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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 March 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File 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 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
--- ---
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, 3,867,850 shares issued and
outstanding as of May 13,1998.
Redeemable Common Stock Purchase Warrants, 1,437,500 issued and
outstanding as of May 13, 1998.
Transitional Small Business Disclosure Format (check one): YES NO X
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QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1998
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
INDEX
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Page
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 .........................2
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997...................................................................3
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 ........................................................................4
Notes to the Consolidated Financial Statements..................................................5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation............7
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................11
ITEM 2. Changes in Securities..........................................................................11
ITEM 3. Defaults Upon Senior Securities................................................................11
ITEM 4. Submission of Matters to a Vote of Security Holders............................................11
ITEM 5. Other Information..............................................................................11
ITEM 6. Exhibits and Reports on Form 8-K...............................................................12
Signatures.....................................................................................14
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -
PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 511,875 $ 1,422,732
Trade accounts receivable, net of allowance for doubtful accounts of
$320,578 at March 31, 1998 and $267,578 at December 31, 1997 10,644,015 10,690,400
Due from affiliate 429,365 458,615
Due from shareholder 577,197 577,197
Note receivable 1,532,877 1,532,877
Other 1,942,720 1,389,213
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Total current assets 15,638,049 16,071,034
PROPERTY AND EQUIPMENT, net 7,338,782 4,984,987
OTHER ASSETS 775,232 393,786
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Total assets $23,752,063 $21,449,807
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,678,559 $ 3,543,051
Accrued liabilities 2,292,047 2,806,155
Line of credit 7,576,092 6,828,722
Current maturities of long-term debt and capital lease obligations 1,508,295 941,488
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Total current liabilities 16,054,993 14,119,416
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LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of
Current maturities 4,885,819 3,057,235
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DEFERRED INCOME TAXES 237,209 237,209
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SHAREHOLDERS' EQUITY:
Preferred stock; 100,000 shares authorized, no shares issued and outstanding -- --
Common stock; no par value, 20,000,000 shares authorized, 3,867,850
And 3,867,000 issued and outstanding at March 31, 1998 and
December 31, 1997, respectively -- --
Common stock purchase warrants; 1,437,500 issued and outstanding at March 31,
1998 and December 31, 1997, respectively 177,117 177,117
Additional paid-in capital 5,569,529 5,567,243
Retained earnings (deficit) (3,172,604) (1,708,413)
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Total shareholders' equity 2,574,042 4,035,947
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Total liabilities and shareholders' equity $23,752,063 $21,449,807
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997
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Three Months Ended
March 31,
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1998 1997
(Unaudited)
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OPERATING REVENUES $19,873,046 $7,413,873
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OPERATING EXPENSES:
Salaries, wages and benefits 9,615,979 2,514,224
Purchased transportation 1,817,359 1,973,192
Operating supplies and expenses 4,723,802 1,330,599
Fuel and fuel taxes 2,750,659 962,519
Communications and utilities 425,978 96,723
Depreciation 227,555 76,187
Operating taxes and licenses 194,767 30,393
Bad debt expense 53,000 3,000
Other operating expenses 1,249,125 302,473
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Total operating expenses 21,058,224 7,289,310
INCOME (LOSS) FROM OPERATIONS (1,185,178) 124,563
OTHER INCOME (EXPENSE):
Interest expense (281,551) (74,596)
Other income, net 2,538 66,976
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INCOME (LOSS) BEFORE
INCOME TAXES (1,464,191) 116,943
PROVISION FOR INCOME TAXES -- (68,000)
BENEFIT FOR INCOME TAXES -- 24,000
INCOME TAX PROVISION DUE TO
CHANGE IN TAX STATUS -- (246,000)
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TOTAL PROVISION FOR INCOME TAXES -- (290,000)
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NET LOSS $(1,464,191) $ (173,057)
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NET LOSS PER COMMON SHARE
- basic and diluted $ (0.38) $ (0.07)
=========== ==========
Weighted average common and common
equivalent shares outstanding
- basic and diluted 3,867,398 2,600,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
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Three Months
Ended March 31,
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1998 1997
