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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
- --- AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 000-22571
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
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(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 (1) 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 (2) has been subject to such filing requirements for the
past 90 days. (1) Yes X No (2) Yes No X
--- --- --- ---
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
--- ----
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, 3,850,000 shares issued and
outstanding as of August 13, 1997.
Redeemable Common Stock Purchase Warrants, 1,250,000 issued and
outstanding as of August 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 JUNE 30, 1997
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
INDEX
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Page
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance
Sheets as of December 31, 1996
and June 30, 1997 (unaudited).................................. 3
Condensed Consolidated Statements
of Operations for the three and six
months ended June 30, 1997 and 1996 (unaudited)................ 4
Condensed Consolidated Statements of Cash
Flows for the six months ended
June 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.............................................. 13
ITEM 2. Changes in Securities.......................................... 13
ITEM 3. Defaults Upon Senior Securities................................ 13
ITEM 4. Submission of Matters to a Vote
of Security Holders........................................... 13
ITEM 5. Other Information.............................................. 13
ITEM 6. Exhibits and Reports on Form 8-K............................... 14
Signatures..................................................... 15
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -
PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
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(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 5,547,008 $ 248,454
Trade accounts receivable, net of allowance for
doubtful accounts of $30,765 at June 30, 1997
and $63,629 at December 31, 1996 2,873,075 2,820,024
Due from underwriter (Note 4) 1,413,406 --
Due from affiliate 389,427 228,893
Other 514,758 176,365
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Total current assets 10,737,674 3,473,736
PROPERTY AND EQUIPMENT, net 1,947,836 1,679,011
OTHER ASSETS 149,487 192,132
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Total assets $ 12,834,997 $ 5,344,879
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 2,265,071 $ 2,144,670
Accrued liabilities 1,723,258 576,997
Line of credit 1,049,325 --
Current maturities of long-term debt and capital
lease obligations 496,703 397,977
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Total current liabilities 5,534,357 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 1,189,607 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, 3,850,000 and 2,600,000 issued
and outstanding at June 30, 1997 and
December 31, 1996, respectively -- --
Common stock purchase warrants; 1,250,000 and none
issued and outstanding at June 30, 1997 and
December 31, 1996, respectively 156,375 --
Additional paid-in capital 5,739,344 57,166
Retained earnings (deficit) (70,130) (58,113)
------------ ------------
Total shareholders' equity (deficit) 5,825,589 (947)
------------ ------------
Total liabilities and shareholders' equity $ 12,834,997 $ 5,344,879
============ ============
</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 Six Month Periods Ended
June 30, 1997 and 1996 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
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1997 1996 1997 1996
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OPERATING REVENUES $ 8,444,551 $ 4,358,650 $ 15,858,424 $ 8,486,674
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Salaries, wages and benefits 3,002,364 1,456,423 5,516,588 2,901,294
Purchased transportation 2,079,512 1,027,278 4,052,704 2,133,561
Operating supplies and expenses 1,517,324 904,437 2,847,923 1,849,137
Fuel and fuel taxes 944,274 566,127 1,906,793 1,069,845
Communications and utilities 105,650 62,109 202,373 132,871
Depreciation 77,286 51,620 153,473 100,282
Operating taxes and licenses 39,351 16,320 69,744 32,256
Bad debt expense 3,000 150 6,000 7,635
Other operating expenses 370,476 186,882 672,949 411,577
------------ ------------ ------------ ------------
Total operating expenses 8,139,237 4,271,346 15,428,547 8,638,458
