest costs. The net loss in 1996 includes an extraordinary item, loss on
early retirement of debt of $230,000, net of taxes of $154,000. These early
retirements related to the use of a portion of the proceeds from the Company's
offering in 1995 of its 12 1/4 % Senior Subordinated Notes due 2005 (the
"Subordinated Notes").
During the year ended December 31, 1996, operating profit margins were
negatively impacted by escalating fuel costs, the assimilation of significant
assets from the Freymiller bankruptcy estate, the merger of the operations of
CBS into Scales, and the cost of developing a corporate staff. The Company has
implemented a fuel surcharge to its customers to help combat this surge in fuel
costs. The merger of CBS into Scales caused the Company to lose some qualified
drivers which in turn resulted in decreased equipment utilization. In addition,
one subsidiary lost drivers as a result of eliminating driver expense allowances
and changing their pay structure. The Company has intensified its efforts in
the driver recruitment and training areas and has begun to correct this problem.
Revenues
In 1996, the Company had revenues of $224.3 million compared with $102.8
million in 1995, an improvement of 118 percent. This increase reflects $116.6
million of additional revenues from the Acquired Companies when compared with
1995. The Predecessor Company had increased revenues of $4.9 million primarily
attributable to increased volume during 1996.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1996 to 1995.
<TABLE>
<CAPTION>
VARIANCE
INCREASE
1996 1995 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 32.1% 31.6% 0.5%
Purchased transportation 25.6 25.8 (0.2)
Operating supplies and expenses 18.3 14.4 3.9
Depreciation and amortization of capital leases 6.3 7.2 (0.9)
Claims and insurance 3.9 4.3 (0.4)
Operating taxes and licenses 2.2 3.0 (0.8)
General supplies and expenses 5.0 3.6 1.4
Amortization of intangibles 0.5 0.5 -
Gain on disposal of property and equipment (0.5) (0.4) (0.1)
---- ---- ----
Operating Ratio 93.4% 90.0% 3.4%
==== ==== ====
</TABLE>
12
<PAGE>
Salaries, wages and fringe benefits for the year ended December 31, 1996
increased $39.5 million, or 122 percent, due to the addition of $37.9 million in
salaries, wages and fringe benefits attributable to the Acquired Companies when
compared with 1995. In addition, the increase is attributable to corporate
salaries, some of which should generate future cost savings for the Company as a
whole due to more competitive prices obtained in such areas as equipment and
parts, fuel, insurance and financing. The slight increase in salaries, wages and
fringe benefits as a percentage of revenue is attributable primarily to the
Acquired Companies, because only 19 percent of their average combined driver
base consisted of owner operators as of December 31, 1996, whose costs are
reflected in purchased transportation. In contrast, 43 percent of the
Predecessor Company's driver base consisted of owner operators. The Predecessor
Company also had increases in wages and salaries for drivers and terminal
personnel due to the increased mileage during 1996 and pay increases.
Purchased transportation costs were up $30.8 million in 1996, but decreased
slightly on a percentage of revenue basis. The Acquired Companies added $28.4
million to these costs compared with 1995, but their driver base, which consists
of just 19 percent owner operators, helped to lower purchased transportation
costs as a percentage of revenue. This decrease in percentage of revenue was
partially offset by a higher percentage of equipment held under operating leases
by the Acquired Companies which resulted in increased equipment rents. The
Predecessor Company showed an increase of $2.4 million in purchased
transportation costs in 1996 due to expanded freight opportunities and its
continued use of owner operator drivers.
Operating supplies and expenses for the Company were $26.2 million higher
for the year ended December 31, 1996. Of this increase, $24.0 million is
attributable to the Acquired Companies when compared with 1995. The Predecessor
Company also added $2.2 million to this increase primarily due to increased fuel
costs. The 3.9 percentage point increase in operating supplies as a percent of
revenue is mainly attributable to the Acquired Companies, whose driver base
consists of an average of 81 percent of Company drivers as of December 31, 1996,
contributing to higher fuel and maintenance costs for Company owned equipment.
The Company's fuel costs would have been lower by approximately $1.8 million had
the average fuel price for the second, third and fourth quarters of 1996
remained consistent with the first quarter of 1996. A portion of this increase
was recovered in revenue as fuel surcharges to customers.
Depreciation and amortization of capital leases were up $6.8 million, but
decreased as a percentage of revenue in 1996 due to the acquisition of used
assets from Freymiller as well as a higher percentage of the Acquired Companies'
equipment being held under operating leases. During 1995, the Company changed
its estimate of the useful lives and salvage values of certain revenue
equipment. This change had the effect of increasing operating income for the
year ended December 31, 1995, by approximately $360,000.
Claims and insurance expenses were up $4.3 million for 1996 compared with
1995, which is due primarily to costs attributable to the Acquired Companies.
However, these costs decreased on a percentage of revenue basis.
General supplies and expenses increased by $7.5 million for 1996 compared
with 1995. The general supplies and expenses of the Acquired Companies accounted
for the majority of this increase as the Predecessor Company had only a slight
increase in this category. The largest components of these expenses of the
Acquired Companies were communications and utilities, building and office
equipment rents, agent commissions and office expenses.
Interest expense increased $11.7 million for the year ended December 31,
1996 over 1995. Interest on the Subordinated Notes, which were issued in
November 1995 in conjunction with the 1995 acquisitions, and the NationsBank and
the Volvo credit facilities, which were used to fund the acquisition of the
Freymiller Assets and KTL, were the primary factors for this change. See
discussion of the NationsBank and Volvo credit facilities in the Liquidity and
Capital Resources section.
The change in the effective tax rate for the year ended December 31, 1996
compared with 1995 is primarily due to the driver's expense allowances paid by
ART and KTL, a portion of which are nondeductible expenses.
13
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994
Net Income
For the year ended December 31, 1995, the Company had net income of $3.2
million compared with net income of $3.1 million for 1994. The additional
revenue and operating income in 1995 from the Acquired Companies was
substantially offset by additional interest costs incurred on the Subordinated
Notes.
Revenues
In 1995, the Company had revenues of $102.8 million compared with $80.1
million in 1994, an improvement of 28.4 percent. This increase reflects $17.5
million of revenues from the Acquired Companies. The Predecessor Company had
increases of 11.1 percent in total miles and 4.6 percent in revenues per total
mile. Expanded freight opportunities at W&L added $5.5 million to revenues,
primarily a result of the purchase of Dietz Motor Lines, Inc. in May 1995.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1995 to 1994.
<TABLE>
<CAPTION>
VARIANCE
INCREASE
1995 1994 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 31.6% 29.5% 2.1%
Purchased transportation 25.8 29.4 (3.6)
Operating supplies and expenses 14.4 12.5 1.9
Depreciation and amortization of capital leases 7.2 7.3 (0.1)
Claims and insurance 4.3 4.0 0.3
Operating taxes and licenses 3.0 3.0 -
General supplies and expenses 3.6 3.1 0.5
Amortization of intangibles 0.5 0.8 (0.3)
Gain on disposal of property and equipment (0.4) (0.4) -
---- ---- ----
Operating Ratio 90.0% 89.2% 0.8%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the year ended December 31, 1995
increased $8.8 million or 37.3 percent compared with 1994 due to the addition of
$6.7 million in salaries, wages and fringe benefits attributable to the Acquired
Companies. The 2.1 percentage point increase in salaries, wages and fringe
benefits as a percentage of revenues is attributable primarily to the Acquired
Companies because only 11 percent of their average combined driver base
consisted of owner operators, whose costs are reflected in purchased
transportation. In contrast, at December 31, 1995, 43 percent of the
Predecessor Company driver base consisted of owner operators. Of the remaining
difference, $1.9 million in additional salaries and wages were incurred by W&L.
This was attributable to an increase in drivers for 1995 due to expanded freight
opportunities.
Purchased transportation costs were up $3.1 million, but decreased on a
percentage of revenue basis by 3.6 percentage points. The Acquired Companies
added $2.1 million to these costs, but their driver base, which consists of just
11 percent owner operators, helped to lower purchased transportation costs on a
percentage of revenue basis. W&L showed an increase of $1.3 million in
purchased transportation costs due to expanded freight opportunities and its
continued use of owner operator drivers. TBI partially offset these increases
with a small decline in its purchased transportation costs.
Operating supplies and expenses for the Company were $4.7 million higher
for the year ended December 31, 1995 over 1994. Of this increase, $3.9 million
is attributable to the Acquired Companies. TBI also added $610,000 to this
increase due to increased maintenance and fuel costs. The 1.9 percentage point
increase as a percentage of revenues is mainly attributable to the Acquired
Companies, whose driver base consists of 89 percent of Company employees which
contributes to more Company owned equipment and higher maintenance and fuel
costs.
14
<PAGE>
Interest expense increased $1.6 million for the year ended December 31,
1995 over the same period in 1994. Interest on the Subordinated Notes issued in
November 1995 is the primary factor for this change.
CONTINGENCIES
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 its subsidiaries 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 year ended December 31, 1996
was $519,000 compared with net cash provided by operating activities of $12.1
million in 1995 and $12.4 million in 1994. The decrease of $12.6 million was
primarily attributable to a $11.3 million increase in accounts and notes
receivable during 1996, of which $7.0 million resulted from the purchase of the
Freymiller Assets, and a decrease in net income of $5.6 million. These decreases
were partially offset by an increase in depreciation and amortization of capital
leases of $6.8 million. The increase in depreciation and amortization of
capital leases of $1.6 million in 1995 when compared with 1994 was offset by a
decrease in other, net operating activities which resulted from the release of
$1.6 million of restricted cash in 1994 held as collateral for a long-term debt
agreement at TBI.
NationsBank Credit Facility
In February 1996, the Company and its subsidiaries entered into a Loan
Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which
NationsBank has provided a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit and
general corporate purposes. Pursuant to the NationsBank Credit Facility, as
amended, NationsBank has provided a $30 million revolving credit facility, with
a $7 million sublimit for letters of credit, maturing on February 1, 1998, at
which time the revolving credit facility will convert into a term loan maturing
on February 1, 2003. This facility is also subject to a borrowing base
consisting of eligible receivables and eligible revenue equipment. Currently,
the Company's borrowing base exceeds $30 million. Borrowings under the
NationsBank Credit Facility bear interest at a per annum rate equal to either
NationsBank's base rate or the rate of interest offered by NationsBank in the
interbank eurodollar market plus an additional margin ranging from 1.5 percent
to 2.0 percent based on the Senior Funded Debt Ratio of the Company. The
Company also pays a letter of credit issuance fee and a quarterly unused
facility fee. Borrowings under the NationsBank Credit Facility were $23.5
million at December 31, 1996 and were primarily used for the purchase of the
Freymiller Assets and the KTL acquisition. Available borrowings were $2.4
million at December 31, 1996 as there were $4.1 million in letters of credit
outstanding.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all personal property of the Company and its
subsidiaries and are guaranteed in full by each of the Operating Companies. For
purposes of the Indenture, such borrowings under the NationsBank Credit Facility
constitute Senior Indebtedness of the Company and Guarantor Senior Indebtedness
of the Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the incurrence of
indebtedness and a requirement that the Company maintain a specified Senior
Funded Debt Ratio and Fixed Charge Coverage Ratio. At December 31, 1996, the
Company was not in compliance with the Senior Funded Debt Ratio covenant or the
Fixed Charge Coverage Ratio covenant.
The Company has received a waiver of such noncompliance from NationsBank
expiring on April 30, 1997 (the "NationsBank Waiver"). During this period the
Company has agreed that it may not make additional borrowings at Eurodollar
rates.
The Company has received a financing commitment (the "Financing
Commitment") pursuant to which the lender (the "New Lender") has committed,
subject to the terms and conditions of the Financing Commitment, to provide a
$30 million credit facility (the "New Credit Facility"). Borrowings under the
New Credit Facility could be used to refinance in full indebtedness under the
NationsBank Credit Facility, to provide working capital and for letters of
credit and general corporate purposes. Pursuant to the New Credit Facility, the
New Lender would provide a $30 million revolving credit facility. Borrowings
under the New Credit Facility would be secured by substantially all unencumbered
personal property of the Company and its subsidiaries, and, for purposes of the
Indenture, would constitute Senior Indebtedness of the Company and would
constitute Guarantor Senior Indebtedness of the Operating Companies.
Under the terms of the Financing Commitment, the New Credit Facility would
contain a number of affirmative and negative covenants, including a limitation
on the incurrence of indebtedness and a requirement that the Company maintain
specified debt coverage ratios. The New Credit Facility is subject to
satisfaction of the terms and conditions set forth in the Financing Commitment.
See "Forward Looking Statements and Risk Factors--Substantial Leverage,
Liquidity, Capital Resources and New Credit Facility."
