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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 000-22571
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1915632
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(State of Incorporation) (I.R.S. Employer Identification No.)
5025 Derrick Jones Road, Suite 120, Atlanta, Georgia 30349
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(Address of principal executive offices)
(770) 907-3360
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and has been subject to such filing requirements for the
past 90 days. Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, no par value per share, 3,867,000 shares issued and outstanding
as of November 13, 1997.
Redeemable Common Stock Purchase Warrants, 1,437,500 issued and outstanding as
of November 13, 1997.
Transitional Small Business Disclosure Format (check one): YES NO X
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QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
INDEX
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1997 (unaudited)..................................................................3
Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 1997 and 1996 (unaudited)...................................................4
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 (unaudited).........................................................5
Notes to the Condensed Consolidated Financial Statements........................................6
ITEM 2. Management's Discussion and Analysis and Results of Operation...................................8
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................12
ITEM 2. Changes in Securities..........................................................................12
ITEM 3. Defaults Upon Senior Securities................................................................12
ITEM 4. Submission of Matters to a Vote of Security Holders............................................12
ITEM 5. Other Information..............................................................................12
ITEM 6. Exhibits and Reports on Form 8-K...............................................................13
Signatures.....................................................................................14
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -
PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
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September 30, December 31,
1997 1996
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(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 3,767,042 $ 248,454
Trade accounts receivable, net of allowance for doubtful accounts of
$33,765 at September 30, 1997 and $63,629 at December 31, 1996 3,895,397 2,820,024
Note receivable 1,500,000 -
Due from affiliate 426,159 228,893
Other 715,641 176,365
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Total current assets 10,304,239 3,473,736
PROPERTY AND EQUIPMENT, net 2,179,282 1,679,011
OTHER ASSETS 258,167 192,132
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Total assets $ 12,741,688 $ 5,344,879
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 2,293,459 $ 2,144,670
Accrued liabilities 1,449,344 576,997
Line of credit 1,049,325 -
Current maturities of long-term debt and capital lease obligations 536,119 397,977
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Total current liabilities 5,328,247 3,119,644
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LINE OF CREDIT - 878,379
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LONG-TERM DEBIT AND CAPITAL LEASE OBLIGATIONS, net of current maturities 1,290,208 1,187,064
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DEFERRED INCOME TAXES 261,975 112,270
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DUE TO SHAREHOLDER 23,469 48,469
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SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock; 100,000 shares authorized, no shares issued and outstanding - -
Common stock; no par value, 20,000,000 shares authorized, 3,867,000
and 2,600,000 issued and outstanding at September 30, 1997 and
December 31, 1996, respectively - -
Common stock purchase warrants; 1,437,500 and none issued and
outstanding at September 30, 1997 and December 31, 1996, respectively 177,117 -
Additional paid-in capital 5,567,243 57,166
Retained earnings (deficit) 93,429 (58,113)
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Total shareholders' equity (deficit) 5,837,789 (947)
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Total liabilities and shareholders' equity $ 12,741,688 $ 5,344,879
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</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Month and Nine Month Periods Ended
September 30, 1997 and 1996 (unaudited)
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Three Months Ended Nine Months Ended
September 30, September 30,
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1997 1996 1997 1996
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OPERATING REVENUES $ 9,112,972 $ 5,527,486 $ 24,971,396 $ 14,014,160