PRO FORMA INCOME (LOSS) FROM
OPERATIONS 305,314 87,304 429,877 (151,784)
OTHER INCOME (EXPENSE):
Interest expense (75,441) (66,455) (150,037) (133,087)
Other income, net 29,167 44,975 96,143 29,069
------------ ------------ ------------ ------------
PRO FORMA INCOME (LOSS) BEFORE
INCOME TAXES 259,040 65,824 375,983 (255,802)
BENEFIT (PROVISION) FOR INCOME
TAXES (119,000) (9,000) (187,000) 77,000
PRO FORMA BENEFIT (PROVISION)
FOR INCOME TAXES 21,000 (16,000) 45,000) 20,000
INCOME TAX PROVISION DUE TO
CHANGE IN TAX STATUS -- -- (246,000) --
------------ ------------ ------------ ------------
TOTAL BENEFIT (PROVISION) FOR
INCOME TAXES (98,000) (25,000) (388,000) 97,000
------------ ------------ ------------ ------------
PRO FORMA NET INCOME (LOSS) $ 161,040 $ 40,824 $ (12,017) $ (158,802)
=========== ============ ============ ============
Add back of pro forma
compensation expense (Note 5) $ 120,000 $ -- $ 120,000 $ --
Reversal of pro forma income tax
benefit (provision) due
to add back of pro forma
compensation expense (Note 5) (45,000) -- (45,000) --
------------ ------------ ------------ ------------
ADJUSTED NET INCOME (LOSS)
(NOTE 5) $ 236,040 $ 40,824 $ 62,983 $ (158,802)
=========== ============ ============ ============
PRO FORMA NET INCOME (LOSS) PER
COMMON SHARE $ 0.04 $ 0.01 $ 0.00 $ (0.06)
=========== ============ ============ =============
ADJUSTED NET INCOME (LOSS) PER
COMMON SHARE (NOTE 5) $ 0.06 $ 0.01 $ 0.02 $ (0.06)
=========== ============ ============ ============
Weighted average common and common
equivalent shares outstanding 3,706,043 2,968,769 3,624,081 2,567,033
=========== ============ ============ ============
</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 Six Month Periods Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Six Month Periods
Ended June 30,
-----------------
1997 1996
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(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Pro forma net income (loss) $ (12,017) (158,802)
----------- -----------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Pro forma income tax adjustment (45,000) --
Pro forma compensation expense 120,000 --
Deferred income taxes 149,705 3,000
Pretax income of Rapid -- (27,832)
Depreciation 153,473 100,282
Changes in operating assets and
liabilities:
Trade accounts receivable, net (53,051) (332,072)
Due from affiliate (160,534) (4,053)
Other current assets (338,393) 21,207
Other assets 42,645 (111,549)
Accounts payable and accrued liabilities 1,266,662 108,077
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Total adjustments 1,135,507 (242,940)
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Net cash provided by (used in)
operating activities 1,123,490 (401,742)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (422,298) (70,855)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit 170,946 366,866
Repayments of long-term debt and capital
lease obligations (223,275) (113,277)
Proceeds from long-term debt 324,544 --
Net proceeds from sale of common stock
and common stock purchase warrants 5,763,553 10,000
Due from underwriter (1,413,406) --
Due to shareholder (25,000) (15,599)
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Net cash provided by financing activities 4,597,362 247,990
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,298,554 (224,607)
CASH AND CASH EQUIVALENTS, beginning of 248,454 16,765
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 5,547,008 $ (207,842)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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. (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, 1995.
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).
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 six 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.
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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 June 30,
1997 and the consolidated results of the Company's operations and its cash flows
for the six month and three month periods ended June 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 1,250,000 redeemable common stock purchase
warrants at $0.125 per warrant. The Initial Public Offering closed on June 25,
1997, at which time the Company received net proceeds (prior to deducting
offering expenses) of approximately $6,813,000, by way of a $5,400,000 wire
transfer and a commercial check in the amount of $1,413,000 drawn on an account
of the managing underwriter. The managing underwriter requested that the Company
not deposit such check on the day of closing. On or before July 17, 1997, the
entire $1,413,000 was received by the Company.