15
<PAGE>
Volvo Credit Facilities
In February 1996, the Company and its subsidiaries 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 December 31, 1996, 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 is being provided by Volvo in connection
with the Operating Companies' agreement to purchase 400 new trucks manufactured
by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997.
The borrowings or leases 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 December 31, 1996, 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 $4.2 million at December 31,
1996; however, available financing under this facility is less than $7 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.
The Operating Companies began taking delivery of the Volvo trucks in early
May 1996, with total deliveries for 1996 of 259 trucks. Another 75 trucks which
were scheduled for delivery by the end of 1996, were not delivered until January
and February 1997. The remaining Volvo trucks are also scheduled for delivery
during 1997.
Subordinated Notes
In November 1995, AmeriTruck completed a private placement of $100 million
of 12 1/4% Senior Subordinated Notes due 2005 (the "Series A Notes"). The Series
A Notes were exchanged for publicly registered 12 1/4% Senior Subordinated Notes
due 2005, Series B (the "Subordinated Notes") in February 1996. The Subordinated
Notes mature on November 15, 2005, and are unsecured subordinated obligations of
the Company. These notes bear interest at the rate of 12.25 percent per annum
from November 15, 1995, payable semiannually on May 15 and November 15 of each
year, commencing on May 15, 1996. The Subordinated Notes are subject to optional
redemption on the terms set forth in the Indenture. As of December 31, 1996, the
Company had applied the net proceeds of the Series A Notes primarily to finance
the 1995 acquisitions and prepay debt and capitalized leases.
Capital Expenditures and Resources
The Company had capital expenditures, net of cash proceeds from
dispositions, of $10.9 million in 1996, $11.9 million in 1995 and $1.6 million
in 1994, excluding the 1995 and 1996 acquisitions and the purchase of the
Freymiller Assets. These amounts also do not include capital expenditures
financed through capital leases and other debt which amounted to approximately
$13.1 million in 1996 and 1995 and $7.7 million in 1994. The decrease in capital
expenditures compared with 1995 was due to a $5.5 million increase in proceeds
from sale of property and equipment as well as financing the majority of the new
Volvo trucks acquired during 1996 through operating leases. Capital expenditures
for 1996, including equipment financed through operating leases, were primarily
for the purchase of approximately 280 new tractors and 465 new trailers in order
to maintain
16
<PAGE>
an average fleet age of approximately 2 years for tractors and 4 years for
trailers. Approximately 90 percent of these new tractors and trailers replaced
older equipment. Capital expenditures for 1995 increased when compared with 1994
primarily due to approximately $6 million at the Acquired Companies to purchase
equipment previously held under operating leases as well as approximately $6
million for the modernization of W&L's fleet to reduce the average age of owned
equipment.
During 1997, the Company plans to purchase approximately 450 new trucks,
including the remaining Volvo trucks. Approximately 300 of these new tractors
will replace existing tractors. These equipment purchases and commitments will
likely be financed using a combination of sources including, but not limited to,
cash from operations, leases, debt issuances and other miscellaneous sources.
Each financing decision will be based upon the most appropriate alternative
available.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") of Largo, Florida from Ronald N. Damico
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. As part of the transaction, Mr.
Damico and KTL entered into an employment agreement, under which Mr. Damico
became employed as KTL's President and Chief Executive Officer. The term of the
employment agreement expires on November 15, 1998. In addition, KTL has agreed
to lease from Mr. Damico and his spouse certain real estate at Clearwater,
Florida on a month-to-month basis. Further, KTL has agreed to lease the real
estate at Largo, Florida used by KTL as its corporate headquarters from a
company owned by Mr. Damico for an 18-month term, at which time KTL has agreed
to purchase the property for $2.4 million less the total amount of
environmental-related costs incurred subsequent to August 16, 1996.
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.
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").
17
<PAGE>
In May 1995, W&L acquired Dietz Motor Lines, Inc. for $2.0 million in cash,
which includes payment for non-compete agreements of $400,000 as well as an
amount for certain eligible accounts receivable. This acquisition has been
accounted for using the purchase method of accounting. Accordingly, the purchase
price was allocated to the assets acquired and the liabilities assumed based on
their estimated fair values at the date of acquisition. The results of
operations of the acquired company are included in the financial statements from
the date of acquisition.
Opportunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into other
specialized trucking segments. Through acquisitions, the Company believes it can
capture additional market share and increase its driver base without adopting a
growth strategy based on widespread rate discounting and driver recruitment,
which the Company believes would be less successful. The Company believes its
large size relative to many other potential acquirers could afford it greater
access to acquisition financing sources such as banks and capital markets.
AmeriTruck has entered into a revolving credit facility with Volvo Truck Finance
North America, Inc. and has received the Financing Commitment for the New Credit
Facility. See "NationsBank Credit Facility". The Volvo facility and, if
obtained, the New Credit Facility, will give AmeriTruck the ability to pursue
acquisitions that the Company could not otherwise fund through cash provided by
operations. However, the proposed size and terms of the New Credit Facility
could impair the ability of the Company to complete the proposed Tran-Star, Inc.
("Tran-Star"), acquisition discussed below and future acquisitions, and the
Company is actively seeking to increase the size of the New Credit Facility or
obtain a larger revolving credit facility from another financing source. In
addition to revolving credit facilities, the Company may finance its
acquisitions through equity issuances, seller financing and other debt
financings.
The Company has signed a Letter of Intent to acquire the capital stock of
Tran-Star, which is owned by Allways Services, Inc. Tran-Star is a carrier of
refrigerated and non-refrigerated products. If this acquisition is completed,
the Company intends to coordinate Tran-Star's activities with those of the other
Operating Companies. Tran-Star, headquartered in Waupaca, Wisconsin, operates
primarily in between the upper midwestern U.S. and the northeast and southeast,
with terminals at Etters and Scranton, Pennsylvania.
This acquisition is subject to a number of conditions, including the
availability of financing and the completion of definitive documentation, and no
assurances can be made that the Company will complete the proposed acquisition.
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.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
From time to time, the Company issues statements in public filings or press
releases, or officers of the Company make public oral statements with respect to
the Company, that may be considered forward-looking 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-K 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, 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: inflation and
fuel costs; substantial leverage and liquidity and capital resources; limited
combined operating history; cyclicality and other economic factors; future
acquisitions; competition; availability of drivers; regulation; claims exposure;
and dependence on key personnel. Each of these risk factors is discussed in more
detail immediately hereafter.
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. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Year Ended December 31, 1996 Compared with the Year
Ended December 31, 1995 - Expenses."
The industry as a whole has seen dramatic increases in fuel prices.
According to a Department of Energy survey, reported by the American Trucking
Association, the average price of diesel fuel peaked during the month of October
at 18.1 cents above the December 31, 1995 price. According to the survey, the
average price of diesel fuel for the fourth quarter of 1996 was approximately
15.4 cents above the first quarter average price. The Company has seen its fuel
prices increase at a rate consistent with the national average.
18
<PAGE>
SUBSTANTIAL LEVERAGE, LIQUIDITY, CAPITAL RESOURCES AND NEW CREDIT FACILITY
As a result of the 1995 acquisitions and the offering of the Subordinated
Notes, the Company has substantial indebtedness in relation to its total
capitalization. This substantial indebtedness poses substantial risks to holders
of the Subordinated Notes, including the possibility that the Company might not
generate sufficient cash flow to pay the principal and interest on the
Subordinated Notes. Such indebtedness may also adversely affect the Company's
ability to finance its future operations and capital needs, may limit its
ability to pursue other business opportunities and may make its results of
operations more susceptible to adverse economic and industry conditions. In
addition, the Company will need to continue to purchase additional revenue
equipment, and, if the Company is unable to enter into operating or capital
leases or obtain borrowed funds in the future, it may have to limit its growth
or operate its revenue equipment for longer periods. If the Company is unable to
generate sufficient cash flow from operations in the future to service its debt
and make necessary capital expenditures, the Company may be required to
refinance all or a portion of its existing debt, including the Subordinated
Notes, to sell assets or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any such sale of
assets or additional financing could be achieved.
Obtaining the New Credit Facility is subject to satisfaction of the terms
and conditions set forth in the Financing Commitment. While management believes
that the Company will obtain the New Credit Facility, in the event the New
Credit Facility is not in place by April 30, 1997, the NationsBank Waiver will
expire and the Company will be in default under the NationsBank Credit Facility.
LIMITED COMBINED OPERATING HISTORY
The Company was founded in August 1995 and conducted no operations prior to
consummation of the 1995 acquisitions. Prior to the 1995 acquisitions, the
Founding Companies operated independently and there can be no assurance that
the Company will be able to successfully integrate these businesses on an
economic basis or that any anticipated economies of scale or other cost savings
will be realized. While the Company's senior management is highly experienced
in the trucking industry and senior management includes the chief executive
officers of the Operating Companies, the Company's management group has been
assembled only recently and there can be no assurance that the management group
will be able to oversee the combined entity and effectively implement the
Company's operating or growth strategies.
During 1996, the assimilation of significant assets from the Freymiller
bankruptcy estate, the merger of the operations of CBS into Scales, and the cost
of developing a corporate staff negatively impacted the Company. The merger of
CBS into Scales caused the Company to lose some qualified drivers which in turn
resulted in decreased equipment utilization. In addition, one subsidiary lost
drivers as a result of eliminating driver expense allowances and changing their
pay structure. The Company is focusing on efforts to correct the negative impact
from the assimilation of the Freymiller Assets and has intensified its efforts
in the driver recruitment and training areas, which has begun to correct that
problem. However, no assurances can be made that this will not continue to have
a negative impact in the future.
CYCLICALITY AND OTHER ECONOMIC FACTORS
Recessionary business cycles or downturns in customers' business cycles
could have a material adverse effect on the operating results of the Company.
Although management believes that because of the nature of its customer base,
the Company is less sensitive to cyclical pressures than many other large
trucking firms, a significant portion of the Company's customers are in cyclical
industries, such as furniture manufacturing. Fuel prices, fuel taxes, tolls,
insurance costs, interest rates, license and registration fees and fluctuations
in the resale value of revenue equipment are economic factors over which the
Company has little or no control. Significant increases or rapid fluctuations in
fuel prices or fuel taxes, interest rates or increases in license and
registration fees, tolls or insurance costs, to the extent not offset by
increases in freight rates, would reduce the Company's profitability. In
addition, freight shipments, operating cost and earnings are also adversely
affected by inclement weather conditions. Fluctuations in the resale value of
tractors and trailers are also important factors that the Company cannot
control. A decline in the resale value of the Company's tractors and trailers
could cause the Company to retain some of its equipment longer than desired,
resulting in increased operating expenses for fuel, maintenance and repairs, or
to realize losses on sale.
FUTURE ACQUISITIONS
The Company believes that future acquisitions, particularly in the
temperature control segment of the trucking industry, are a key part of its
objective of offering customers both customized service and pricing that
reflects the advantages of economies of scale. No assurances can be made that
the Company will be able to find suitable acquisition candidates or complete
future acquisitions or, if completed, that any such acquisitions will help the
Company achieve its objectives.
COMPETITION
The trucking industry is highly competitive. The Operating Companies
compete with many other truck carriers of varying sizes and, to a lesser extent,
with railroads. This competition has created downward pressure on the trucking
industry's pricing structure. Some of the Company's larger competitors in the
refrigerated business include Prime, FFE
19
<PAGE>
Transportation Service and KLLM Inc. Merchants Home Delivery Service is one of
the largest competitors in the furniture business. A number of trucking
companies with which the Operating Companies compete have greater financial
resources or own more revenue equipment than does the Company.
AVAILABILITY OF DRIVERS
The difficulty in attracting qualified drivers (including owner-operators)
is a wide-spread problem in the trucking industry and is an important factor in
the Company's ability to provide a high level of service to its customers and to
effectively utilize the Company's equipment. Problems with driver retention had
a negative impact on the Company's performance in 1996. Competition for drivers
is intense and, in part because their driver standards are high, the Operating
Companies have sometimes experienced difficulty attracting and retaining
qualified drivers. Although in the past the Operating Companies have experienced
lower turnover rates than the trucking industry as a whole, there can be no
assurance that the Company's business will not be affected by a shortage of
qualified drivers in the future.
REGULATION
Interstate and Intrastate motor carriage has been substantially deregulated
as a result of the enactment of the Motor Carrier Act of 1980, the Trucking
Industry Regulatory Reform Act of 1994, and the ICC Termination Act of 1995.
Carriers can now readily enter the trucking industry and rates and services are
largely free of regulatory controls. However, interstate for-hire carriers do
remain subject to certain regulatory controls imposed by DOT. In addition, the
Operating Companies' operations are subject to various environmental laws and
regulations, including laws and regulations dealing with underground fuel
storage tanks and ownership of property than may contain hazardous substances
and laws which subject the Company to stricter air emission standards
regulation, including requirements that manufacturers produce cleaner-running
tractors and that fleet operators perform more rigorous inspection and
maintenance procedures.