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OPERATING EXPENSES:
Salaries, wages and benefits 3,463,873 1,751,239 8,980,461 4,652,533
Purchased transportation 2,059,381 1,645,112 6,112,085 3,778,673
Operating supplies and expenses 1,779,383 942,241 4,627,306 2,791,378
Fuel and fuel taxes 1,021,022 633,449 2,927,815 1,703,294
Communications and utilities 126,255 63,183 328,628 196,054
Depreciation 103,627 71,885 257,100 172,167
Operating taxes and licenses 23,934 9,773 93,678 42,029
Bad debt expense 3,016 6,200 9,016 13,835
Other operating expenses 437,434 267,996 1,110,383 679,573
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Total operating expenses 9,017,925 5,391,078 24,446,472 14,029,536
PRO FORMA INCOME (LOSS) FROM
OPERATIONS 95,047 136,408 524,924 (15,376)
OTHER INCOME (EXPENSE):
Interest expense (93,728) (81,174) (243,765) (214,261)
Other income, net 114,240 15,040 210,383 44,109
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PRO FORMA INCOME (LOSS) BEFORE
INCOME TAXES 115,559 70,274 491,542 (185,528)
BENEFIT (PROVISION) FOR INCOME
TAXES ( 27,000) (29,000) (214,000) 48,000
PRO FORMA BENEFIT FOR
INCOME TAXES - 3,000 45 000 23,000
INCOME TAX PROVISION DUE TO
CHANGE IN TAX STATUS - - (246,000) -
TOTAL BENEFIT (PROVISION) FOR
------------ ------------- -------------- -------------
INCOME TAXES (27,000) (26,000) (415,000) 71,000
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PRO FORMA NET INCOME (LOSS) $ 88,559 $ 44,274 $ 76,542 $ (114,528)
============ ============= ============== =============
PRO FORMA NET INCOME (LOSS)
PER COMMON SHARE $ 0.02 $ 0.01 $ 0.02 $ (0.04)
============ ============= ============== =============
Weighted average common and common
equivalent shares outstanding 4,727,892 3,468,211 3,971,384 2,578,102
============ ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30, 1997 and 1996
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Nine Month Periods
Ended September 30,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Pro forma net income (loss) $ 76,542 $ (114,528)
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Adjustments to reconcile pro forma net income (loss)
to net cash
provided by (used in) operating activities:
Pro forma income tax adjustment (45,000) (23,000)
Pro forma compensation expense 120,000 60,000
Deferred income taxes 149,705 25,000
Pretax income of Rapid - (26,691)
Depreciation 257,100 172,167
Changes in operating assets and liabilities:
Trade accounts receivable, net (1,075,373) (410,460)
Due from affiliate (197,266) (49,607)
Other current assets (539,276) 11,139
Other assets (66,035) (179,059)
Accounts payable and accrued liabilities 1,021,136 419,264
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Total adjustments (375,009) (1,247)
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Net cash used in operating activities (298,467) (115,775)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (757,371) (114,372)
Issuance of secured note from unrelated party (1,500,000) -
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Net cash used in investing activities (2,257,371) (114,372)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit 170,946 513,866
Repayments of long-term debt and capital lease obligations (345,129) (285,424)
Proceeds from long-term debt 586,415 83,540
Net proceeds from sale of common stock and
common stock purchase warrants 5,687,194 10,000
Cash distribution to shareholders - (25,362)
Due to shareholder (25,000) 69
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Net cash provided by financing activities 6,074,426 296,689
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,518,588 66,542
CASH AND CASH EQUIVALENTS, beginning of period 248,454 16,765
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CASH AND CASH EQUIVALENTS, end of period $ 3,767,042 $ 83,307
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</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 and 1996 (Unaudited)
1. ORGANIZATION AND OPERATION
Professional Transportation Group Ltd., Inc. ("PTG, Ltd.") serves as a
holding company for its three operating subsidiaries: Timely Transportation,
Inc. ("Timely"), Truck-Net, Inc. ("Truck-Net"), and PTG, Inc. (collectively,
Timely, Truck-Net and PTG, Inc. are referred to as the "Subsidiaries"). PTG,
Ltd. together with the Subsidiaries is hereafter referred to as the "Company."
The Company, through the Subsidiaries, provides transportation and logistics
services primarily for the air freight and expedited delivery industries
throughout the continental United States. Timely operates a fleet of
company-owned and leased vehicles to provide time-definite truckload
transportation services for companies in the air freight and expedited delivery
markets. Truck-Net provides brokerage services to companies, mainly in the air
freight industry, that are in need of third-party transportation. PTG, Inc.
operates a courier service in the Atlanta, Georgia metropolitan region (d.b.a.
Rapid Transit) and provides third-party logistics services in recovering
copiers, fax machines, and telephone equipment that are need of repair or under
expired leases.