(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,464,191) $(173,057)
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Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Pro forma income tax adjustment -- (24,000)
Pro forma compensation expense -- 60,000
Deferred income taxes -- 149,705
Depreciation 227,555 76,187
Changes in operating assets and liabilities:
Trade accounts receivable, net 46,385 (423,821)
Due from affiliate 29,250 (108,706)
Other current assets (553,507) (54,812)
Accounts payable and accrued liabilities 621,400 704,152
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Total adjustments 371,083 378,705
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Net cash provided by (used in) operating activities (1,093,108) 205,648
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,581,350) (331,095)
Increase in other assets (381,446) (96,474)
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Net cash used in investing activities (2,962,796) (427,569)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit 747,370 52,000
Repayments of long-term debt and capital lease obligations (254,002) (107,931)
Proceeds from long-term debt 2,649,393 256,544
Net proceeds from sale of common stock and common stock
purchase warrants 2,286 --
Due from shareholder -- (25,000)
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Net cash provided by financing activities 3,145,047 175,613
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NET DECREASE IN CASH AND CASH EQUIVALENTS (910,857) (46,308)
CASH AND CASH EQUIVALENTS, beginning of period 1,422,732 248,454
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 511,875 $ 202,146
=========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 and 1997
1. ORGANIZATION AND OPERATION
Professional Transportation Group Ltd., Inc. ("PTG, Ltd.") serves as a
holding company for its four operating subsidiaries: Timely Transportation, Inc.
("Timely"), Truck-Net, Inc. ("Truck-Net"), Timely North, Inc. ("Timely North"),
and PTG, Inc. (collectively, 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 and floorcovering 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. Timely North provides time-definite
truckload transportation services for companies in the floorcovering industry.
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 in need of repair or
under expired leases.
Prior to January 1997, the Subsidiaries, except for Timely North which
was organized in October 1997, 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.
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.
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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 three 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 consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the consolidated financial position of the Company at March 31, 1998 and
the consolidated results of the Company's operations and its cash flows for the
three month periods ended March 31, 1998 and 1997. 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 $60,000 for the three months ended March 31, 1997 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. A pro forma tax benefit of $24,000 related to this assumed
compensation has also been reflected in the accompanying consolidated statement
of operations for the three months ended March 31, 1997.
6. DEBT COMPLIANCE
Pursuant to the line of credit with its bank, the Company must
satisfy certain financial and other covenants. As of March 31, 1998, the
Company was in default under several non-monetary covenants. The Company has
received from the bank waivers of compliance with these covenants for the
quarter ended March 31, 1998.
7. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." Adoption of
this statement had no impact on the Company for the three months ended March
31, 1998 because comprehensive loss was the same as net loss.
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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 March
31, 1998 and the Company's results of operations for the three month periods
ended March 31, 1998 and 1997 should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto. The following discussion
contains statements which constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. These statements appear in a number
of places in this Quarterly Report and include all statements that are not
historical statements of fact regarding the intent, anticipation, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy (including, but not limited to, the
Company's consolidation of operations); and (iv) the declaration and payment of
dividends. The words "may," "would," "could," "will," "expect," "estimate,"
"anticipate," "believe," "intends," "plans," and similar expressions and
variations thereof are intended to identify forward-looking statements.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, many of
which are beyond the Company's ability to control, and that actual results may
differ materially from those projected in the forward-looking statements. Actual
results may differ materially from these forward-looking statements as a result
of many factors, including the inability to obtain, continue and manage growth,
growth in the Company's customers, increased competition, and the other factors
discussed in the Company's registration statement of Form SB-2 as declared
effective on June 19, 1997, including the "Risk Factors" section contained
therein and the other documents filed thereafter by the Company pursuant to the
Securities Exchanged Act of 1934, as amended. 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 and 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. On June 19, 1997, the Company completed the Initial
Public Offering, which resulted in net proceeds to the Company of approximately
$5.7 million.