CLAIMS EXPOSURE
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation and cargo loss and damage. The Operating
Companies currently maintain insurance against these risks and are subject to
liability as a self-insurer to the extent of the deductible under each policy.
The Company maintains liability insurance for bodily injury and property damage
of at least $25 million per incident, with a deductible for bodily injury and
property damage of $300,000 per incident. The current deductible for workers'
compensation in states where most of the Company's drivers are domiciled ranges
from $250,000 to $350,000 per claim. The Company is self-insured as to damage or
loss to the property and equipment they own or lease. In addition, the Company
maintains cargo loss and damage insurance of between $100,000 and $1 million per
incident with a deductible ranging from $5,000 to $15,000 per incident. To the
extent that the Company or any of the Operating Companies were to experience a
material increase in the frequency or severity of accidents or workers'
compensation claims, or unfavorable developments on existing claims, the Company
might have to collateralize its self-insurance amounts and the Company's
operating results, financial position and liquidity could be materially
adversely affected. In addition, significant increases in insurance costs, to
the extent not offset by increases in freight rates, would reduce the Company's
future profitability.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified management personnel. There
is competition for qualified personnel in the trucking industry. There is no
assurance that the Company will be able to retain its existing senior management
or to attract additional qualified management personnel. The Company does not
maintain key man life insurance on any of its senior management team but the
Company has entered into employment agreements with each member of its senior
management team.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996* 1995* 1994*
--------- --------- --------
<S> <C> <C> <C>
Operating revenue $224,257 $102,846 $80,087
-------- -------- -------
Operating expenses:
Salaries, wages and fringe benefits 71,996 32,463 23,639
Purchased transportation 57,413 26,564 23,504
Operating supplies and expenses 40,946 14,786 10,038
Depreciation and amortization of 14,211 7,407 5,815
capital leases
Claims and insurance 8,806 4,471 3,169
Operating taxes and licenses 4,988 3,145 2,436
General supplies and expenses 11,215 3,675 2,465
Amortization of intangibles 1,130 475 656
Gain on disposal of property and
equipment (1,267) (425) (283)
-------- -------- -------
Total operating expenses 209,438 92,561 71,439
-------- -------- -------
Operating income 14,819 10,285 8,648
Interest expense 16,677 4,993 3,422
Other income (expense), net (34) 385 205
-------- -------- -------
Income (loss) before income taxes and
extraordinary items (1,892) 5,677 5,431
Income tax expense 340 2,496 2,317
-------- -------- -------
Income (loss) before extraordinary items (2,232) 3,181 3,114
Extraordinary items, loss on early
retirement of debt, net of taxes
of $154 and $16, respectively (230) (23) -
-------- -------- -------
Net income (loss) $ (2,462) $ 3,158 $ 3,114
======== ======== =======
</TABLE>
*Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
21
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 734 $ 15,286
Accounts and notes receivable, net 29,001 12,269
Prepaid expenses 7,735 4,057
Repair parts and supplies 1,092 844
Deferred income taxes 1,467 960
Other current assets 1,388 941
-------- --------
Total current assets 41,417 34,357
Property and equipment, net 103,801 67,191
Goodwill, net 39,399 32,705
Notes receivable 975 -
Other assets 7,056 6,282
-------- --------
Total assets $192,648 $140,535
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 11,988 $ 10,566
Accounts payable and accrued expenses 13,557 12,071
Claims and insurance accruals 1,684 1,852
Other current liabilities 593 499
-------- --------
Total current liabilities 27,822 24,988
Long-term debt 157,338 107,769
Deferred income taxes 8,571 7,773
Other liabilities 2,741 1,822
-------- --------
Total liabilities 196,472 142,352
-------- --------
Commitments and contingencies (Note 10)
Stockholders' equity (deficiency):
Common stock; $.01 par value, 3,503
shares and 3,278 shares
issued and outstanding,
respectively 35 33
Additional paid-in capital 898 -
Loans to stockholders (1,880) (1,435)
Accumulated deficit (2,877) (415)
-------- --------
Total stockholders' equity
(deficiency) (3,824) (1,817)
-------- --------
Total liabilities and
stockholders' equity
(deficiency) $192,648 $140,535
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (2,462) $ 3,158 $ 3,114
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization of
capital leases 14,211 7,407 5,815
Amortization of intangibles 1,130 475 656
Gain on disposal of property and
equipment (1,267) (425) (283)
Provision for deferred income taxes 291 1,074 933
Provision for doubtful accounts 234 224 114
Extraordinary items, loss on early
retirement of debt, net of taxes 230 23 -
Other, net (125) 897 2,517
Changes in current assets and
liabilities, net of effects from
acquisitions:
Accounts and notes receivable, net (11,620) (325) (2,237)
Prepaid expenses (1,438) (1,199) 4
Repair parts and supplies (9) 22 (147)
Other current assets (234) 1,652 857
Accounts payable and accrued
expenses (541) (791) 144
Claims and insurance accruals 1,064 406 433
Other current liabilities 17 (527) 500
-------- -------- --------
Net cash provided by (used in)
operating activities (519) 12,071 12,420
-------- -------- --------
INVESTING ACTIVITIES
Purchase of Freymiller Assets, net of
liabilities assumed (18,821) - -
Payments for acquisitions, net of cash
acquired (9,342) (18,258) -
Purchase of property and equipment (19,948) (15,399) (2,632)
Proceeds from sale of property and
equipment 9,055 3,520 1,013
Other, net 1,007 (557) (91)
-------- -------- --------
Net cash used in investing
activities (38,049) (30,694) (1,710)
-------- -------- --------
FINANCING ACTIVITIES
Revolving line of credit 32,881 - -
Proceeds from issuance of long-term
debt 17,236 103,427 9,954
Repayment of long-term debt (25,075) (49,011) (19,461)
Distribution to controlling
stockholders - (17,361) -
Redemption of preferred stock - (2,000) (1,000)
Other, net (1,026) (2,763) (215)
-------- -------- --------
Net cash provided by (used in)
financing activities 24,016 32,292 (10,722)
-------- -------- --------
Net increase (decrease) in cash (14,552) 13,669 (12)
Cash and cash equivalents, beginning of
period 15,286 1,617 1,629
-------- -------- --------
Cash and cash equivalents, end of period $ 734 $ 15,286 $ 1,617
======== ======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 16,592 $ 4,315 $ 3,000
Income taxes (net of refunds) 135 2,812 1,247
Property and equipment financed
through capital lease
obligations and other debt 13,107 13,063 7,726
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
COMMON ADDITIONAL TOTAL STOCK-
SHARES COMMON PAID-IN LOAN TO ACCUMULATED HOLDERS' EQUITY
OUTSTANDING STOCK CAPITAL STOCKHOLDERS DEFICIT (DEFICIENCY)
----------- -------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 11 $ 361 $ 953 $ - (3,723) $ (2,409)
Dividends on preferred
stock - - - - (376) (376)
Conversion of no par value
common stock to $.01 par
value common stock - (361) 361 - - -
Issuance of 490 shares of
preferred stock
as dividends - - - - (490) (490)
Conversion of 8,812 shares
of preferred stock into
common stock 9 - 8,812 - - 8,812
Issuance of common stock 9 - 161 - - 161
Contributed capital - - 1,676 - - 1,676
Net income (loss) - - - - 3,114 3,114
----- ----- ------- ------- ------- --------
Balance, December 31, 1994 29 - 11,963 - (1,475) 10,488
Dividends on preferred
stock - - - - (187) (187)
Loans to stockholders - - - (283) - (283)
Issuance of common stock 2 - 1,152 (1,152) - -
Distribution to
controlling stockholders - - (15,583) - (1,778) (17,361)
Issuance of common stock to
controlling stockholders 2,173 22 (22) - - -
Issuance of common stock for
acquired companies and
minority stockholders 1,074 11 2,490 - (133) 2,368
Net income (loss) - - - - 3,158 3,158
----- ----- ------- ------- ------- --------
Balance, December 31, 1995 3,278 33 - (1,435) (415) (1,817)
Loans to stockholders - - - (445) - (445)
Issuance of common stock
for acquired company 225 2 898 - - 900
Net income (loss) - - - - (2,462) (2,462)
----- ----- ------- ------- ------- --------
Balance, December 31, 1996 3,503 $ 35 $ 898 $(1,880) $(2,877) $ (3,824)
===== ===== ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
AmeriTruck Distribution Corp. and its wholly-owned subsidiaries generally
operate in specialized areas of the transportation services industry
including time-sensitive delivery, special handling, unconventional pick-up
and delivery times, in-house logistic services, dedicated fleets and
temperature control.
Principles of Consolidation
The combined financial statements include the accounts of AmeriTruck
Distribution Corp. and its wholly-owned subsidiaries ("AmeriTruck" or the
"Company"). AmeriTruck was formed in August 1995 to effect the combination
of six regional trucking lines 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 related company ("Scales")
and CBS 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 (the "Controlling
Stockholders"). In addition, the Controlling Stockholders controlled
approximately 67 percent of the outstanding common stock of AmeriTruck
after the consummation of these acquisitions. Therefore, the Controlling
Stockholders on a combined basis have been treated as the acquirer for
purposes of accounting for these acquisitions. With respect to the
acquisitions of W&L and TBI, their acquisitions are accounted for as a
purchase by the Controlling Stockholders of the stock of the remaining
stockholders of W&L and TBI (the "Minority Stockholders"), who owned
approximately 13 percent of W&L and TBI on a combined basis.
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 accompanying AmeriTruck consolidated statements of operations and cash
flows for the years ended December 31, 1996, 1995 and 1994 reflect W&L and
TBI combined historical results and cash flows for such periods, Bangerter
results and cash flows since August 1, 1995, the results of the CMS
distribution business and Scales (including the CBS Express business) since
November 1, 1995, the results of ART as it relates to the purchase of
assets from Freymiller Trucking, Inc. ("the Freymiller Assets"), since
February 5, 1996, and the results of KTL, Inc. ("KTL") since July 1, 1996.
The accompanying AmeriTruck consolidated balance sheet at December 31, 1995
includes W&L, TBI, Bangerter, the CMS distribution business and Scales
(including the CBS Express business) assets and liabilities as adjusted by
purchase accounting. In addition, the consolidated balance sheet at
December 31, 1996 includes KTL assets and liabilities as adjusted by
purchase accounting and the Freymiller Assets.
The Company's principal subsidiaries currently are W&L, TBI, Bangerter,
CMS, Scales, ART and KTL (the "Operating Companies"). All significant
intercompany accounts and transactions have been eliminated.
Separate financial statements of the Company's subsidiaries are not
included because (a) all of the Company's direct and indirect subsidiaries
have guaranteed the Company's obligations under the Indenture, dated as of
November 15, 1995 (the "Indenture"), among the Company, such subsidiaries
(in such capacity, the "Guarantors"), and The Bank of New York, as Trustee,
(b) the Guarantors have fully and unconditionally guaranteed the 12 1/4%
Senior Subordinated Notes due 2005 ("Subordinated Notes") issued under the
Indenture on a joint and several basis, (c) the Company is a
25
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
holding company with no independent assets or operations other than its
investments in the Guarantors and (d) the separate financial statements and
other disclosures concerning the Guarantors are not presented because
management has determined that they would not be material.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the periods presented.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in demand deposits and
short-term investments with original maturities of 90 days or less. Cash
equivalents are stated at cost, which approximates market value.
Prepaid Expenses
Prepaid expenses primarily consist of tires in service. The cost of new and
replacement tires is capitalized and included in prepaid expenses when
placed in service, and then amortized on a straight-line basis over their
estimated useful lives. Estimated useful lives range from 10 to 24 months.
Repair Parts and Supplies
Repair parts and supplies consists of fuel, tires until placed in service,
tubes, replacement parts and supplies and are valued at the lower of
average cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of 3 to 10 years
for revenue and service equipment, 10 to 30 years for structures, 4 to 10
years for leasehold improvements, and 2 to 10 years for furniture and
office equipment. Major additions and betterments are capitalized, while
maintenance and repairs that do not improve or extend the life of the asset
are charged to expense as incurred. Gains and losses on dispositions are
included in operating income.
Goodwill and Other Intangibles
Goodwill represents the excess of the acquisition costs over the fair value
of net identifiable assets of businesses acquired and is amortized on a
straight-line basis over 40 years. Accumulated amortization of goodwill at
December 31, 1996 and 1995 was $2,129,000 and $1,333,000, respectively.
Other intangibles, which primarily consist of financing and other costs
associated with business acquisitions, are included in other assets and are
amortized over the life of the financing agreement.
The realizability of goodwill and other intangibles is evaluated
periodically as events or circumstances indicate a possible inability to
recover their carrying amount. Such evaluation is based on various
analyses, including cash flow and profitability projections that
incorporate, as applicable, the impact on existing company operations. The
analyses necessarily involve significant management judgment to evaluate
the capacity of an acquired operation to perform within projections.