Prior to January 1997, the Subsidiaries were owned and operated by the
majority shareholder of the Company as separate operating companies. On January
1, 1997, the respective shares of stock in the Subsidiaries were contributed to
PTG, Ltd. by their sole shareholder, whereupon each became a wholly owned
subsidiary of PTG, Ltd.; and PTG, Ltd., which had previously been an operating
company, transferred its operations to PTG, Inc.
As the companies were all under common control, the above transactions
were treated as a reorganization (the "Reorganization") and were accounted for
in a manner similar to a pooling of interests. All references to number of
shares and to per share information in the financial statements have been
adjusted to retroactively reflect the Reorganization as if it had occurred on
December 31, 1996.
In connection with the Reorganization, the Company effected a
5,000-for-1 stock split. All references in the accompanying financial
statements to number of shares and per share amounts of the Company's common
stock have been retroactively restated to reflect the increased number of
shares outstanding from the 5,000-for-1 stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of PTG,
Ltd. and the Subsidiaries. All significant intercompany balances and
transactions have been eliminated.
INCOME TAXES
Prior to the Reorganization, PTG, Ltd. and two of the Subsidiaries
elected to be treated as S corporations for federal and state income tax
purposes. Accordingly, all income or losses of these companies were recognized
by the shareholders on their individual tax returns. In connection with the
Reorganization, these companies converted from S corporation to C Corporation
status and, accordingly, are subject to federal and state income taxes for all
periods after December 31, 1996. For all periods presented, the accompanying
financial statements reflect provisions for income taxes computed in accordance
with the requirements of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." For periods prior to the Reorganization for
those companies with S corporation status, the provisions have been presented
on a pro forma basis as if the Company had been liable for federal and state
income taxes during those periods. Offsetting amounts to such pro forma income
tax provisions are reflected in shareholders' equity (deficit).
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As a result of this change in tax status, the Company recorded an
increase in its provision for income taxes of approximately $246,000 during the
first nine months of 1997 to reflect the deferred income taxes attributable to
those entities which had previously been exempt from federal income taxation.
These deferred income taxes result from the use of accelerated depreciation and
cash basis tax reporting by these entities.
3. BASIS OF PRESENTATION
In the opinion of management, the unaudited condensed consolidated
financial statements contain all normal and recurring adjustments necessary to
present fairly the consolidated financial position of the Company at September
30, 1997 and the consolidated results of the Company's operations and its cash
flows for the nine month and three month periods ended September 30, 1997 and
1996. Certain information and footnote disclosures usually found in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted.
4. INITIAL PUBLIC OFFERING
On June 19, 1997, the Company's initial public offering (the "Initial
Public Offering") was declared effective by the Securities and Exchange
Commission. In the Initial Public Offering, the Company sold 1,250,000 shares
of Common Stock at $6.00 per share and 1,437,500 redeemable common stock
purchase warrants at $0.125 per warrant.
5. PRO FORMA COMPENSATION EXPENSE
Operating expenses of the Company reflect compensation expense on a
pro forma basis of $120,000 for the nine months ended September 30, 1997 and
$60,000 for the nine months ended September 30, 1996 to reflect the fair value
of services performed by the Company's Chief Executive Officer and President.
Such amounts are an assumed expense only and have never been paid. Beginning on
July 1, 1997, the actual compensation paid to such individual has been
recorded.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following analysis of the Company's financial condition as of
September 30, 1997 and the Company's results of operations for the three month
and the nine month periods ended September 30, 1997 and 1996 should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto. The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements. The
financial information provided below has been rounded in order to simplify its
presentation. However, the percentages provided below are calculated using the
detailed financial information contained in the Consolidated Financial
Statements and the notes thereto.
OVERVIEW
Through December 31, 1996, the Company, Timely Transportation, Inc.
("Timely") and Truck-Net, Inc. ("Truck-Net") operated as three separate
entities. At such time, Dennis A. Bakal, the Company's principal shareholder
owned all of the shares of Timely and Truck-Net. Effective January 1, 1997, Mr.