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 three month periods ended March 31, 1998 and 1997, FedEx
accounted for approximately 22% and 44% respectively, of the consolidated
operating revenues of the Company. Since the inception of the agreement, the
Company has consistently exceeded the required performance standards under the
agreement. The agreement, originally due to expire in November 1998, has been
extended for a period of 18 months. There can be no assurance, however, that
this agreement will be renewed at the expiration of this current term.
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.
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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 three months ended March 31, 1998, Truck-Net was
able to utilize Timely's equipment for approximately 10% 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 5% and 17% of the
Company's consolidated operating revenues for the three month periods ended
March 31, 1998 and 1997, respectively.
In October 1997, the Company organized Timely North and entered into a
marketing agreement (the "Marketing Agreement") with Continental American
Transportation, Inc. ("Continental"). Under that agreement, Timely North, on
November 1, 1997, leased or subleased from Continental and its two main
operating subsidiaries, Carpet Transport, Inc. and Blue Mack Transport, Inc.,
(collectively "CTI"), substantially all of their operating assets and terminals.
In addition, all of the employees of CTI were hired by Timely North effective
November 1, 1997. The Marketing Agreement terminates upon the earlier of 60 days
notice by Timely North to CTI or consummation of an asset purchase by July 31,
1998.
The primary business of CTI was the truckload and less-than-truckload
("LTL") cartage of carpet from the manufacturing facilities located in north
Georgia to customers primarily located in the eastern and southern United
States. The movement of carpet is primarily a one direction movement with most
of the carpet movement being outbound from north Georgia, making it necessary to
find sufficient back-haul business to bring the trucks back to Georgia at the
lowest possible cost. After an analysis of the LTL business and implementing
programs to bring this part of the operation to a profitable level, Timely North
entered into an agreement with CSI/Crown, Inc. ("CSI/Crown"), an industry
competitor and subsidiary of US Xpress Enterprises, Inc., under which Timely
North terminated its LTL operations and agreed to use its best efforts to
persuade the LTL customers to transfer their business to CSI/Crown. During April
1998, the Company closed the 17 remote LTL terminals located in 10 states,
terminated approximately 400 employees and returned equipment to the north
Georgia location. The closing of the LTL business will allow Timely North to
concentrate on the truckload movement of carpet from north Georgia
During the second quarter of 1998, the Company began consolidating
certain of its operations which will allow it to eliminate duplicative functions
and allow for the free interchange of drivers and equipment between fleets. The
Company anticipates that this consolidation will improve customer service, lower
"deadhead" miles and lower its operating costs.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 compared to Three Months Ended March 31, 1997
The Company's operating revenues increased approximately $12.5 million,
or 168%, to approximately $19.9 million for the three months ended March 31,
1998, from approximately $7.4 million for the three months ended March 31, 1997.
The inclusion of Timely North revenues accounted for approximately $10.7 million
of the increase while Timely increased to $7.4 million from $5.2 million.
Timely's growth is attributable to the growth of the contract business performed
for FedEx. Truck-Net and PTG recorded lower revenues of $1.7 million and
$146,000, respectively, in the first quarter of 1998 compared to $1.9 million
and $288,000, respectively, for the same period in 1997.
The Company's operating expenses increased approximately $ 13.8
million, or 189%, to approximately $21.1 million in the three months ended March
31, 1998 from approximately $7.3 million in the three months ended March 31,
1997. The increase in the Company's operating expenses is primarily due to the
inclusion of $12
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million of operating expense for Timely North and an increase in Timely's
operating expenses to $7.2 million from $5.1 million. The increase for Timely is
primarily due to the increased revenues of Timely and the costs related thereto.
Operating expenses for the three month period ended March 31, 1997 reflect
$60,000 in compensation expense on a pro forma basis for Mr. Bakal to reflect
the fair value of his services prior to the effective date of his employment
contract with the Company. It is not anticipated by either the Company or Mr.
Bakal that this amount will ever be paid to him.