Management believes that no significant impairment of goodwill and other
intangible assets has occurred.
26
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Claims and Insurance Accruals
Claims accruals represent reserves for estimated costs to repair and
replace damaged goods resulting from cargo claims. Insurance accruals
reflect the estimated cost of claims for bodily injury and property damage,
workers' compensation and employee health care not covered by insurance.
These liabilities for self-insurance are accrued based on claims incurred
and on estimates of both unasserted and unsettled claims which are assessed
based on management's evaluation of the nature and severity of individual
claims and on the Company's past claims experience.
Revenue Recognition
Freight revenues are recognized upon the delivery of freight.
Reclassifications
Certain prior year information has been reclassified to conform to the
current year presentation.
2. ACQUISITIONS
As discussed in Note 1, AmeriTruck was formed in August 1995 to effect the
combination of six regional trucking lines in November 1995: W&L, TBI,
Bangerter, CMS Transportation Services, Inc., Scales and CBS Express, Inc.
AmeriTruck acquired all of the outstanding common stock of these companies,
except Bangerter, in exchange for shares of AmeriTruck's common stock and
the payment of $35.0 million in cash of which $17.4 million is reflected as
a dividend to the Controlling Stockholders for accounting purposes. All of
the outstanding common stock of Bangerter was acquired for a cash purchase
price of $1.0 million. The acquisitions of Bangerter, CMS Transportation
Services, Inc., Scales and CBS Express, Inc. were accounted for by the
purchase method. The excess of the purchase price over the fair values of
the net assets acquired has been recorded as goodwill. The net purchase
price was allocated as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and equipment, net $ 13,951
Goodwill(1) 26,106
Other assets 7,955
Long-term debt (18,341)
Other liabilities (10,687)
--------
Purchase price, net of cash acquired $ 18,984
========
</TABLE>
(1) Includes $2,033 related to the excess of the purchase price over
the fair values of the net assets acquired from the minority
stockholders.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL of Largo, Florida, from Ronald N. Damico 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. As part of the transaction, Mr.
Damico and KTL entered into an employment agreement under which Mr. Damico
became employed as KTL's President and Chief Executive Officer. The term of
the employment agreement expires on November 15, 1998. In addition, KTL has
agreed to lease from Mr. Damico and his spouse certain real estate at
Clearwater, Florida on a month-to-month basis. Further, KTL has agreed to
lease the real estate at Largo, Florida used by KTL as its corporate
headquarters from a company owned by Mr. Damico for an 18-month term, at
which time KTL has agreed to purchase the property for $2.4 million less
the total amount of environmental-related costs incurred subsequent to
August 16, 1996.
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,
27
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. The net assets acquired were
as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash $ 107
Property and equipment, net 12,141
Goodwill 6,167
Other assets 3,445
Long-term debt (10,786)
Other liabilities (1,684)
--------
Net assets acquired $ 9,390
========
</TABLE>
The accompanying consolidated financial statements include assets,
liabilities and financial results of Bangerter since August 1, 1995, of the
CMS distribution business, and Scales (including the CBS Express business)
since November 1, 1995 and of KTL since July 1, 1996. The following pro
forma operating results of the Company for the twelve months ended December
31, 1996 and 1995, reflect these acquisitions as if they had occurred on
January 1, 1995.
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
--------------------
1996 1995
---------- --------
<S> <C> <C>
(in thousands)
Operating revenue $237,559 $173,721
Operating income 17,067 18,478
Income (loss) before extraordinary items (1,594) 2,775
Net income (loss) (1,824) 2,752
</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, 1995, or
of future results of operations of the consolidated entities. The pro forma
results for the twelve months ended December 31, 1996 include the purchase
of the Freymiller Assets since February 1996. These assets have not yet
generated operating margins comparable to the other AmeriTruck
subsidiaries. The acquisition of the Freymiller Assets did not require pro
forma financial statements and thus the comparative results for the twelve
months ended December 31, 1995 do not reflect the pro forma effect of such
assets.
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
28
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to purchase approximately 185 tractors and approximately 309 trailers
previously operated by Freymiller, for approximately $14 million. An
additional 80 trailers were leased for a seven-year period. In exchange for
the 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.
The cash portion of the 1995 acquisitions was funded with a portion of the
proceeds from the private placement of the Subordinated Notes in November
1995. The Subordinated Notes were exchanged for publicly registered
Subordinated Notes in February 1996. The Subordinated Notes were issued
pursuant to the Indenture. The initial offering of the Subordinated Notes
in November 1995 is sometimes referred to as the "Initial Offering". The
Company funded the cash payments for the purchase of the Freymiller Assets
and the KTL acquisition primarily from borrowings under the NationsBank and
Volvo credit facilities. See footnote "8. Long-term Debt and Related
Agreements."
In addition, in May 1995, W&L acquired Dietz Motor Lines, Inc., for $2.0
million in cash, which includes payment for non-compete agreements of
$400,000 as well as an amount for certain eligible accounts receivable.
This acquisition has been accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and the liabilities assumed based on their estimated fair values
at the date of acquisition. The results of operations of the acquired
company are included in the financial statement from the date of
acquisition.
3. OTHER INCOME, NET
Other income (expense) consists of the following for the years ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Interest income $ 435 $ 359 $ 189
Amortization of financing fees (484) (38) -
Miscellaneous, net 15 64 16
----- ------ ------
$ (34) $ 385 $ 205
===== ====== ======
</TABLE>
4. INCOME TAXES
Income tax expense excluding the extraordinary items, was as follows
for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----- ------ ------
<S> <C> <C> <C>
Current:
Federal $ - $1,301 $1,188
State 49 121 196
----- ------ ------
49 1,422 1,384
----- ------ ------
Deferred:
Federal 305 706 788
State (14) 368 145
----- ------ ------
291 1,074 933
----- ------ ------
Total $ 340 $2,496 $2,317
===== ====== ======
</TABLE>
29
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the federal statutory income tax rate to the effective
income tax rate, excluding the extraordinary items, was as follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Federal statutory income tax rate
(benefit) (34.0)% 34.0% 34.0%
State income taxes, net of federal
tax benefit 1.7 5.6 5.1
Nondeductible expenses 61.5 5.0 3.2
Change in valuation allowance - - (1.9)
Nondeductible interest - - 1.9
Nontaxable income (11.4) - -
Other, net 0.2 (0.6) 0.4
----- ---- ----
Effective tax rate 18.0% 44.0% 42.7%
===== ==== ====
</TABLE>
The components of deferred tax assets and liabilities at December 31 were
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $(13,249) $(8,316)
Prepaid items and other (821) (791)
-------- -------
Total deferred tax liabilities (14,070) (9,107)
-------- -------
Deferred tax assets:
Accrued expenses and reserves 1,786 1,350
Net operating losses and tax credits 5,180 944
-------- -------
Total deferred tax assets 6,966 2,294
-------- -------
Net deferred tax liability $ (7,104) $(6,813)
======== =======
Current deferred income tax asset $ 1,467 $ 960
Noncurrent deferred income tax liability (8,571) (7,773)
-------- -------
Net deferred tax liability $ (7,104) $(6,813)
======== =======
</TABLE>
The Company has available at December 31, 1996, an alternative minimum tax
(AMT) credit carryforward of $259,000 to offset future regular tax
liabilities. The AMT credit carryforward has no expiration date. The
benefit of the tax credits is recognized in continuing operations for
accounting purposes. The Company also has available federal net operating
losses of approximately $11.7 million. The federal net operating loss
carryover will expire between 2011 and 2012.
The Company has available at December 31, 1996, unused Bangerter
preacquisition operating loss carryforwards of approximately $1.2 million
which expire between 2006 and 2011. These preacquisition carryforwards may
be used only to offset future taxable income, if any, of Bangerter and may
not be used to offset future taxable income of any other member of the
group with which the Company files a consolidated return. The amount of
preacquisition tax loss carryforwards available to offset future taxable
income will be subject to limitation, due to the ownership change, under
Internal Revenue Code Section 382. The Company will be required to pay tax
in any year in which Bangerter's taxable income exceeds the ownership
change limitation, notwithstanding the existence of tax loss carryforwards.
The amount of the preacquisition carryforwards which may be applied in any
one year is limited by the Internal Revenue Code to the lesser of
Bangerter's taxable income or approximately $84,000.
30
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ACCOUNTS RECEIVABLE
AmeriTruck maintains an allowance for doubtful accounts based upon the
expected collectibility of all accounts receivable. Allowances for doubtful
accounts of $560,000 and $406,000 were recorded at December 31, 1996 and
1995, respectively. Driver advances and employee receivables of $1,575,000
and $203,000 were included in accounts receivable at December 31, 1996 and
1995, respectively.
6. PROPERTY AND EQUIPMENT
Property and equipment at December 31 was as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenue equipment $119,076 $ 80,764
Structures 5,537 3,359
Service equipment and other 1,721 1,348
Office furniture and equipment 3,672 913
Land 1,007 816
Leasehold improvements 857 568
-------- --------
Total property and equipment 131,870 87,768
Accumulated depreciation and
amortization (28,069) (20,577)
-------- --------
Net property and equipment $103,801 $ 67,191
======== ========
</TABLE>
Property and equipment includes gross assets acquired under capital leases
of $5,560,000 and $12,139,000 at December 31, 1996 and 1995, respectively.
Related amounts included in accumulated depreciation and amortization were
$2,214,000 and $3,972,000 at December 31, 1996 and 1995.
During 1995, the Company changed its estimate of the useful lives and
salvage values of certain revenue equipment. This change had the effect of
increasing operating income by approximately $360,000 for the year ended
December 31, 1995. These changes in estimates were made to more accurately
reflect future service lives and salvage values of the equipment.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at
December 31, (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts Payable - trade $ 5,840 $ 5,387
Payroll and owner operator pay 2,630 2,044
Accrued interest 1,786 1,821
Taxes other than income taxes 954 603
Other 2,347 2,216
------- -------
Total $13,557 $12,071
======= =======
</TABLE>
31
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LONG-TERM DEBT AND RELATED AGREEMENTS
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Senior Subordinated Notes due 2005
with an interest rate of 12.25% (net
of unamortized discount of $1,247 and
$1,387 respectively) $ 98,753 $ 98,613
Obligations collateralized by
equipment maturing through 2001 with
interest rates ranging from 7.25% to
11.51% 34,539 9,405
Capital lease obligations
collateralized by equipment maturing
through 2000 with interest rates
ranging from 4.63% to 11.50% 2,473 8,654
Accounts receivable financing
agreement with an interest rate of
prime plus 2.5% (11.0% as of December
31, 1995) - 829
Obligation collateralized by real
property maturing 2000 with an
interest rate of 10.0% - 645
Obligations maturing through 2005 with
interest rates ranging from 6.0% to
11.21% 680 189
Borrowings outstanding on the
NationsBank revolving line of credit,
average weighted interest rate of
7.43% (variable) 23,517 -
Borrowings outstanding on the Volvo
revolving line of credit, average
weighted interest rate of 8.25%
(variable) 9,364 -
-------- --------
169,326 118,335
Less current portion 11,988 10,566
-------- --------
Total long-term portion of debt $157,338 $107,769
======== ========
</TABLE>
Aggregate long-term debt (including current portion), maturing during the
next five years and thereafter is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 11,988
1998 7,541
1999 14,668
2000 7,988
2001 4,785
Thereafter 122,356
--------
$169,326
========
</TABLE>
Subordinated Notes
In November 1995, AmeriTruck completed a private placement of $100 million
of 12 1/4% Senior Subordinated Notes due 2005 (the "Series A Notes"). The
Series A Notes were exchanged for publicly registered 12 1/4% Senior
Subordinated Notes due 2005, Series B (the "Subordinated Notes") in
February 1996.
The Subordinated Notes mature on November 15, 2005 and are unsecured
subordinated obligations of the Company. These notes bear interest at the
rate of 12.25 percent per annum from November 15, 1995, payable
semiannually on May 15 and November 15 of each year, commencing on May 15,
1996. The Subordinated Notes are subject to optional redemption on the
terms set forth in the Indenture. As of December 31, 1996, the Company had
applied the net proceeds of the Series A Notes primarily to finance the
1995 acquisitions (See footnote "2. Acquisitions") and prepay debt and
capitalized leases. The early retirement of debt resulted in an
extraordinary loss for December 31, 1996 of $230,000, net of taxes of
$154,000.