5. PRO FORMA COMPENSATION EXPENSE
Operating expenses of the Company for the three months and six months
ended June 30, 1997 reflect compensation expense on a pro forma basis of $60,000
and $120,000, respectively, to reflect the fair value of services performed by
the Company's Chief Executive Officer and President during such period. Such
amounts are an assumed expense only and have never been paid. Therefore, pro
forma net income (loss) and pro forma net income (loss) per common share have
been adjusted to reflect the results had this pro forma expense not been
recorded. In subsequent periods, the actual compensation paid to such individual
will be 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 June
30, 1997 and the Company's results of operations for the three month and the six
month periods ended June 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 six month periods ended June 30, 1997 and 1996, FedEx accounted
for approximately 50% and 34% respectively, of the consolidated operating
revenues of the Company. For the quarters ended June 30, 1997 and 1996, FedEx
accounted for approximately 56% and 38%, 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
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equipment to complete the brokerage contracts. During the six months ended June
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 9% of the
Company's consolidated operating revenues for both the six month and three month
periods ended June 30, 1997 and 1996, respectively.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 compared to Six Months Ended June 30,
1996
The Company's operating revenues increased approximately $7.4 million,
or 87%, to approximately $15.9 million during the six months ended June 30,
1997, from approximately $8.5 million for the six months ended June 30, 1996.
For the six months ended June 30, 1997, Timely, Truck-Net and PTG accounted for
approximately $11.3 million, $4.0 million and $550,000, respectively, of the
Company's revenues. The increase in the Company's operating revenues is
primarily attributable to the expansion of Timely and Truck-Net operations for
major customers such as FedEx and Panalpina. Revenues for the six month period
ended June 30, 1996, were adversely affected by severe weather conditions in the
northeastern portion of the U.S. during January and February 1996. In addition,
in February 1996, a major customer of both Timely and Truck-Net filed a Chapter
7 bankruptcy petition. The combination of the severe weather conditions 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 $6.8 million,
or 79%, to approximately $15.4 million in the six months ended June 30, 1997,
from approximately $8.6 million in the six months ended June 30, 1996. For the
six months ended June 30, 1997, Timely, Truck-Net and PTG accounted for
approximately $11.0 million, $3.8 million and $534,000, respectively, of the
Company's operating expenses. 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. In addition, the operating expenses for the six months ended June
30, 1997 reflect $120,000 in compensation expense on a pro forma basis to
reflect the fair value of services provided by Mr. Bakal during the period. See
Note 5 to the Condensed Consolidated Financial Statements.
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 or losses of these companies
were recognized by the shareholders of the companies on their individual tax
returns. The accompanying statement of operations for the six months ended June
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 six month period ended June 30, 1997, the
Company has recognized a tax provision totaling $388,000, of which $246,000
(approximately $0.07 per share) is a one-time charge related to the termination
of the S Corporation election of the Company and its subsidiaries (except
Truck-Net) 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 $97,000 for the six months ended June 30, 1996 to a
provision of $142,000 (excluding the $246,000 one-time charge) for the six
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months ended June 30, 1997 is a direct result of the change in income before
income taxes from a loss of approximately $256,000 in the first six months of
1996 to income of approximately $376,000 in the first six months of 1997.
The Company's pro forma net loss decreased approximately $147,000, to
approximately $12,000 for the first six months of 1997 from a pro forma net loss
of approximately $159,000 for the same period in 1996 primarily as a result of
increased revenues. Adjusted net income (reflecting the reversal of the pro
forma compensation expense and its tax effect) increased approximately $222,000
to approximately $63,000 for the first six months of 1997 from a loss of
approximately $159,000 for the same period in 1996.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 compared to Three Months Ended June
30, 1996
The Company's operating revenues increased approximately $4.1 million,
or 94%, to approximately $8.5 million during the three months ended June 30,
1997, from approximately $4.4 million for the three months ended June 30, 1996.
For the three months ended June 30, 1997, Timely, Truck-Net and PTG accounted
for approximately $6.1 million, $2.1 million and $264,000, respectively, of the
Company's revenues. The increase in the Company's operating revenues is
primarily attributable to the expansion of Timely and Truck-Net operations for
major customers such as FedEx and Panalpina.