An analysis of the LTL division of Timely North, which was discontinued
on April 1, 1998, indicated this operation lost approximately $400,000 a month.
The combined result of closing down the LTL operation and combining the Timely
and Timely North truckload operations during the second quarter of 1998 will
have the approximate effect of reducing the number of leased tractors by more
than 250, the number of leased trailers by 300 and the number of employees by
400. In addition, the Company expects to realize efficiencies by the
consolidation of operations and administrative systems and personnel.
Losses incurred in the first three months of 1998 will be carried
forward to future periods, therefore, no provision for income taxes have been
recorded. For the three month period ended March 31, 1997, the Company has
recognized a tax provision of $246,000 (approximately $.09 per share) which 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". Also included
in the 1997 first quarter tax provision is a pro forma tax benefit related to
the pro forma compensation discussed above.
The Company's net loss increased approximately $1.3 million from a loss
of $173,000 to a loss of $1.5 million for the three months ended March 31, 1998
compared to the similar period in 1997 primarily as a result of the Timely North
LTL operations.
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 negative working capital of approximately $417,000 at
March 31, 1998 compared to positive working capital of $2 million at December
31, 1997. The reduction in working capital is primarily the result of cash used
to support the Timely North operations and an increase in the current portion of
long-term debt. Since the Initial Public Offering, the Company has been able to
secure financing for new equipment at substantially lower rates than were
available to it in the past. In October 1997 the Company began returning more
expensive leased transportation units as they came off of lease and replacing
them with new equipment under financing leases.
Net cash used in operating activities totaled approximately $ 1.1
million for the three month period ended March 31, 1998, compared to net cash
provided of approximately $206,000 in the comparable period ended March 31,
1997. This increase in usage arose mainly from the $ 1.4 million loss incurred
from the LTL operations of Timely North. Cash used in investing activities
increased to approximately $ 3 million primarily due the acquisition of
approximately $ 2.6 million of property and equipment. The Company installed
$1.1 of satellite communications equipment in the expanded fleet and acquired $
1.2 of trailers to replace more expensive leased equipment. Proceeds from
long-term debt, net of debt retirement and net proceeds from the Company's line
of credit was approximately $3.1 million.
The Company has available a combined $ 9 million line of credit with
its bank to provide for the Company's working capital and letter of credit
requirements. The loan is guaranteed by the Company's principal shareholder and
bears interest at a rate equal to 0.75% above the bank's base rate (as defined
in the agreement). This facility matures on June 30, 1998 and the Company
anticipates extending the facility or entering into new
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arrangements with the bank during the second quarter of 1998. Pursuant to the
loan agreement with the bank, the Company must satisfy certain financial and
other covenants. As of March 31, 1998, the Company was in default under several
non-monetary covenants. The Company has received from the bank waivers of
compliance with these covenants for the quarter ended March 31, 1998.
The Company believes that improved cash flows from operations,
anticipated as a result of the operating changes discussed above and from its
existing lines of credit, will be sufficient to satisfy its contemplated cash
requirements over the next 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 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 March
31, 1998, the Company had approximately $512,000 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.
YEAR 2000 ISSUES
As part of the upgrade of its management information system in 1997 the
Company acquired software which is Year 2000 compliant, and, therefore, all of
the Company's material systems and software are Year 2000 compliant. The Company
does not believe that it will incur any additional material costs with respect
to Year 2000 compliance matters.
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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 $435,000 within the 90 days preceding the filing of
Right O Way's bankruptcy petition under Chapter 7 of the U.S. Bankruptcy Code. A
settlement has been reached with the Right O Way bankruptcy attorney, and
approval of such settlement by the bankruptcy court is pending. The proposed
settlement calls for Timely and Truck-Net collectively to pay the bankruptcy
estate a total of $33,000 in six monthly payments.