32
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NationsBank Credit Facility
In February 1996, the Company and its subsidiaries entered into a Loan
Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to
which NationsBank has provided a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit
and general corporate purposes. Pursuant to the NationsBank Credit
Facility, as amended, NationsBank has provided a $30 million revolving
credit facility, with a $7 million sublimit for letters of credit, maturing
on February 1, 1998, at which time the revolving credit facility will
convert into a term loan maturing on February 1, 2003. This facility is
also subject to a borrowing base consisting of eligible receivables and
eligible revenue equipment. Currently, the Company's borrowing base exceeds
$30 million. Borrowings under the NationsBank Credit Facility bear interest
at a per annum rate equal to either NationsBank's base rate or the rate of
interest offered by NationsBank in the interbank eurodollar market plus an
additional margin ranging from 1.5 percent to 2.0 percent based on the
Senior Funded Debt Ratio of the Company. The Company also pays a letter of
credit issuance fee and a quarterly unused facility fee. Borrowings under
the NationsBank Credit Facility were $23.5 million at December 31, 1996 and
were primarily used for the purchase of Freymiller Assets and the KTL
acquisition. Available borrowings were $2.4 million at December 31, 1996 as
there were $4.1 million in letters of credit outstanding.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all personal property of the Company and
its subsidiaries and are guaranteed in full by each of the Operating
Companies. For purposes of the Indenture, such borrowings under the
NationsBank Credit Facility constitute Senior Indebtedness of the Company
and Guarantor Senior Indebtedness of the Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the
incurrence of indebtedness and a requirement that the Company maintain a
specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio. At
December 31, 1996, the Company was not in compliance with the Senior Funded
Debt Ratio covenant or the Fixed Charge Coverage Ratio covenant.
The Company has received a waiver of such noncompliance from NationsBank
expiring on April 30, 1997 (the "NationsBank Waiver"). During this period
the Company has agreed that it may not make additional borrowings at
Eurodollar rates.
The Company has received a financing commitment (the "Financing
Commitment") pursuant to which the lender (the "New Lender") has committed,
subject to the terms and conditions of the Financing Commitment, to provide
a $30 million credit facility (the "New Credit Facility"). Borrowings under
the New Credit Facility could be used to refinance in full indebtedness
under the NationsBank Credit Facility, to provide working capital and for
letters of credit and general corporate purposes. Pursuant to the New
Credit Facility, the New Lender would provide a $30 million revolving
credit facility. Borrowings under the New Credit Facility would be secured
by substantially all unencumbered personal property of the Company and its
subsidiaries, and, for purposes of the Indenture, would constitute Senior
Indebtedness of the Company and would constitute Guarantor Senior
Indebtedness of the Operating Companies.
Under the terms of the Financing Commitment, the New Credit Facility would
contain a number of affirmative and negative covenants, including a
limitation on the incurrence of indebtedness and a requirement that the
Company maintain specified debt coverage ratios. The New Credit Facility is
subject to satisfaction of the terms and conditions set forth in the
Financing Commitment.
Volvo Credit Facilities
In February 1996, the Company and its subsidiaries 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 December 31, 1996, 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 is being provided by Volvo in connection
with the Operating Companies' agreement to purchase 400 new trucks
manufactured by Volvo GM Heavy Truck Corporation between March 1, 1996 and
June 30, 1997. The 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.
33
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1996, 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 $4.2 million at
December 31, 1996; however, available financing under this facility is less
than $7 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.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities reflected in the consolidated
financial statements approximates fair value due to the short-term maturity
of these instruments.
The fair value of the Company's long-term debt of $170,609,000 at December
31, 1996, as compared with the carrying value of $169,326,000, was
calculated by discounting future cash flows using an estimated fair market
value interest rate. The interest rate used for the Senior Subordinated
Notes was the December 31, 1996 quoted market price. The rate for all other
debt was estimated based on rates obtained by the Company at the end of
1996.
10. COMMITMENTS AND CONTINGENCIES
Self-Insurance
The Company is primarily self-insured for all collision damages to revenue
equipment. In addition, the Company is self-insured for liability coverage
up to its deductible amounts which vary among the Operating Companies.
Furthermore, the Operating Companies act as self-insurers for workers'
compensation in several states in which the deductible is as high as
$350,000.
Leases
The Company leases various equipment and buildings under capital and
noncancelable operating leases with an initial term in excess of one year.
As of December 31, 1996, future minimum rental payments required under
these capital and operating leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- ---------
<S> <C> <C>
1997 $2,079 $ 5,483
1998 312 3,516
1999 113 3,079
2000 113 2,767
2001 - 53
Thereafter - -
------ -------
Total 2,617 $14,898
------ =======
Less amount representing interest (144)
------
Present value of minimum lease
payments $2,473
======
</TABLE>
34
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for operating leases was $4,975,000, $1,718,000 and $927,000
for the years ended December 31, 1996, 1995 and 1994.
The Company also leases revenue equipment from owner operators and leasing
companies under various short-term cancelable operating leases. Rental
payments are based on per mile charges or on a percent of revenue generated
through the use of the equipment.
Letters of Credit
As of December 31, 1996 and 1995, respectively, the Company had various
outstanding letters of credit totaling $4,066,000 and $1,829,000. These
letters of credit were mainly issued to insurance companies in conjunction
with coverage obtained.
Environmental Matters
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and certain other laws, the Company
is potentially liable for the cost of clean-up of various contaminated
sites identified by the U.S. Environmental Protection Agency ("EPA") and
other agencies. 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 is a defendant in legal proceedings considered to be in the
normal course of business, none of which, singularly or collectively, are
considered to be material by management of the Company.
11. CAPITAL STOCK
AmeriTruck is authorized to issue 4,875,000 shares of Class A Common Stock,
$.01 par value, 4,875,000 shares of Class B Common Stock, $.01 par value
and 1,775,000 shares of Class C Common Stock, $.01 par value. AmeriTruck
had 2,108,000 shares of Class A Common Stock and 1,395,000 shares of Class
C Common Stock issued and outstanding at December 31, 1996. The holders of
Class A Common Stock have one vote per share. The holders of Class B Common
Stock do not have any right to vote except as may be provided pursuant to
the Delaware General Corporation Law. The holders of Class C Common Stock
have one vote per share and normally vote together with the holders of the
Class A Common Stock as a single class. In addition, the holders of Class C
Common Stock have additional voting rights under certain circumstances.
In November 1995, the Company's Board of Directors and stockholders
approved the Company's 1995 Stock Option Plan (the "1995 Plan"), which
provides for the grant of incentive stock options and nonstatutory stock
options to employees, and for the grant of nonstatutory stock options to
consultants, of the Company and its subsidiary corporations. In most cases,
these stock options vest ratably over a two year period from date of grant.
In addition, these options expire 10 years from date of grant or three
months from an employee's termination date. A maximum of 927,887 shares of
Class A Common Stock, $.01 par value, ("Common Stock") are currently
reserved for issuance under the 1995 Plan. Approximately 116,000 shares
were available for future grant at December 31, 1996. The option price per
share may not be less than the fair market value of a share on the date the
option is granted, and the maximum term of an option may not exceed 10
years.
35
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Activity in the 1995 Plan was as follows:
<TABLE>
<CAPTION>
Exercise price
Number of Options per option
------------------ --------------
<S> <C> <C>
Outstanding at January 1, 1995 - -
Granted 203,650 $4.00
--------
Outstanding at December 31, 1995 203,650 $4.00
Granted 745,000 $4.00
Expired and forfeited (136,842) $4.00
--------
Outstanding at December 31, 1996 811,808 $4.00
========
</TABLE>
The stock option plan has been accounted for in accordance with Accounting
Principles Board Opinion 25. The application of Statement of Financial
Accounting Standards No. 123 would not result in a significant difference
from reported net income. As of December 31, 1996, a total of 811,808
options were outstanding with a weighted average exercise price of $4.00
per option and a weighted average remaining contracted term of
approximately 9-1/2 years.
In consideration for its advisory services in connection with the 1995
acquisitions, upon consummation of the 1995 acquisitions the Company issued
a warrant to BancBoston Ventures, Inc. exercisable after February 15, 1996
but prior to February 15, 2003 for 375,000 shares of common stock at an
exercise price of $4.00 per share (approximate fair value at date of
issuance).
One director of the Company and a former company President have issued
separate promissory notes to TBI and W&L, in the original principal amount
of $1.2 million in connection with the purchase of capital stock of TBI and
W&L. This stock was subsequently converted into shares of the Company's
common stock in connection with the 1995 acquisitions. Each of the
promissory notes is secured by these shares and is payable in one
installment which is due on October 10, 2005. Each of the promissory notes
bear interest at the rate of 6.77 percent per annum, such interest being
payable at maturity.
12. EMPLOYEE BENEFITS
Certain of AmeriTruck's Operating Companies sponsor defined contribution
401(k) retirement savings, pension or profit sharing plans. TBI's profit
sharing plan covers nondriver employees. TBI also has defined contribution
pension plans covering mail and nonmail drivers, which provide for hourly
contributions for the first 40 hours of driving per week for nonmail
drivers and hourly contributions for the first 40 hours of driving per mail
route per week for mail drivers. CMS' retirement plan, Bangerter's profit
sharing plan and W&L's retirement savings plan cover substantially all
eligible employees meeting certain age and service requirements. The CBS
profit sharing plan was terminated on June 30, 1996. Contributions to W&L's
retirement savings plan, CMS' retirement plan and TBI's and Bangerter's
profit sharing plans are at the discretion of the Board of Directors. For
the employee benefit plans mentioned above, the Company's expense was
$926,000, $903,000 and $911,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
During the second quarter of 1997, the employee benefit plans will be
merged into the AmeriTruck Distribution Corp. retirement plan. This new
plan is designed to cover all employees of AmeriTruck Distribution Corp.
and its wholly-owned subsidiaries who meet certain eligibility
requirements, with the exception of TBI's mail contract drivers. This
profit sharing plan has a 401(k) feature with a discretionary company
match.
13. SUBSEQUENT EVENT
The Company has signed a Letter of Intent to acquire the capital stock of
Tran-Star, Inc. ("Tran-Star"), which is owned by Allways Services, Inc.
Tran-Star is a carrier of refrigerated and non-refrigerated products. If
this acquisition is completed, the Company intends to coordinate Tran-
Star's activities with those of the other Operating Companies. Tran-Star,
headquartered in Waupaca, Wisconsin, operates primarily in between the
upper midwestern U.S. and the northeast and southeast, with terminals at
Etters and Scranton, Pennsylvania.
This acquisition is subject to a number of conditions, including the
availability of financing and the completion of definitive documentation,
and no assurances can be made that the Company will complete the proposed
acquisition.
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
AmeriTruck Distribution Corp.
We have audited the consolidated balance sheets of AmeriTruck Distribution Corp.
as of December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the two years then ended. We
have also audited the combined statements of operations, stockholders' equity,
and cash flows of W&L Services Corp. and Subsidiaries and Thompson Bros., Inc.
(the predecessor company) for the year ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated and combined financial statements referred to
above present fairly, in all material respects, the financial position of
AmeriTruck Distribution Corp. at December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
March 31, 1997
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
---------------------------
<TABLE>
<CAPTION>
NAME AGE TERM OF OFFICE
---- --- --------------
<S> <C> <C>
Michael L. Lawrence (2) 52 Until Resigns or is Removed
Richard A. Beauchamp 56 Until Resigns or is Removed
Kenneth H. Evans, Jr. (1) 44 Until Resigns or is Removed
William E. Greenwood(1)(2) 58 Until Resigns or is Removed
Michael J. Langevin (1) 50 Until Resigns or is Removed
J. Michael May 52 Until Resigns or is Removed
William P. Scales 55 Until Resigns or is Removed
</TABLE>
(1) Member of Audit Committee
(2) Member of Compensation Committee
Messrs. Lawrence and Greenwood have been directors since the Company's
inception on August 9, 1995. Messrs. Beauchamp, Evans and Scales have
been directors since November 15, 1995. Messrs. Langevin and May have
been directors since January 31, 1996, and hold office as the
designees of BancBoston Ventures, Inc. ("BBV").
Pursuant to a Stockholder Agreement (the "Stockholder Agreement")
entered into at the time the 1995 acquisitions were consummated, the
stockholders of the Company agreed that it will have a Board of
Directors comprised of nine members. The stockholders have agreed to
vote for the following persons as Directors: (i) two individuals
designated by BBV, so long as BBV shall hold at least 10 percent of the
outstanding shares, and thereafter one individual designated by BBV, so
long as it holds any shares; (ii) initially Michael Lawrence, so long
as he is the Chairman, President and Chief Executive Officer of the
Company, and thereafter an individual designated by the nominating
committee referred to below: (iii) initially, Messrs. Beauchamp and
Scales and two former executives of the Operating Companies, so long as
each is an executive officer of the Company or the Chairman, President
and Chief Executive Officer of any of the Operating Companies, and
thereafter individuals designated by the nominating committee referred
to below: (iv) initially William E. Greenwood, and thereafter a person
designated by the nominating committee referred to below: and (v)
initially Kenneth H. Evans, Jr., and thereafter a person designated by
the nominating committee referred to below. One of the directors
designated by BBV and the Chairman and Chief Executive Officer of the
Company shall constitute a nominating committee with the power to
designate any replacement for the Directors referred to in (ii) through
(v) above.