The Company's operating expenses increased approximately $3.9 million,
or 91%, to approximately $8.1 million in the three months ended June 30, 1997,
from approximately $4.3 million in the three months ended June 30, 1996. For the
three months ended June 30, 1997, Timely, Truck-Net and PTG accounted for
approximately $5.9 million, $2.0 million and $198,000, respectively, of the
Company's operating expenses. 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. In addition, the operating expenses for the three months ended
June 30, 1997 reflect $60,000 in compensation expense on a pro forma basis to
reflect the fair value of services provided by Mr. Bakal during the period. See
Note 5 to the Condensed Consolidated Financial Statements.
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 or losses of these companies
were recognized by the shareholders of the companies on their individual tax
returns. The accompanying statement of operations for the three months ended
June 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. The change in the Company's income tax provision from
a provision of $25,000 for the three months ended June 30, 1996 to a provision
of $98,000 for the three months ended June 30, 1997 is a direct result of the
change in income before income taxes from approximately $66,000 in the second
quarter of 1996 to income of approximately $259,000 in the second quarter of
1997.
The Company's pro forma net income increased approximately $120,000 to
approximately $161,000 for the second quarter of 1997 from pro forma net income
of approximately $41,000 for the second quarter of 1996 primarily as a result of
increased revenues. Adjusted net income (reflecting the reversal of the pro
forma compensation expense and its tax effect) increased approximately $195,000
to approximately $236,000 for the first six months of 1997 from net income of
approximately $41,000 for the same period in 1996.
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LIQUIDITY AND CAPITAL RESOURCES
On June 19, 1997, the Company's registration statement for the sale of
1,250,000 shares of common stock at a price of $6.00 per share and 1,250,000
redeemable common stock purchase warrants ( the "warrants") at a price of $0.125
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 $5,764,000. Prior
to June 30, 1997, the Company received $5,400,000 from the underwriters. The
balance due from the underwriters (approximately $1,413,000) was tendered by
commercial check from the managing underwriter to the Company at closing, with
the request of the managing underwriter that the Company not deposit it
immediately. This amount was ultimately received, in total, by the Company on or
before July 17, 1997. The difference between the proceeds received from the
underwriter and the net proceeds recorded by the Company represent expenses
incurred by the Company directly related to the underwriting.
The Company had working capital of approximately $5.2 million at June
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. The Company's
expansion over the last several years primarily has been financed by 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
the 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, the Company anticipates that with the completion of the Initial Public
Offering it will be able to replace its currently leased equipment, as the
leases terminate, and obtain equipment on more favorable terms.
Net cash provided by operating activities totaled approximately $1.1
million for the six month period ended June 30,1997 compared to a use of
approximately $402,000 for the six month period ended June 30, 1996. This
increase in cash flow from operations resulted primarily from improved operating
results and an increase in accounts payable, partially offset by an increase in
accounts receivables which resulted from the significant increase in
transportation volumes in June 1997 compared to the same period in 1996.
Cash provided from financing activities increased from approximately
$248,000 in the first six months of 1996 to approximately $4.6 million in the
same period of 1997 primarily as a result of the Initial Public Offering. In
addition, the Company incurred approximately $272,000 of net new financing under
its line of credit and certain equipment borrowings, after current repayments of
existing debt.
On March 28, 1997, Dennis A. Bakal, the Company's sole director and
majority shareholder, entered into a revolving loan agreement with SouthTrust
Bank of Georgia, NA ("SouthTrust") under which SouthTrust advanced to the
Company, through Mr. Bakal, approximately $1.9 million, including a sub-limit of
up to $300,000 for stand-by letters of credit. Mr. Bakal has pledged certain
personal assets as security for the loan and the Company and its subsidiaries
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. Mr. Bakal's agreement with SouthTrust provides
for an interest rate equal to 0.75% above SouthTrust's Base Rate (as defined
therein) and the loan's original maturity date was January 31, 1998. In May
1997, SouthTrust provided the Company a binding letter extending the maturity
date to April 1, 1998. It is anticipated that during the third quarter, the loan
will be restructured with the Company replacing Mr. Bakal as the borrower, the
amount available under the line increased and the maturity date of the loan
extended. Such restructuring will assist the Company to fund future growth.
