<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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.
(Exact name of registrant as specified in its charter)
Georgia 58-1915632
(State of Incorporation) (I.R.S. Employer Identification No.)
1950 Spectrum Circle, Suite B-100, Marietta, Georgia 30067
(Address of principal executive offices)
(770) 988-8590
(Registrant's telephone number, including area code)
Not Applicable
(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, 3,968,160 shares issued and
outstanding as of May 13,1999.
Redeemable Common Stock Purchase Warrants, 1,437,500 issued and
outstanding as of May 13, 1999.
Transitional Small Business Disclosure Format (check one):
YES NO X
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QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
INDEX
<TABLE>
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Page
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998..........................3
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998...................................................................4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 ........................................................................5
Notes to the Consolidated Financial Statements..................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation............8
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................13
ITEM 6. Exhibits and Reports on Form 8-K...............................................................14
Signatures.....................................................................................16
</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, 1999 and December 31, 1998
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 162,371 $ 1,003,783
Trade accounts receivable, net of allowance for doubtful accounts of
$760,765 at March 31, 1999 and $757,765 at December 31, 1998 8,020,448 6,633,732
Due from affiliate 429,365 429,365
Due from shareholder 577,197 577,197
Prepaid expenses 1,041,855 662,176
Other current assets 667,930 583,311
------------ ------------
Total current assets 10,899,166 9,889,564
PROPERTY AND EQUIPMENT, net 6,693,860 6,940,060
NONCURRENT NOTES AND RECEIVABLES 2,890,425 2,831,248
OTHER ASSETS 153,664 157,847
------------ ------------
Total assets $ 20,637,115 $ 19,818,719
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,486,479 $ 3,226,222
Accrued liabilities 2,814,411 3,074,145
Line of credit 6,466,722 6,666,722
Current maturities of long-term debt and capital lease obligations 1,526,027 1,487,025
------------ ------------
Total current liabilities 15,293,639 14,454,114
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of
current maturities 3,862,670 4,268,887
------------ ------------
DEFERRED INCOME TAXES 237,209 237,209
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock; 100,000 shares authorized, no shares issued and
outstanding Common stock; no par value, 20,000,000 shares authorized, -- --
3,968,160 and 3,868,160 shares issued and outstanding at March 31, 1999 and
December 31, 1998, respectively -- --
Common stock purchase warrants; 1,437,500 issued and outstanding at
March 31, 1999 and December 31, 1998, respectively 402,787 353,867
Additional paid-in capital 5,961,466 5,711,466
Accumulated deficit (5,120,656) (5,206,824)
------------ ------------
Total shareholders' equity 1,243,597 858,509
------------ ------------
Total liabilities and shareholders' equity $ 20,637,115 $ 19,818,719
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
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(unaudited)
<S> <C> <C>
OPERATING REVENUES $ 10,102,224 $ 19,873,046
------------ ------------
OPERATING EXPENSES:
Salaries, wages and benefits 4,469,831 9,615,979
Purchased transportation 959,712 1,817,359
Operating supplies and expenses 2,161,512 4,723,802
Fuel and fuel taxes 1,111,580 2,750,659
Communications and utilities 220,014 425,978
Depreciation 246,200 227,555
Operating taxes and licenses 146,984 194,767
Bad debt expense 3,000 53,000
Other operating expenses 496,832 1,249,125
------------ ------------
Total operating expenses 9,815,665 21,058,224
INCOME (LOSS) FROM OPERATIONS 286,559 (1,185,178)
OTHER INCOME (EXPENSE):
Interest expense (272,436) (281,551)
Other income, net 72,045 2,538
------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES 86,168 (1,464,191)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) $ 86,168 $ (1,464,191)
============ ============
NET LOSS PER COMMON SHARE - basic $ 0.02 $ (0.38)
============ ============
NET LOSS PER COMMON SHARE - diluted $ 0.02 $ (0.38)
============ ============
Weighted average common and common
equivalent shares outstanding - basic 3,892,604 3,867,898
============ ============
Weighted average common and common equivalent
shares outstanding - diluted 4,721,769 3,867,898
============ ============
</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, 1999 and 1998
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
<S> <C> <C>
Net income (loss) $ 86,168 $(1,464,191)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation 246,200 227,555
Changes in operating assets and liabilities:
Trade accounts receivable, net (1,368,716) 46,385
Due from affiliate -- 29,250
Other current assets (464,298) (553,507)
Accounts payable and accrued liabilities 1,000,523 621,400
----------- -----------
Total adjustments (604,291) 371,083
----------- -----------
Net cash used in operating activities (518,123) (1,093,108)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (2,581,350)
Increase in other assets (55,994) (381,446)
----------- -----------
Net cash used in investing activities
(55,994) (2,962,796)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayment of) line of credit (200,000) 747,370
Repayments of long-term debt and capital lease obligations (367,215) (254,002)
Proceeds from long-term debt -- 2,649,393
Net proceeds from sale of common stock and common stock
purchase warrants 298,920 2,286
Net cash provided by (used in) financing activities (367,215) 3,145,047
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (841,412) (910,857)
CASH AND CASH EQUIVALENTS, beginning of period 1,003,783 1,422,732
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 162,371 $ 511,875
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and 1998
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, 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, expedited delivery and floor covering 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 in need of repair or under expired leases.