Notwithstanding the foregoing, if a Control Event (as defined in the
Charter) has occurred and is continuing, the Board of Directors shall
be elected as provided below under "Charter Provisions" and each
Stockholder will agree to vote all shares held by it in favor of any
matters recommended for approval by the stockholders of the Company by
the Board of Directors until such time as the Control Period (as
defined in the Charter) has terminated.
Charter Provisions
In connection with the 1995 acquisitions, the Company amended its
Certificate of Incorporation to add the provisions described below (as
so amended, the "Charter").
. Classes of Stock. The Charter provides for three classes of Common
Stock: 4,875,000 shares of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"); 4,875,000 shares of Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"),
and 1,775,000 shares of Class C Common Stock par value $.01 per share
(the "Class C Common Stock").
The holders of Class A Stock have one vote per share. The holders of
Class B Common Stock do not have any right to vote except as may be
provided pursuant to the Delaware General Corporation Law. The holders
of Class C Common Stock have one vote per share and normally vote
together with the holders of the Class A Common Stock as a single
class. In addition, the holders of Class C Common Stock have the
additional voting rights described below.
. Board Designation Rights. At any time while a Control Event (as
defined below) has occurred and is continuing, the holders of not
less than 51 percent of the Company's then outstanding Class C Common
Stock are entitled to deliver a notice to the Company. Upon delivery
of such a notice, the holders of Class C Common Stock will be
entitled to 1,000 votes per share and will continue to vote together
with the holders of the Company's Class A Common Stock as a single
class on all matters other than the election or removal of directors.
In addition, the holders of Class C Common Stock, voting together as
a separate class, shall be entitled to elect the smallest number of
directors to the Board of Directors of the Company that shall
constitute a majority of the authorized number of directors on such
Board of Directors. In such event, the holders of the Class A Common
Stock shall be entitled to elect the remaining directors. BBV owns
all of the outstanding Class C Common Stock.
A "Control Event", as defined in the Charter, means (a) the Company
shall have failed to make any required payment of principal or interest
when due pursuant to the terms of any agreement evidencing Senior
Indebtedness (as defined in the Indenture) or pursuant to the terms of
the Indenture, and such failure to pay shall have continued without
being cured, waived or consented to, beyond the period of grace, if
any, specified in such agreement or the Indenture, as applicable, (b)
there shall have occurred any of certain events of default under any
agreement evidencing Senior Indebtedness which event of default shall
have continued uncured for three out of four consecutive fiscal
quarters, (c) the Company shall have failed to complete a Qualified
Public Offering (as described in the Stockholder Agreement, dated as of
November 15, 1995, a copy of which has been filed as an exhibit to this
Annual Report on Form 10-K) on or prior to the third anniversary of the
completion of the 1995 acquisitions, or (d) there shall exist a default
or breach of any covenant, agreement or provision contained in Section
6 of the Stockholder Agreement, dated as of November 15, 1995, a copy
of which has been filed as an exhibit to this Annual Report on Form
10-K.
(b) Identification of Executive Officers
------------------------------------
Executive officers of the Company are appointed by the Board of
Directors on an annual basis and serve until their successors have
been duly elected and qualified. There are no family relationships
among any of the executive officers and directors of the Company.
38
<PAGE>
NAME AGE POSITION
---- --- --------
Michael L. Lawrence 52 President and Chief Executive Officer
Richard A. Beauchamp 56 Chief Executive Officer, ART
Kenneth H. Evans, Jr. 44 Chief Financial and Accounting Officer
J. Michael May 52 General Counsel and Secretary
Michael Noel 58 Corporate Vice President - Sales
Joseph M. Samford 49 Executive Vice President - Equipment and
Maintenance
Richard A. Beauchamp has been the Chief Executive Officer of ART since
1988. He has been the President of Transportation Management Services, Inc.
since 1990, the President of I.L.C. Leasing, Inc. from 1988 until 1994, and
the President of Carolina Transportation Company from 1992 until June of
1995. He has also been a director of Crown Anderson, Inc., a pollution
control company, since 1974. Mr. Beauchamp was previously President and
Chief Executive Officer of Refrigerated Transportation Company, Inc., and
has 31 years experience in the trucking industry.
Kenneth H. Evans, Jr. has been a Director and Chief Financial and
Accounting Officer of the Company since November 1995. He was National Co-
Chairperson, Transportation Industry Services of Coopers & Lybrand L.L.P.
from 1993 until 1995. He was a Business Assurance Partner of Coopers &
Lybrand L.L.P. from 1985 until 1995 and has served transportation clients
for 12 years.
William E. Greenwood has been President of Zephyr Group since 1994. From
1990 until 1994, Mr. Greenwood was the Chief Operating Officer of
Burlington Northern Railroad Company. He was the Executive Vice President
of marketing from 1986 to 1990. Mr. Greenwood is a director of Mark VII, an
intermodal, third party, truck brokerage and logistics company, and has
served in such position since 1994. He is also a director of Transport
Dynamics, Inc., a privately held logistics software development and service
company, and a director of Box Energy Corporation, a publicly held,
independent exploration and production company primarily engaged in the
exploration for, and the development and production of oil and natural gas.
Michael L. Lawrence has been a Director and the Chairman of the Board of
Directors of TBI since July 1990 and of W&L since August 1994. Mr. Lawrence
was a Director and Chief Executive Officer of TRISM, Inc., a trucking
company specializing in carrying heavy machinery and equipment, explosives
and radioactive materials, from January 1990 to March 1995. Mr. Lawrence
was the President, Chief Executive Officer and principal owner of Lucas
Trucking and Leasing from August 1989 to March 1991. He has a total of 22
years experience in the trucking industry.
Michael J. Langevin has been a Director of the Company since January 1996.
Since 1989, Mr. Langevin has been an independent financial consultant
associated with Dunbar Associates, Inc., a financial management consulting
firm.
J. Michael May has been a Director, General Counsel and Secretary of the
Company since January 1996. From August 1991 to January 1996, Mr. May was
General Counsel and Secretary of TRISM Inc., and from December 1979 to
August 1991 was General Counsel and Secretary of McGil Specialized
Carriers, Inc. He has 25 years experience in the trucking industry.
Michael Noel has been Corporate Vice President of Sales of the Company
since April 1996. He was employed as Executive Vice President of Tranax,
Ltd., the largest Canadian carrier of commodities requiring temperature
control, from April 1994 to April 1996. Prior to that, Mr. Noel was
employed as Executive Vice President of Wintz Companies for 10 years.
Joseph M. Samford has been Executive Vice President - Equipment and
Maintenance of the Company since March 1996. He was employed by TRISM, Inc.
from June 1992 until March 1996, last holding the position of President,
Trism Maintenance Services, Inc., a subsidiary of TRISM, Inc. For more than
five years prior to March 1992, Mr. Samford was Vice President of
Maintenance at Burlington Motor Carriers.
William P. Scales has been a Director of AmeriTruck since November 1995 and
was the Chief Executive Officer of Scales from 1984 until March 1997. Mr.
Scales previously held managerial positions with Ranger Transportation and
with Refrigerated Transportation Company, Inc. and has 29 years experience
in the trucking industry.
39
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(a) Compensation to Named Executive Officers.
----------------------------------------
The following table summarizes the total compensation paid by the
Company or one of the Operating Companies for services rendered during
the years ended December 31, 1996, 1995 and 1994 to the Chief
Executive Officer, to each of the four other most highly
compensated executive officers of the Company at the end of 1996 and
to two former executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
---------------------------------------- ------------------------- -------
Securities
Other Annual Restricted Underlying All Other
Name and Compensation Stock Options/ LTIP Compensation
Principal Position Year Salary Bonus (1) (2) Award(s) SARs (#) Payouts (3)
- --------------------------- ---- --------- ------------ ------------ ----------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael L. Lawrence 1996 $121,875 $ - $ 6,300 $ - - - $ -
President and Chief 1995 75,085 - - - - - 7,819
Executive Officer 1994 75,085 95,000 - - - - 8,024
Richard A. Beauchamp 1996 200,099 - 22,812 - - - 1,795
Chairman, ART 1995 25,000 - - - - - -
1994 - - - - - - -
Kenneth H. Evans, Jr. 1996 192,000 - 6,300 - - - -
Chief Financial and 1995 16,000 75,000 - - - - -
Accounting Officer 1994 - - - - - - -
William P. Scales 1996 150,000 - 5,600 - - - -
President, Scales 1995 25,000 - - - - - -
1994 - - - - - - -
Joseph M. Samford 1996 120,833 16,066 6,300 - - - -
Executive Vice 1995 - - - - - - -
President - 1994 - - - - - - -
Equipment and
Maintenance
Michael J. Crowe 1996 173,560 67,000 4,200 - - - -
Former President, 1995 120,251 104,000 - - - - -
W&L 1994 116,294 254,890 - - - - -
Randy Thompson 1996 150,121 - 6,300 - - - -
President, TBI 1995 132,340 - - - - - 13,782
Mail Division 1994 124,380 113,000 - - - - 13,299
</TABLE>
(1) The bonus awards for the executive officers named in the table were paid
pursuant to the annual incentive compensation plans described in the
"Report on Executive Compensation."
(2) The other annual compensation includes amounts paid for monthly allowances.
(3) All other compensation includes matching contributions to the Company's
401(k) Plan or a company contribution under the profit sharing plan.
40
<PAGE>
OPINION/SAR GRANTS IN 1996 FISCAL YEAR
The following table sets forth information with respect to the individuals named
in the Summary Compensation Table concerning the grant of options during 1996.
<TABLE>
<CAPTION>
% of Total Potential Realizable
Options/SARs Value at Assumed Annual
Number of Granted to Rates of Stock Price
Securities Employees in Appreciation for
Underlying Year ended Exercise or Option Term(2) Grant
Name and Options/SARs December 31, Base Price Expiration ---------------------- Date
Principal Position Granted (#) 1996 ($/Sh) (1) Date 5% 10% Price
- ------------------ ------------ ------------ ----------- ------------ --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael L. Lawrence 30,000 4% $4.00 May 16, 2006 $ 75,467 $191,249 $4.00
President and Chief
Executive Officer
Richard A. Beauchamp - - - - - - -
Chairman, ART
Kenneth H. Evans, Jr. 20,000 3% $4.00 May 16, 2006 $ 50,312 $127,499 $4.00
Chief Financial and
Accounting Officer
William P. Scales 40,000 5% $4.00 May 16, 2006 $100,623 $254,999 $4.00
President, Scales
Joseph M. Samford 30,000 4% $4.00 March 10,2006 $100,623 $254,999 $4.00
Executive Vice 10,000 1% $4.00 May 10, 2006
President - Equipment
and Maintenance
Michael J. Crowe 40,000 5% $4.00 May 16, 2006 $100,623 $254,999 $4.00
Former President, W&L
Randy Thompson 30,000 4% $4.00 May 16, 2006 $ 75,467 $191,249 $4.00
President, TBI Mail
Division
</TABLE>
(1) Exercise prices represent the fair market value, as determined by the Board
of Directors, on the date of grant.
(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
Company's Common Stock. These dollar amounts represent gain before income
taxes.
AGGREGATED 1996 STOCK OPTION/SAR EXERCISES
AND YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the individuals
named in the Summary Compensation Table concerning their exercise of options
during 1996 and unexercised stock options held as of the end of 1996.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercied Value of Unexercised in-the-Money
Options/SARs at Year End Options/SARs at Year End
Name and Share Acquired Value ------------------------- ------------------------------
Principal Position of Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Lawrence - - 9,411 20,589 - -
President and Chief
Executive Officer
Richard A. Beauchamp - - - - - -
Chairman, ART
Kenneth H. Evans, Jr. - - 111,274 13,726 - -
Chief Financial and
Accounting Officer
William P. Scales - - 12,548 27,452 - -
President, Scales
Joseph M. Samford - - 15,301 24,699 - -
Executive Vice
President - Equipment
and Maintenance
Michael J. Crowe - - - - - -
Former President, W&L
Randy Thompson - - 9,411 20,589 - -
President TBI, Mail
Division
</TABLE>
41
<PAGE>
(b) Stock Option Plan
-----------------
In 1995, the Company's Board of Directors and stockholders approved the
Company's 1995 Stock Option Plan ("1995 Plan"), which provides for the
grant of incentive stock options and nonstatutory stock options to
employees, and for the grant of nonstatutory stock options to consultants,
of the Company and its subsidiary corporations. A maximum of 927,887 shares
of Class A Common Stock, $.01 par value, ("Common Stock") are currently
reserved for issuance under the 1995 Plan. After giving effect to the 1995
and 1996 acquisitions there are approximately 3,500,000 shares of Common
Stock outstanding and a warrant to purchase 375,000 shares of Common Stock.