Bakal contributed his ownership in Timely and Truck-Net to the Company, along
with his ownership of PTG Inc. ("PTG"), a previously inactive company. On
December 31, 1996, PTG acquired certain assets (subject to certain
liabilities), business, operating authorities, names and customer lists of
Rapid Transit ("Rapid"), the courier division of a company controlled by Mr.
Bakal, and certain fixed assets from another company owned by Mr. Bakal, all in
exchange for amounts due the Company, Timely and Truck-Net from the former
corporate owner of Rapid.
Timely, organized in 1991, performs contract truckload ground
transportation services primarily for customers in the air freight and
expedited delivery markets. In November 1995, Timely entered into an agreement
to perform trucking services for Federal Express Corporation ("FedEx") and
became one of FedEx's eight core carriers. Under the core carrier concept, a
limited number of carriers are selected by a shipper to provide scheduled
services between points for a contractually determined period of time. Such
agreements specify routes, pricing (normally determined by route), equipment
specifications and performance standards. In addition, such agreements
generally provide for pricing adjustments based on fuel pricing or changes in
cost structure at predetermined times. For the nine month periods ended
September 30, 1997 and 1996, FedEx accounted for approximately 51% and 35%
respectively, of the consolidated operating revenues of the Company. For the
quarters ended September 30, 1997 and 1996, FedEx accounted for approximately
53% and 46%, respectively, of the Company's consolidated operating revenues.
Since the inception of the agreement, the Company has consistently exceeded the
required performance standards under the agreement, and management anticipates
the renewal of the agreement when it expires in November 1998. There can be no
assurance, however, that this agreement will be renewed.
In developing its niche in the industry, Timely has concentrated, since
January 1994, on the contract carriage of truckload freight for the air freight
and expedited delivery markets. By concentrating in these markets, the Company
has eliminated the need for terminals and has been able to focus its efforts on
acquiring equipment and recruiting drivers and other personnel.
Truck-Net, a licensed freight broker acquired by Mr. Bakal in 1991,
performs truckload brokerage services in the same air freight and expedited
delivery markets served by Timely. As a broker, Truck-Net matches a shipper
with a specific routing and/or equipment need with a carrier able to satisfy
the shipper's particular requirements. All carriers used by Truck-Net are
required to be properly certified and to have a current certificate of
insurance. When logistically feasible, Truck-Net utilizes Timely's equipment to
complete the brokerage contracts. During the nine months ended September 30,
1997, Truck-Net was able to utilize Timely's equipment for approximately TEN
percent of its shipments. The Company anticipates that this utilization will
increase in the future as the Company expands.
Truck-Net offers its services to customers on a contract basis. Some of
its services provide specific scheduled runs for a definite time period, and
others provide deliveries on an as needed basis by the shipper. Truck-Net's
largest customer, Panalpina Inc. ("Panalpina"), the U.S. subsidiary of a major
European air freight forwarder, accounted for approximately 16% and 13% of the
Company's consolidated operating revenues for the nine month
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periods ended September 30, 1997 and 1996, respectively. For the three month
periods ended September 30, 1997 and 1996, Panalpina accounted for 15% and 19%,
respectively of the Company's consolidated operating revenues.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 compared to Nine Months Ended September
30, 1996
The Company's operating revenues increased approximately $11.0
million, or 78%, to approximately $25.0 million for the nine months ended
September 30, 1997, from approximately $14.0 million for the nine months ended
September 30, 1996. For the nine months ended September 30, 1997, Timely,
Truck-Net and PTG accounted for approximately $ 18.0 million, $6.2 million and
$750,000, respectively of the Company's revenues. The increase in the Company's
operating revenues is primarily attributable to the expansion of operations for
major customers such as FedEx and Panalpina. Timely's revenue increased
approximately $9 million on a 98% increase in revenue miles to 15.8 million
miles. In addition during the period ended September 30, 1997, the company
received an undetermined amount of additional revenue arising from the
increased volume experienced by FedEx during the strike of one of its
competitors. During the nine month period ended September 30, 1996 revenues
were adversely affected by severe weather conditions in January and February
1996 and the Chapter 7 bankruptcy petition filed by a major customer of both
Timely and Truck-Net. The combination of the severe weather and the bankruptcy
idled certain of the Company's equipment and drivers during the first quarter
of 1996.