FINANCIAL CONDITION
The Company had a working capital deficit of $4.4 million at March 31,
1999, which includes a liability of $6.5 million under the Company's line of
credit agreement. This agreement is currently due to expire on May 31, 1999.
Management is negotiating an extension of its line of credit agreement and
expects that if it is unable to extend the line of credit, it will seek
additional third-party financing to satisfy its anticipated cash requirements
through 1999. There can be no assurance that the Company will be successful in
obtaining an extension of its credit agreement or in arranging alternative
financing under commercially reasonable terms or at all. If the Company is not
successful in negotiating a satisfactory outcome, there is doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
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
Net operating loss carryforwards will be utilized to fully offset
income generated in the first quarter of 1999. Therefore, no income tax
provision was recorded.
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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, 1999 and
the consolidated results of the Company's operations and its cash flows for the
three month periods ended March 31, 1999 and 1998. Certain information and
footnote disclosures usually found in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999.
4. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
5. BUSINESS SEGMENT INFORMATION
The following table summarizes revenues and operating income by business segment
for the quarters ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
TIMELY AND
TIMELY NORTH TRUCK-NET PTG, INC. TOTAL
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<S> <C> <C> <C> <C>
1999:
Revenues from external customers 8,049,110 1,807,264 245,850 10,102,224
Intersegment revenues 674,735 42,937 0 717,672
Operating profit 197,869 38,098 89,442 325,409
1998:
Revenues from external customers 18,013,307 1,714,142 145,597 19,873,046
Intersegment revenues 370,796 37,496 0 408,292
Operating profit (981,768) (13,587) (41,037) (1,036,392)
</TABLE>
The following table reconciles segment profit to consolidated income for the
quarters ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------------------------------
<S> <C> <C>
Total operating profit for reportable segments 325,409 (1,036,392)
Interest expense (272,436) (281,551)
Salaries, wages and benefits 0 (105,611)
Other unallocated amounts 33,195 (40,637)
--------------------------------
Total consolidated income(loss) 86,168 (1,464,191)
--------------------------------
</TABLE>
7
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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, 1999 and the Company's results of operations for the three month periods
ended March 31, 1999 and 1998 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 Section
21E of 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 statements of historical fact regarding the intent, 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 (including, but not
limited to, its ability to extend its credit facility or enter into new
arrangements to replace such facility); (iii) the Company's growth strategy and
operating strategy (including, but not limited to, issues related to Year 2000
compliance); and (iv) the declaration and payment of dividends. The words "may,"
"would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intend," "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. Actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Among the key risks,
assumptions and factors that may affect operating results, performance and
financial condition are the Company's reliance on a small number of customers
for a larger portion of its revenues, fluctuations in its quarterly results,
ability to continue and manage its growth, Year 2000 risks and concerns,
liquidity and other capital resources issues, competition and the other factors
discussed in detail in the Company's filings with the Securities and Exchange
Commission, including the "Risk Factors" section of the Company's Registration
Statement on Form S-3 (Registration Number 333-70985), as declared effective by
the Securities and Exchange Commission on February 5, 1999. 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 majority
stockholder and then sole director 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, 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 its 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 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 months ended
March 31, 1999 and 1998, FedEx accounted for approximately 51% and 22%,
respectively, of the Company's consolidated 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 May 2000. There can be no assurance, however, that
this agreement will be renewed.
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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.