No individual may be granted options under the 1995 Plan for a number of
shares in excess of two-thirds of the shares that from time to time may be
reserved for issuance under the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee, which has
authority to determine which eligible individuals are to receive options,
the terms of such options, including the status of such options as
incentive or nonstatutory stock options under the federal income tax laws,
the numbers of shares, exercise prices, and times at which the options
become and remain exercisable, and the time, manner, and form of payment
upon exercise of options, including cashless exercise or payment of the
exercise price with a promissory note. The exercise price of incentive
stock options granted under the 1995 plan may not be less than 100 percent
of the fair market value of the underlying shares of Common Stock on the
date of grant. Options granted under the 1995 Plan may be immediately
exercisable, or may become exercisable in such cumulative or non-cumulative
installments as the Compensation Committee may determine (subject to
acceleration by the Compensation Committee in whole or in part at any
time). Incentive stock options may not be exercised after a maximum of
three months following termination of the optionee's employment with the
Company or one of its affiliates, except in the event that termination is
due to death or disability, in which case the incentive stock option is
exercisable for a maximum of one year after such termination. Such three-
month and one-year periods may be shortened by the Compensation Committee
in the option agreement evidencing an option grant. In any event, no
incentive stock option may be exercised after the tenth anniversary of its
date of grant.
In the event of any stock dividend, stock split, or reverse stock split
affecting Common Stock, the numbers of shares and exercise prices of
outstanding options under the 1995 Plan will be proportionately adjusted.
In the event of a reclassification or change of outstanding shares of
Common Stock, upon exercise of an option granted under the 1995 Plan, the
optionee will receive such shares of stock or other securities as are
equivalent in kind and value to the shares of Common Stock that the
optionee would have received if he had exercised the option immediately
prior to such reclassification or change and thereafter had continued to
hold those shares and all other shares, stock, and securities thereafter
issued in respect thereof.
In the event of a consolidation or merger of the Company with or into
another company, or the sale to another company of all or substantially all
of the Company's assets, then, subject to the following sentence, upon
exercise of an option granted under the 1995 Plan, the optionee will
receive such shares of stock or other securities as are equivalent in kind
and value to the shares of stock and/or other securities that the optionee
would have received if he had held the full number of shares of Common
Stock subject to the option immediately prior to such consolidation,
merger, or sale, and thereafter had continued to hold those shares and all
other shares, stock, and securities thereafter issued in respect thereof.
Unless any particular option agreement provides otherwise, however, in the
event of any such consolidation, merger, or sale the Compensation Committee
in its discretion may provide instead that any outstanding option will
terminate, to the extent not previously exercised, either (i) as of the
date of such transaction in consideration of the Company's payment to the
optionee of an amount of cash equal to the difference between the aggregate
fair market value of the shares of the Company's Common Stock for which the
option is then exercisable and the aggregate exercise price for such shares
under the option, or (ii) at the close of a period of not less than ten
days specified by the Compensation Committee and commencing on the
Compensation Committee's delivery of written notice to the optionee of its
decision to terminate such option without payment of such consideration.
Upon dissolution or liquidation of the Company, all outstanding options
granted under the 1995 Plan will terminate to the extent not previously
exercised.
42
<PAGE>
The Company's Board of Directors may at any time terminate the 1995 Plan or
make such modifications of the 1995 Plan as it deems advisable. No
termination or amendment of the 1995 Plan may adversely affect the rights
of any individual to whom an option has previously been granted without
such individual's consent.
As of December 31, 1996, options to purchase approximately 812,000 shares
of Common Stock have been granted under the 1995 Plan and are outstanding,
and options to purchase approximately 116,000 additional shares of Common
Stock were available for future grants under the 1995 Plan.
(c) Compensation of Directors.
-------------------------
Mr. Greenwood received compensation as a director in the amount of $1,000
per month and $1,000 per committee meeting. Mr. Greenwood has also been
awarded options to purchase 20,000 shares of the Company's Common Stock. No
other director received any compensation for his service as a director.
All directors will be reimbursed for any out-of-pocket expenses incurred in
attending Board of Directors meetings.
(d) Employment Contracts and Termination of Employment.
--------------------------------------------------
Employment Agreements have been entered into by AmeriTruck or one of the
Operating Companies, as specified below, with each of Messrs. Lawrence,
Bangerter, Beauchamp, Crowe, Evans, Scales and Thompson.
Mr. Lawrence, the Chairman and Chief Executive Officer of AmeriTruck, has
entered into an employment agreement having a term expiring in November
1998 and providing for a base salary of $75,000 annually through October
31, 1996, and thereafter, an annual base salary of $300,000. Any additional
increases are at the discretion of AmeriTruck's board of directors.
Mr. Beauchamp, the Chief Executive Officer of ART, has entered into an
employment agreement having a term expiring in November 1998 and providing
for a base salary of $150,000 with increases thereafter being at the
discretion of the employer's board of directors.
Mr. Crowe, the former President of W&L, had entered into an employment
agreement having a term expiring in November 1997 and providing for a base
salary of $150,000 for the first twelve months following execution of an
amendment to the employment agreement in November 1995 with any increases
thereafter being at the discretion of W&L's board of directors.
Mr. Evans, the Chief Financial Officer and Executive Vice President of the
Company, has entered into an employment agreement having a term expiring in
November 1998 and providing for a base salary of $192,000 for the first
twelve months with any increases thereafter being at the discretion of the
Company's board of directors.
Mr. Samford, the Executive Vice President of Equipment and Maintenance of
the Company, has entered into an employment agreement having a term
expiring in November 1998 and providing for a base salary of $150,000
annually, with increases thereafter being at the discretion of the
Company's board of directors.
Mr. Scales, the President of Scales until March 1997, had entered into an
employment agreement having a term expiring in November 1998 and providing
for a base salary of $150,000 with increases thereafter being at the
discretion of Scales' board of directors.
Mr. Thompson, the President of TBI Mail Division, has entered into an
employment agreement having a term expiring in July 1997 and providing for
a base salary of $150,000 for the first twelve months following execution
of an amendment to the employment agreement in November 1995. Increases are
at the discretion of TBI's board of directors.
Mr. Damico, the President of KTL, has entered into an employment agreement
having a term expiring November 1998 and providing for a base salary of
$150,000 annually, with increases thereafter being at the discretion of the
Company's board of directors.
43
<PAGE>
Each of the above described employment agreements includes a severance
clause under the terms of which the employee is entitled to severance pay
if during the term of the agreement or a renewal term, his employment is
terminated without cause by written notice by the employer to the employee.
Under this severance clause, the employer must continue to pay to the
employee his base salary as in effect prior to the termination, such salary
being payable until the longer of (i) one year after the date of
termination, or (ii) the end of the stated term of the agreement. In
addition, each of the above described employment agreements provides that
upon the employee's termination (i) without cause by written notice by the
employer to the employee or (ii) due to the death or disability of the
employee, the employee is entitled to receive the management incentive
bonus (described below under "Long-Term Incentive Plan"), if any, that the
employee would have received for the fiscal year of the Company in which
the employment was terminated. The employee is not entitled to such
severance pay or management incentive bonuses in the event of a termination
for cause.
Each of the above described employment agreements also provides that the
employee shall be provided accident, disability and health insurance under
the respective employer's group accident, disability and health insurance
plan maintained for its full-time salaried employees.
Each of the above described employment agreements also contains a non-
competition provision pursuant to which the employee is prohibited, during
the term of his employment and generally for one year thereafter, from
engaging, within a designated area described below, in competition with the
employer, from diverting to any competitor of the employer any customer of
the employer, and from soliciting or encouraging any officer, employee or
consultant of the employer to leave the employment of the employer for
employment with any competitor of the employer. Each of the above described
employment agreements provides that the employee may not compete with the
employer for the time periods and under the circumstances described above
anywhere within the continental United States of America.
(e) Long-Term Incentive Plan.
------------------------
Senior management of the Company and each of the Operating Companies are
eligible to participate in an executive incentive compensation plan
pursuant to which, in general, they will be paid annual bonuses based upon
the financial performance of both their respective individual Operating
Companies and that of the Company. The bonus for each participant will be
determined by reference to the relevant Operating Company's growth and
return on invested capital as well as an assessment of the participant's
individual performance rating.
(f) Compensation Committee Interlocks and Insider Participation.
-----------------------------------------------------------
Messrs. Michael L. Lawrence and William E. Greenwood have been the members
of the Compensation Committee since the Company's inception. Mr. Lawrence
is also President and Chief Executive Officer of the Company.
(g) Board Compensation Committee Report.
-----------------------------------
The following report is presented by the Compensation Committee of the
Board (the "Committee"). The Compensation Committee consists of Messrs.
Lawrence and Greenwood. The committee administers the executive
compensation policies of the Company. All actions of the committee
pertaining to executive compensation are submitted to the Board of
Directors for approval.
The Company's executive compensation program is designed to attract,
retain, and motivate high caliber executives and to focus the interests of
the executives on objectives that enhance stockholder value. These goals
are attained by emphasizing "pay for performance" by having a significant
portion of the executive's compensation dependent upon business results and
by providing equity interests in the Company. The principal elements of the
Company's executive compensation program are base salary, incentive
compensation, and stock options. In addition, the Company recognizes
individual contributions as well as overall business results, using a
discretionary bonus program.
In 1996 no bonuses were paid to the Company's Executive Officers and annual
salaries were primarily determined based upon the amounts required under
their employment contracts. The Company increased Mr. Beauchamp's salary in
1996 above the salary required in his employment agreement in light of his
increased responsibilities for the Company's temperature controlled
operations.
Chief Executive Officer
Mr. Lawrence's base salary is determined by the terms of his employment
agreement with the Company. See "Employment Contracts and Termination of
Employment". In light of the Company's financial performance in 1996, the
Company did not pay any bonuses to its executive officers, including Mr.
Lawrence.
MICHAEL L. LAWRENCE
WILLIAM E. GREENWOOD
44
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth certain information regarding
beneficial ownership of the Common Stock of the Company by each person
known to the Company to own beneficially more than 5 percent of its
outstanding Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address Beneficial Ownership Percent of Class(1)
---------------- ------------------- -------------------
<S> <C> <C>
BancBoston Ventures, Inc.(2) 1,394,814 39.8%
100 Federal Street
Boston, MA 02110
William P. Scales(3) 392,217 11.2%
c/o Scales Transport Corporation
507 A Samples Scales Road
P.O. Box 189
Homer, GA 30547
Michael L. Lawrence 361,239 10.3%
c/o AmeriTruck Distribution Corp.
301 Commerce, Suite 1101
Fort Worth, TX 76102
Randy Thompson 338,782 9.7%
c/o Thompson Bros., Inc.
3605 Teem Drive
Sioux Falls, SD 57107
Richard Beauchamp(4) 283,363 8.1%
c/o AmeriTruck Refrigerated
Transport, Inc.
4200 Northside Parkway
Building 8, Suite C
Atlanta, GA 30327
Ronald N. Damico 225,000 6.4%
c/o KTL, Inc.
1501 Lake Ave.
Largo, FL 34641
</TABLE>
(1) Represents percentage ownership of all outstanding classes of
Common Stock. All stockholders except BBV hold shares of Class A
Common Stock.
(2) Excludes a warrant issued to BBV exercisable on or after February
15, 1996 for 375,000 shares.
(3) Includes 27,860 shares held by Mr. Scales' spouse. Mr. Scales
disclaims beneficial ownership with respect to these shares.
(4) Includes 278,587 shares held by Mr. Beauchamp's spouse. Mr.
Beauchamp disclaims beneficial ownership with respect to these
shares.
45
<PAGE>
(b) Security Ownership of Management.
--------------------------------
The following table shows as of March 15, 1997 the beneficial
ownership of the Company's Common Stock by each director, Named
Executive Officer and officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
---------------- ----------------- ----------
<S> <C> <C> <C>
Class A Common William P. Scales 392,217(1) 11.2%
Michael L. Lawrence 361,239 10.3%
Richard Beauchamp 283,363(2) 8.1%
Kenneth H. Evans, Jr.(3)
Michael J. Langevin(4) 102,934 2.9%
All Directors and
Executive Officers
as a Group (9)
Persons 1,139,753 32.5%
</TABLE>
(1) Includes 27,860 shares held by Mr. Scales' spouse. Mr. Scales
disclaims beneficial ownership with respect to these shares.
(2) Includes 278,587 shares held by Mr. Beauchamp's spouse. Mr.
Beauchamp disclaims beneficial ownership with respect to these
shares.
(3) Mr. Evans holds options to purchase 125,000 shares.