The Company's operating expenses increased approximately $ 10.4
million, or 74%, to approximately $24.4 million in the nine months ended
September 30, 1997 from approximately $14.0 million in the nine months ended
September 30, 1997. The increase in the Company's operating expenses is
primarily due to increased levels of operations related to the increase in
Timely revenue miles, which required investments by the Company in additional
personnel, equipment and office space. In addition, during the nine month
period ended September 30, 1997 the Company incurred costs attributable to its
status as a public company. Such increased costs include additional legal and
accounting costs that were not incurred during the similar period ended
September 30, 1996, prior to the Company's initial public offering. Operating
expenses for the nine month period ended September 30, 1997 reflect $120,000 in
compensation expense on a pro forma basis for Mr. Bakal to reflect the fair
value of his services during the period January 1 to June 30, 1997, prior to
the effective date of his employment contract with the Company. It is not
anticipated by the Company or Mr. Bakal that this amount will ever be paid to
him. There is a similar charge in the amount of $60,000 included in the
operating expenses for the nine month period ended September 30, 1996. See Note
5 to the Consolidated Financial Statements. Other income increased
approximately $166,000 primarily due to interest income received on the net
proceeds of the Initial Public Offering, which was completed in June 1997.
Prior to January 1, 1997, the Company and all of its subsidiaries
except Truck-Net had elected to be treated as S Corporations for federal and
state income tax purposes. Accordingly, all income and losses of these
companies were recognized by the shareholders of the companies on their
individual tax returns. The accompanying statement of operations for the nine
months ended September 30, 1996 reflects a tax benefit on a pro forma basis as
if the Company and all its subsidiaries were liable for federal income taxes as
taxable corporate entities for such period. For the nine month period ended
September 30, 1997, the Company has recognized a tax provision totaling
$415,000, of which $246,000 (approximately $.06 per share) is a one-time charge
related to the termination of the S Corporation election of the Company and
certain of its subsidiaries and represents the recognition of deferred tax
liabilities attributable to these entities, which treatment is mandated by SFAS
Statement No. 109, "Accounting for Income Taxes" The change in the Company's
income tax provision from a benefit of $71,000 to a provision of $169,000
(excluding the $246,000 one-time charge) for the nine months ended September
30, 1997 is a direct result of the change in income before income taxes from a
loss of approximately $186,000 in the first nine months of 1996 to income of
approximately $492,000 in the first nine months of 1997.
The Company' pro forma net income increased approximately $191,000
from a loss of $115,000 to net income of $77,000 for the nine months ended
September 30, 1997 when compared to the similar period in 1996 primarily as a
result of increased revenues.
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Three Months Ended September 30, 1997 compared to Three Months Ended September
30, 1996
The Company' operating revenues increased approximately $3.6 million,
or 65%, to approximately $9.1 million in the three months ended September 30,
1997, from $5.5 million in the three months ended September 30, 1996. For the
three months ended September 30, 1997, Timely, Truck-Net and PTG accounted for
approximately $6.7 million, $2.2 million and $200,000, respectively, of the
Company's consolidated revenues. The increase in the Company's consolidated
revenues is primarily due to a $3.3 million or 91% increase in Timely's
revenues during the reporting period. For the three months ended September 30,
1997, revenue miles driven by Timely increased 87% to 5.8 million miles.
The Company's operating expenses increased approximately $3.6 million,
or 67%, to approximately $9 million in the three months ended September 30,
1997, from $5.4 million in the three months ended September 30, 1996. The
increase in the Company's operating expenses is primarily due to increased
levels of operation of both Timely and Truck-Net, which required investments by
the Company in additional personnel, equipment and office space. The increased
operations of Timely contributed to increases in fuel and fuel taxes of 61%,
which was offset by reductions in the cost per gallon of fuel. In addition, the
cost of driver payroll and benefits increased 65% for the three months ended
September 30, 1997 compared to the same three month period in 1996. Other
income increased approximately $99,000 primarily due to interest income
received on the net proceeds of the Company's Initial Public Offering,
completed in June 1997.