Under the terms of an agreement between Mr. Bakal, the Company and its
subsidiaries, such
11
<PAGE> 12
entities have agreed to accept advances, through Mr. Bakal, on the same terms
and conditions agreed to by Mr. Bakal and SouthTrust. The letter of credit
facility has been granted to Timely, and its performance has been guaranteed by
the Company, its other subsidiaries and Mr. Bakal. The Company used the proceeds
of the loan from SouthTrust to repay all of its outstanding indebtedness with
SunTrust Bank, Atlanta.
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 at least 12 months. The Company's financial
requirements will depend upon, among other things, the growth rate of the
Company's business, the amount of cash flow 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 June 30, 1997, the Company had approximately
$5.5 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.
12
<PAGE> 13
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
On May 1, 1997, Dennis A. Bakal, the Company's principal shareholder,
executed a consent in lieu of an annual meeting and voted all of his shares
electing himself as sole Director and President of the Company, Linda K. Roberts
as Secretary and Peter C. Roth as Treasurer.
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 June 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. 1,250,000 Warrants ($156,250)
were registered and sold.
13
<PAGE> 14
(v)An estimate of the amount of expenses incurred by the
Company in connection with the issuance and distribution of
the Securities registered is $1,892,250. 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 $5,764,000.
(vii)Through June 30, 1997, all of the net proceeds of the
Initial Public Offering were invested in temporary
investments. 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).
11.1 Statement regarding Computation of Earnings Per Share.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report on Form 10-QSB is filed.
</TABLE>
14
<PAGE> 15
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: August 13, 1997 By: /s/ Dennis A. Bakal
---------------------- ---------------------
Dennis A. Bakal
President and Chief Executive
Officer (Principal Executive
Officer)
Date: August 13, 1997 By: /s/ Peter C. Roth
---------------------- -------------------
Peter C. Roth
Chief Financial Officer
(Principal Financial and
Accounting Officer
15
<PAGE> 1
Exhibit 11.1 Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pro forma net
income (loss) $ 161,040 $ 40,824 $ (12,017) $ (158,802)
========= ========= ========= ===========
Pro forma net
income (loss)
per share
(primary) $ 0.04 $ 0.01 $ 0.00 $ (0.06)
========= ========= ========= ===========
Weighted
average common
and common
equivalent
shares outstanding(a) 3,706,043 2,968,769 3,624,081 2,567,033
========= ========= ========= ===========
Pro forma net
income (loss)
per share
(fully diluted) $ 0.04 $ 0.01 $ 0.00 $ (0.06)
========= ========= ========= ===========
Weighted
average common
and common
equivalent
shares outstanding(a) 3,706,043 3,493,280 3,624,081 2,567,033
========= ========= ========= ===========
</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 FOR THE SIX MONTHS ENDED JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,044,733
<SECURITIES> 4,502,275
<RECEIVABLES> 1,444,171
<ALLOWANCES> 30,765
<INVENTORY> 0
<CURRENT-ASSETS> 10,737,674
<PP&E> 2,552,830
<DEPRECIATION> 604,994
<TOTAL-ASSETS> 12,834,997
<CURRENT-LIABILITIES> 5,534,357
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,825,589
<TOTAL-LIABILITY-AND-EQUITY> 12,834,997
<SALES> 15,858,424
<TOTAL-REVENUES> 15,858,424
<CGS> 0
<TOTAL-COSTS> 15,428,547
<OTHER-EXPENSES> 96,143
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 150,037
<INCOME-PRETAX> 375,986
<INCOME-TAX> 388,000
<INCOME-CONTINUING> (12,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,017)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