(4) Dunbar Associates, Inc. owns 102,934 shares. The President of
Dunbar Associates, Inc. is Vickie D. Langevin, Mr. Langevin's
spouse. Mr. Langevin disclaims any beneficial ownership with
respect to these shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS AND RELATED TRANSACTIONS
The information contained herein relating to the Stock Purchase
Agreement and the Employment Agreements (each as defined herein) is
qualified in its entirety by reference to the complete text of such
agreements, copies of which have been filed as exhibits to this Annual
Report on Form 10-K.
46
<PAGE>
Stock Purchase Agreement
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") of Largo, Florida, from Ronald
N. Damico 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. As
part of the transaction, Mr. Damico and KTL entered into an employment
agreement under which Mr. Damico became employed as KTL's President
and Chief Executive Officer. The term of the employment agreement
expires on November 15, 1998. In addition, KTL has agreed to lease
from Mr. Damico and his spouse certain real estate at Clearwater,
Florida on a month-to-month basis. Further, KTL has agreed to lease
the real estate at Largo, Florida used by KTL as its corporate
headquarters from a company owned by Mr. Damico for an 18-month term,
at which time KTL has agreed to purchase the property for $2.4 million
less the total amount of environmental-related costs incurred
subsequent to August 16, 1996.
Employment Agreements
In connection with the 1995 acquisitions, the Company entered into or
amended employment agreements with each of the members of senior
management. In addition, in connection with the KTL acquisition, the
Company entered into an employment agreement with Ronald N. Damico.
For a description of the employment agreements, see Item 11 -
"Employment Contracts and Termination of Employment."
Payments To Management and Significant Stockholders
In connection with the KTL acquisition, Ronald N. Damico received
$8,118,000 in cash and 225,000 shares of Common Stock in exchange for
his interest in KTL.
PRE-1995 TRANSACTIONS
Since January 1, 1994, the Operating Companies have entered into
a number of transactions with significant stockholders, officers and
directors. Certain of these transactions were still in effect in 1996.
CMS
The spouse of Mr. Richard A. Beauchamp (a stockholder and director of
the Company and an executive officer of CMS) owed CMS $639,073 as of
June 30, 1995, representing an unsecured advance. Prior to completion
of the Initial Offering, CMS forgave $437,823 of such amount. The
balance of $201,250 is represented by an interest-bearing note (with
interest at the lowest rate required by the Internal Revenue Service
to avoid imputation of interest income) due in ten years, with certain
mandatory prepayments in the event of public sales of Common Stock
held by Mrs. Beauchamp.
REAL PROPERTY LEASES
Scales entered into lease agreements with respect to its Tampa,
Florida and Homer, Georgia facilities, respectively, with Phil and
Barbara Scales, the owners of both such facilities. Mr. Scales is a
stockholder and director of the Company, and he was an executive
officer of Scales until March 1997. Scales paid a total of $38,844
rent to Mr. and Mrs. Scales during 1994 under the terms of the lease
agreement with respect to
47
<PAGE>
the Tampa facility and no rent to Mr. And Mrs. Scales during 1994
under the terms of the lease agreement with respect to the Homer
facility, but did pay the taxes and insurance with respect to the
Homer facility. In connection with the Acquisitions these leases were
revised to provide for three-year terms, terminable by either party
upon six-months' prior notice, and rent of $57,600 per year for the
Tampa facility and $6,000 per year for the Homer facility.
In connection with the KTL acquisition, the Company entered into a
lease with Ronald N. Damico and his spouse as discussed above under
"Stock Purchase Agreement."
ARRANGEMENTS WITH DUNBAR ASSOCIATES, INC.
TBI has entered into a Consulting and Non-Competition Agreement
with Dunbar Associates, Inc. ("Dunbar"), pursuant to which Dunbar
agreed to provide, through its representative, consulting services to
TBI for a term extending until November 13, 1998 (renewable for
additional one year terms thereafter upon the consent of the parties
thereto). TBI agreed to pay transaction fees to Dunbar, as approved
by TBI's board of directors, in connection with the completion of any
major financing or acquisition transaction by TBI, the aggregate
amount of which transaction fees shall not be less than $192,000 nor
more than $492,000 during any calendar year. TBI also agreed to pay a
retainer to Dunbar in the amount of $16,000 per month during the term
of the agreement, such retainer being applied against the amount of
transaction fees earned by Dunbar as described above. Michael J.
Langevin, a Director of the Company, is an employee of Dunbar, which
is owned by his spouse.
Dunbar has also issued separate promissory notes in favor of TBI
and W&L, in the original principal amounts of $245,235 and $491,104,
respectively, in connection with Dunbar's purchase of capital stock of
TBI and W&L. This stock was subsequently converted into shares of the
Company's Common Stock in connection with the Acquisitions. Each of
the promissory notes is secured by these shares and is payable in one
installment which is due on October 10, 2005. Each of the promissory
notes bears interest at the rate of 6.77 percent per annum, such
interest being payable at maturity.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for the three years ended December 31,
1996
Consolidated Statements of Stockholders' Equity for the three years ended
December 31, 1996
Consolidated Statements of Cash Flows for the three years ended December
31, 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
All schedules for the Company are omitted because they are not required or
not applicable. The required information is included in the financial
statements or notes thereto.
48
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this report.
Exhibit
Number Description
- ------- --------------
* 3.1 Certificate of Incorporation of the Company, as amended.
* 3.2 By-laws of the Company, as amended
* 4.1 Indenture for the Notes, dated as of November 15, 1995, among the
Company, the Guarantors named therein and The Bank of New York, as
Trustee (including form of Exchange Note).
* 4.2 Purchase Agreement, dated as of November 10, 1995, among the
Company, the Guarantors named therein and Smith Barney Inc., as the
Initial Purchaser.
* 4.3 Registration Rights Agreement, dated November 15,1995, among the
Company, the Guarantors named therein, and the initial
Purchaser.
* 4.4 Form of Exchange Note (included in Exhibit 4.1)
** 10.1 First Amendment to Loan Agreement, dated August 13, 1996, to be
effective as of June 28, 1996, between the Company and NationsBank
of Texas, N.A. (Form 10-Q for the quarter ended September 30, 1996,
filed November 1996).
** 10.2 Stock Purchase Agreement, dated as of August 23, 1996, between the
Company and Ronald N. Damico, including his employment agreement.
(Form 8-K dated August 23, 1996, filed September 1996).***
** 10.3 Continuing and Unconditional Guaranty, dated as of September 16,
1996, between KTL and NationsBank of Texas, N.A. (Form 10-Q for the
quarter ended September 30, 1996, filed November 1996).
** 10.4 Security Agreement, dated as of September 16, 1996, between KTL and
NationsBank of Texas, N.A. (Form 10-Q for the quarter ended
September 30, 1996, filed November 1996).
** 10.5 Guarantee of 12 1/4% Senior Subordinated Notes due 2005, Series B,
dated as of September 19, 1996, by KTL (Form 10-Q for the quarter
ended September 30, 1996, filed November 1996).
** 10.6 Loan and Security Agreement, dated February 21, 1996, between Volvo
Truck Finance North America, Inc. ("Volvo") and the Company and
certain of its Subsidiaries (Form 8-K dated May 3, 1996, filed May
1996).
** 10.7 Financing Integration Agreement, dated February 21, 1996, between
Volvo and the Company and certain of its subsidiaries (Form 8-K
dated May 3, 1996, filed May 1996).
** 10.8 Loan Agreement, dated February 1, 1996, between the Company and
NationsBank of Texas, N.A. (Form 8-K dated May 3, 1996, filed May
1996).
** 10.9 Asset Purchase Agreement, dated as of January 5, 1996, between CMS
Transportation Services, Inc. and Freymiller Trucking, Inc., as
debtor and debtor-in-possession (Form 8-K dated May 3, 1996, filed
May 1996).
49
<PAGE>
** 10.10 Consulting and Non-Competition Agreement, dated as of April 1,
1995, between Thompson Bros., Inc. and Dunbar Associates, Inc.
(Form 8-K dated May 3, 1996, filed May 1996).***
* 10.11 Agreement and Plan of Reorganization, dated as of October 20, 1995
(including the amendment thereto dated as of November 14, 1995 and
including all exhibits thereto).
* 10.12 Stock Contribution Agreements, dated as of October 20, 1995, among
the Company and the stockholders of each of the Operating Companies,
respectively (each included in Exhibit 10.11).
* 10.13 Stockholder Agreement, dated as of November 15, 1995, among the
Company and each of its stockholders (included in Exhibit 10.11).
* 10.14 Registration Rights Agreement, dated as of November 15, 1995, among
the Company and each of its stockholders (included in Exhibit
10.11).
* 10.15 Warrant to Purchase 375,000 Shares of Common Stock of the Company,
dated as of November 15, 1995, issued to BancBoston Ventures, Inc.
* 10.16 Employment Agreements among the Company and/or certain of
the Operating Companies and each of Michael L. Lawrence, Paul
L. Bangerter, Richard Beauchamp, Michael J. Crowe, Kenneth H.
Evans, Jr., William P. Scales and Randy Thompson.***
* 10.17 1995 Stock Option Plan of the Company.***
12 Computation of ratio of earnings to fixed charges.
* 16.1 Letter from Deloitte & Touch LLP regarding their dismissal as
independent accountants of W&L Services Corp. and Subsidiaries.
* 21 Subsidiaries of the Company and Jurisdictions of Incorporation.
* 24 Powers of Attorney (see signature pages).
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form
S-4, Registration No. 33-99716, initially filed with the Securities and
Exchange Commission on November 24, 1995, as amended.
** Exhibit is incorporated by reference as indicated.
*** Management contract or compensatory plan or arrangement.
REPORTS ON FORM 8-K
During the fourth quarter of 1996, there were no reports filed on Form 8-K.
50
<PAGE>
S I G N A T U R E S
-------------------
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Michael L. Lawrence
-------------------------------------
Michael L. Lawrence
Director, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 31, 1997 by the following persons on behalf of
the Registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ Michael L. Lawrence Director, Chairman of the Board and
- ------------------------------------ Chief Executive Officer
Michael L. Lawrence
/s/ Richard A. Beauchamp Director
- ------------------------------------
Richard A. Beauchamp
/s/ Kenneth H. Evans, Jr. Director, Treasurer and Chief
- ------------------------------------ Financial and Accounting Officer
Kenneth H. Evans, Jr.
/s/ William E. Greenwood Director
- ------------------------------------
William E. Greenwood
Director
- ------------------------------------
Michael J. Langevin
/s/ J. Michael May Director, General Counsel and
- ------------------------------------ Secretary
J. Michael May
Director
- ------------------------------------
William P. Scales
51
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
EXHIBIT INDEX
Page
Exhibit Number Description Number
- -------------- ----------- ------
12 Computation of ratio of earnings
to Fixed Charges
27 Financial Data Schedule
52
<PAGE>
EXHIBIT 12
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended December 31
---------------------------------------------
1992 1993 1994 1995 1996
-------- ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes
and extraordinary items $(1,282) $3,551 $ 5,431 $ 5,677 $(1,892)
------- ------ ------- ------- -------
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 3,438 3,783 3,422 4,993 16,677
Portion of rent under long-term
operating leases representative of an
interest factor 826 306 309 573 1,658
Preferred stock dividend requirements
of consolidated subsidiaries 1,139 1,224 1,486 188 -
------- ------- ------ ------- -------
Total fixed charges 5,403 5,313 5,217 5,754 18,335
------- ------ ------- ------- -------
Earnings before income taxes,
extraordinary items and fixed charges 4,121 8,864 10,648 11,431 16,443
======= ====== ======= ====== =======
Ratio of earnings to fixed charges * 1.67x 2.04x 1.99x *
======= ====== ======= ======= =======
</TABLE>
* The Company's earnings were insufficient to cover fixed charges by $1,892 and
$1,282 for the years ended December 31, 1996 and 1992, respectively.
53
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERITRUCK
DISTRIBUTION CORP'S. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 734
<SECURITIES> 0
<RECEIVABLES> 29,561
<ALLOWANCES> 560
<INVENTORY> 1,092
<CURRENT-ASSETS> 41,417
<PP&E> 131,870
<DEPRECIATION> 28,069
<TOTAL-ASSETS> 192,648
<CURRENT-LIABILITIES> 27,822
<BONDS> 169,326
0
0
<COMMON> 35
<OTHER-SE> (3,859)
<TOTAL-LIABILITY-AND-EQUITY> 192,648
<SALES> 0
<TOTAL-REVENUES> 224,257
<CGS> 0
<TOTAL-COSTS> 209,438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 234
<INTEREST-EXPENSE> 16,677
<INCOME-PRETAX> (1,892)
<INCOME-TAX> 340
<INCOME-CONTINUING> (2,232)
<DISCONTINUED> 0
<EXTRAORDINARY> (230)
<CHANGES> 0
<NET-INCOME> (2,462)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>