Income tax expense for the three months ended September 30, 1997 is
based on annualized income tax expense for the nine month period ended on the
same date. Income tax expense for the three month period ended September 30,
1996 is based on the pro forma income tax provision recorded for the year ended
December 31, 1996. For a full discussion of the Benefit (Provision) for income
taxes for the period ended September 30, 1996 please refer to the applicable
paragraph in the nine month comparison of results for operations.
The Company's pro forma net income increased 100% to approximately
$89,000 for the three months ended September 30, 1997 compared to $44,000 to
the three months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
On June 19, 1997, the Company's registration statement for the sale of
1,250,000 of common stock at a price of $6.00 per share and 1,437,500
redeemable common stock purchase warrants (the "warrants") at a price of $.0125
per warrant was declared effective (the "Initial Public Offering") by the
Securities and Exchange Commission. Proceeds to the Company, after underwriting
discounts and related offering expenses totaled approximately $ 5.7 million.
The Company had working capital of approximately $5.0 million at
September 30, 1997. The Company's primary long-term and working capital
requirements have been to fund capital expenditures for tractors, trailers,
computer and satellite communication equipment and for financing accounts
receivable. Prior to the Initial Public Offering the Company's expansion had
been financed through bank borrowings and lease financing. Most of the
Company's requirements for tractors have been met through leases from large
national leasing companies or through leasing programs of the manufacturer. The
Company is unable to estimate the amounts of cash, which will be required to
fund its future equipment needs. However, with the completion of the Initial
Public Offering, the Company has obtained commitments for financing of new
equipment at substantially lower rates than were available to it in the past.
Delivery of these units commenced in October 1997 and at that time the Company
began returning more expensive leased units as they come off of lease.
In September 1997 the Company loaned, on a fully secured basis, $1.5
million to wholly-owned subsidiaries of Continental American Transportation,
Inc. ("CAT"). Under the terms of the loan agreement, the Company received an
exclusive option to purchase the operating assets, subject to certain
liabilities, of four of the operating subsidiaries of CAT within 120 days of
the execution of the loan agreement. On October 31, 1997 a newly formed,
wholly-owned subsidiary of the Company entered into a marketing agreement with
CAT and its
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subsidiaries under which the newly formed company leased all the operating
assets and terminals of CAT's subsidiaries and hired all of the subsidiaries
employees. This agreement is for a term of nine months and during that time the
newly formed subsidiary will operate the businesses formerly operated by the
subsidiaries of CAT and will pay a specified fee to the subsidiaries based on
the retained revenues of the businesses. Under the terms of the marketing
agreement, the Company's option to purchase the assets of the subsidiaries of
CAT was extended to the termination date of the marketing agreement. The
subsidiaries of CAT, whose assets are subject to the option agreement, operate
a fleet of approximately 500 tractors and more than 1000 trailers and employ
approximately 1000 people.
Net cash used in operating activities totaled approximately $298,000
for the nine month period ended September 30, 1997, compared to a use of
approximately $116,000 in the comparable period ended September 30, 1996. This
increase in usage arose mainly from an increase in accounts receivable and
other current assets and corresponding, but smaller increases in accounts
payable and accrued liabilities and operating results. Cash used in investing
activities increased to $2.3 million primarily due to the loan agreement
discussed above and the acquisition of approximately $757,000 of property and
equipment. Cash provided by financing activities increased approximately $5.8
million primarily due to the completion of the Initial Public Offering.
The Company's line of credit was obtained through Dennis A. Bakal, the
Company's major shareholder. Under the terms of the agreement between Mr.Bakal
and SouthTrust Bank of Georgia, NA ("SouthTrust"), SouthTrust has advanced to
the Company, through Mr. Bakal, approximately $1.635 million and has provided a
facility amounting to $265,000 for letters of credit, which are used for
security deposits on certain equipment leases. Mr. Bakal has pledged certain
personal assets as security for the loan and the Company and its subsidiaries
(other than the newly formed subsidiary) have pledged substantially all of
their assets, including accounts receivable, to provide further security for
the loan and have guaranteed Mr. Bakal's performance under the agreement. The
loan bears interest at a rate equal to 0.75% above SouthTrust's Base rate (as
defined in the agreement) and matures on April 1, 1998. It is anticipated that
the loan will be restructured in the first quarter of 1998, with the Company
replacing Mr. Bakal as the primary borrower and removing Mr. Bakal's guarantee
of the letter of credit facility.