On or about December 31, 1997, an action was brought against the
Company, Timely, Timely North and other unrelated parties by Lance Enterprises,
Inc. in the Superior Court of Gordon County, Georgia seeking recovery against
the defendants for breach of contract, conspiracy to avoid a lawful obligation,
tortious interference with contractual obligations, attorney's fees and expenses
of litigation, quantum meruit, punitive damages and declaratory judgement. This
lawsuit stems from the plaintiff's agreement with Continental American
Transportation, Inc. under which plaintiff was to assist Continental American
with the sale of its business for a prescribed fee. The plaintiff alleges that
the Company's and Timely North's dealings with Continental American and its
subsidiaries, specifically the $1.5 million loan and marketing arrangement,
constitute a sale under the agreement. Continental American refused to pay the
plaintiff any fee under the agreement. The Company, Timely and Timely North were
not parties to the agreement, have filed an answer to the complaint denying all
of the material allegations and any liability on their part and intend 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 March 31, 1998.
(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.
11
<PAGE> 13
(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.
(vii) Through March 31, 1998, $511,875 of the net
proceeds of the Initial Public Offering were
invested in temporary investments or was
available in cash; $1,500,000 was loaned to
an unrelated party and the remainder was
used in the Company's operations. 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 Amended and Restated Commercial Loan Agreement, dated March 2, 1998, by
and between the Company, Timely Transportation, Inc., Truck-Net, Inc.,
PTG, Inc., Timely North, Inc. and SouthTrust Bank, N.A. (Incorporated
by reference to Exhibit 10.1 from the Company's current report on Form
8-K, date of report March 2, 1998 (the "March 8-K"))
10.2 Amended, Restated and Consolidated Commercial Revolving Note, dated
March 2, 1998, by and between the Company, Timely North, Inc., and
SouthTrust Bank, N.A. (Incorporated by reference to Exhibit 10.2 of the
March 8-K)
10.3 Reaffirmation of Guaranty, dated March 2, 1998, by an among the
Company, Truck-Net, Inc., Timely Transportation, Inc., PTG, Inc.,
Timely North, Inc., Dennis A. Bakal and SouthTrust Bank, N.A.
(incorporated by reference to Exhibit 10.3 of the March 8-K)
10.4 Reaffirmation of Guaranty, dated March 2, 1998, by and among the
Company, Truck-Net, Inc., Timely Transportation, Inc., PTG, Inc.,
Dennis A. Bakal and SouthTrust Bank, N.A. (Incorporated by reference to
Exhibit 10.4 of the March 8-K)
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C>
10.5 Consulting and Non-Competition Agreement, dated March 27, 1998, between
Timely North, Inc. and CSI/Crown, Inc. (Incorporated by reference to
Exhibit 10.20 of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997)*
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
- -----------------
* Confidential treatment previously granted 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 March 31, 1998, date of report
March 2, 1998, regarding the Company's amending, restating and
consolidating its loan facilities with SouthTrust Bank, N.A.
13
<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: May 14, 1998 By: /s/ Dennis A. Bakal
------------ ---------------------------------------
Dennis A. Bakal
President and Chief Executive Officer
(principal executive officer)
Date: May 14, 1998 By: /s/ Peter C. Roth
------------- ---------------------------------------
Peter C. Roth
Chief Financial Officer
(principal financial and accounting
officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PROFESSIONAL
TRANSPORTATION GROUP LTD. INC.'S UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1998, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> (773,025)
<SECURITIES> 1,284,900
<RECEIVABLES> 10,964,593
<ALLOWANCES> 320,578
<INVENTORY> 0
<CURRENT-ASSETS> 15,638,049
<PP&E> 8,404,865
<DEPRECIATION> (1,066,083)
<TOTAL-ASSETS> 23,752,063
<CURRENT-LIABILITIES> 16,111,943
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,574,042
<TOTAL-LIABILITY-AND-EQUITY> 23,752,063
<SALES> 19,873,046
<TOTAL-REVENUES> 19,873,046
<CGS> 0
<TOTAL-COSTS> 21,058,224
<OTHER-EXPENSES> (2,538)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 281,551
<INCOME-PRETAX> (1,464,191)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,464,191)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,464,191)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