The Company believes that the proceeds of the Initial Public Offering,
together with cash flow from operations will be sufficient to satisfy its
contemplated cash requirements for Timely, Truck-Net and PTG for at least twelve
months. The Company has recently obtained a commitment from SouthTrust for a
working capital line credit of up to $5.0 million to fund the cash flow of its
new subsidiary which is operating the businesses formerly operated by CAT's
subsidiaries. There is no assurance that the Company will be able to obtain such
financing or that cash flow from operations will meet such subsidiaries'
obligations. The Company may then be required to utilize cash flow from its
other operations to meet the obligations of this new subsidiary. The Company's
financial requirements will depend upon, among other things, the growth rate of
the Company's business, the amount of cash generated by operations and the
Company's ability to borrow funds or enter into lease or purchase financing
arrangements for the acquisition of new equipment or for working capital
purposes. Should the Company require additional debt or equity financing to
support its operations or to make acquisitions, there can be no assurance that
such additional financing will be available to the Company on commercially
reasonable terms, or at all. At September 30, 1997, the Company had
approximately $3.8 million in cash and cash equivalents.
INFLATION
Inflation has not had a material effect on the Company's operations.
If inflation increases, the Company will attempt to increase its rates to
offset its increased expenses. No assurances can be given, however, that the
Company will be able to adequately increase its prices in response to
inflation.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On or about February 26, 1997, an action was brought against two of
the Company's subsidiaries, Timely Transportation, Inc. ("Timely") and
Truck-Net, Inc. ("Truck-Net"), by the trustee in bankruptcy in the U.S.
Bankruptcy Court for the Central District of California in the matter of In re
Right O Way Transportation, Inc. (Case No. SA96-1174 JR), seeking to recover
alleged preferential transfers to and for the benefit of Timely and Truck-Net
in the aggregate of approximately $345,000 within the 90 days preceding the
filing of Right O Way's bankruptcy petition under Chapter 7 of the U.S.
Bankruptcy Code. Answers have been filed on behalf of Timely and Truck-Net
which generally deny all of the trustee's material allegations and asserting
several affirmative defenses as a bar to recovery by the trustee. The Company
intends to vigorously defend this action.
The Company is not a party to any other material legal proceedings
other than routine litigation arising in the normal course of business.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
(a) Pursuant to Item 701(f) of Regulation S-B, the Company is
obligated to report on the use of proceeds from the Initial Public Offering.
The information provided below is given as of September 30, 1997.
(1) The Company's registration statement on Form SB-2 (File
No. 333-24619) was declared effective by the Securities and Exchange Commission
on June 19, 1997.
(2) The Initial Public Offering commenced on June 19, 1997.
(3) The Initial Public Offering did not terminate before
any securities were sold.
(4) (i) The Initial Public Offering did not terminate
before the sale of all securities registered.
(ii) The managing underwriter of the Initial Public
Offering was Argent Securities, Inc.
(iii) Common Stock and redeemable common stock
purchase warrants (the "Warrants") were
registered in the Initial Public Offering.
(iv) 1,250,000 shares ($7,500,000) of Common Stock
were registered and sold. 1,437,500 Warrants
($179,687.50) were registered and sold.
(v) An estimate of the amount of expenses incurred
by the Company in connection with the issuance
and distribution of the Securities registered
is $1,995,494. Such expenses have been or will
be paid directly or indirectly to persons or
entities other than directors, officers,
persons owning 10% or more of the Company's
securities and affiliates of the Company.
(vi) The net proceeds to the Company after
deducting the total expenses described above
were $5,684,194.
12
<PAGE> 13
(vii) Through September 30, 1997, $3,746,429 of
the net proceeds of the Initial Public
Offering were invested in temporary
investments; $1,500,000 was loaned to an
unrelated party and $437,765 is available
cash. None of the net proceeds have been
paid directly or indirectly to directors,
officers, persons owning 10% or more of the
Company's securities and affiliates of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
No. Description
- --- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit
3.1 from the Company's Registration Statement on Form SB-2, File No. 333-24619 (the "Registration
Statement")).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.2 from the Registration Statement).
4.1 Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 from the Registration
Statement).
4.2 Specimen Redeemable Warrant Certificate (Incorporated by reference to Exhibit 4.2 from the
Registration Statement).
10.1 Marketing Agreement, dated as of October 31, 1997 between the Company and Carpet Transport, Inc.,
Blue Mack Transport, Inc., Chase Brokerage, Inc.,CTI Properties, Inc. and Continental American
Transportation, Inc. (Incorporated by reference to Exhibit 10.1 from the Company's current report on
Form 8-K, date of report November 12, 1997, File No. 000-22571).*
10.2 Loan Agreement, dated as of September 12, 1997 between the Company and Carpet Transport, Inc., Blue
Mack Transport, Inc., Chase Brokerage, Inc. and CTI Properties, Inc. (Incorporated by reference to
Exhibit 1.1 from the Company's current report on Form 8-K, date of report September 12, 1997, File
No. 000-22571).
11.1 Statement regarding Computation of Earnings Per Share.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
- --------------
* Confidential treatment previously requested for portions of this exhibit.
(b) Reports on Form 8-K.
The Company filed one current report on Form 8-K during the three
month period ended September 30, 1997, dated of report September 12, 1997,
regarding the loan transaction between the Company and the subsidiaries of CAT.
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
Date: November 13, 1997 By: /s/ Dennis A. Bakal
-------------------- --------------------------------------
Dennis A. Bakal
President and Chief Executive Officer
(principal executive officer)
Date: November 13, 1997 By: /s/ Peter C. Roth
-------------------- --------------------------------------
Peter C. Roth
Chief Financial Officer
(principal financial and accounting officer)
14
<PAGE> 1
Exhibit 11.1 Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pro forma net income (loss)
$ 88,559 $ 44,275 $ 76,542 $ (114,528)
=========== =========== =========== ============
Pro forma net income (loss)
per share (primary)
$ 0.02 $ 0.01 $ 0.02 $ (0.04)
=========== =========== =========== ============
Weighted average common and
common equivalent shares
outstanding(a)
4,727,892 3,468,211 3,971,384 3,578,102
=========== =========== =========== ============
Pro forma net income (loss)
per share (fully diluted)
$ 0.02 $ 0.01 $ 0.02 $ (0.04)
=========== ============ =========== ============
Weighted average common and
common equivalent shares
outstanding(a)
4,746,753 3,490,000 3,971,384 2,578,102
=========== ============ =========== ============
</TABLE>
- ----------
(a) Weighted average common and common equivalent shares outstanding have
been calculated using the treasury stock method. Fully diluted
computations have not been presented in the Condensed Consolidated
Statements of Operations because the effect is not material.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ISSUER'S
UNAUDITED INTERIM FINANCIAL STATEMENTS OF PROFESSIONAL TRANSPORTATION GROUP LTD,
INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, SET FORTH IN THE
ACCOMPANYING FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 20,613
<SECURITIES> 3,746,429
<RECEIVABLES> 3,929,162
<ALLOWANCES> 33,765
<INVENTORY> 0
<CURRENT-ASSETS> 10,304,239
<PP&E> 2,887,904
<DEPRECIATION> 257,100
<TOTAL-ASSETS> 12,741,688
<CURRENT-LIABILITIES> 5,328,247
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,837,789
<TOTAL-LIABILITY-AND-EQUITY> 12,741,688
<SALES> 24,971,396
<TOTAL-REVENUES> 24,971,396
<CGS> 0
<TOTAL-COSTS> 24,446,472
<OTHER-EXPENSES> 210,383
<LOSS-PROVISION> 9,016
<INTEREST-EXPENSE> 243,765
<INCOME-PRETAX> 491,542
<INCOME-TAX> 415,000
<INCOME-CONTINUING> 76,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,542
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