In October 1997, the Company organized Timely North, Inc. in order to
enter into a marketing agreement (the "Marketing Agreement") with Continental
American Transportation, Inc. ("Continental"). Under that agreement, Timely
North, on November 1, 1997, leased or sub-leased 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 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 business was headquartered in Calhoun, Georgia, the heart of the
carpet manufacturing industry in the United States, and served most of the major
carpet mills. 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. CTI operated 17 remote terminals to handle
the LTL freight it received from the mills. These terminals were located in 10
states. On November 1, 1997 Timely North began operating these terminals and
began an analysis of the LTL business. In January 1998, Timely North announced a
substantial rate increase to its LTL customers in an attempt to bring this part
of the operation to a profitable level. On March 27, 1998, 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 as of April 1, 1998 and used its reasonable best efforts to
persuade the LTL customers to transfer their business to CSI/Crown. At the time
of termination, all LTL terminals were closed, employees terminated and
equipment and records prepared for return to the Calhoun location. All terminal
location leases were either leased by CTI or are owned by a former subsidiary of
Continental. Neither the Company nor Timely North is a party to any of the
leases or finance contracts entered into by CTI or Continental.
During the second quarter of 1998, the Company consolidated the
operations of Timely and Timely North which allowed it to eliminate duplicative
functions and permitted the free interchange of drivers and equipment between
fleets. The Company believes that this consolidation has improved customer
service, lowered "deadhead" miles and lowered its operating costs.
Truck-Net, a licensed freight broker, 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
certificated and to have a current certificate of insurance. When logistically
feasible, Truck-Net utilizes Timely's equipment to complete the brokerage
contracts. In the first quarter of 1998 the Company began dedicating a portion
of the Timely fleet to servicing Truck-Net customers.
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, the U.S. subsidiary of a major European air freight
forwarder, accounted for approximately 11% of the Company's consolidated
operating revenues for the three months ended March 31, 1999.
9
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RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 compared to Three Months Ended March 31, 1998
The Company's operating revenues decreased approximately $9.8 million,
or 49.2%, to approximately $10.1 million for the three months ended March 31,
1999, from approximately $19.9 million for the three months ended March 31,
1998. The decrease is primarily due to the inclusion of $10.8 million of Timely
North revenues in the first quarter of 1998. Timely's revenues increased by 11%
to $8.0 million in the first three months of 1999 from $7.2 million for the same
period in 1998. Timely's growth is attributable to the growth of the contract
business performed for FedEx and new dedicated lane traffic acquired. Truck-Net
and PTG recorded revenues of $1.8 million and $246,000, respectively, in the
first quarter of 1999 compared to $1.7 million and $146,000, respectively, for
the same period in 1998.
Since the end of the first quarter, the Company has formalized the
development of an agency division. The division is essentially a cooperative for
smaller, time-definite, expedited truckload carriers whereby the Company bills
the agent carrier's customers and collects the revenues for these shipments. The
agent carriers receive economies of scale by participating with the Company in
the purchase of certain overhead and other items such as maintenance and fuel.
The Company's operating expenses decreased approximately $11.2 million,
or 53.4%, to approximately $9.8 million in the three months ended March 31, 1999
from approximately $21.1 million in the three months ended March 31, 1998. The
decrease in the Company's operating expenses is primarily due to the inclusion
of $12 million of operating expense for Timely North in the first quarter of
1998. Timely's operating expenses increased approximately 12.5% to $7.9 million
from $7.0 million. The increase for Timely is primarily due to the increased
revenues of Timely and the costs related thereto.
The Company discontinued its Timely North LTL operations, which was
losing approximately $400,000 a month, on April 1, 1998. The combined result of
closing down the LTL operation and combining the Timely and Timely North
truckload operations during the remainder of 1998 had 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
realized efficiencies by the consolidation of operations and administrative
systems and personnel.
Net operating loss carryforwards will be utilized to fully offset
income generated in the first quarter of 1999. Therefore, no provision for
income taxes has been recorded.
The Company's net income was approximately $86,000 for the three months
ended March 31, 1999 compared to a loss of $1.5 million in the similar period of
1998. This improvement in net income was primarily the result of discontinuing
the Timely North LTL operations, which losses together with costs incurred to
discontinue these operations and costs related to the termination of the
marketing agreement with CTI amounted to approximately $1.3 million in the first
quarter of 1998, and improved operations of the Company's remaining
subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
The Company had negative working capital of approximately $4.4 million
at March 31, 1999 compared to negative working capital of $4.6 million at
December 31, 1998. During the fourth quarter of 1998, certain notes and accounts
receivable associated with Timely North's marketing agreement with CTI were
reclassified from current to non-current assets due to the unpredictability of
the time required to settle accounts due to the bankruptcy of the principal
debtors. In addition, the Company's primary credit facility, which is discussed
below, has been classified as a current liability due to the May 31, 1999
maturity date.
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Net cash used in operating activities totaled approximately $518,000
for the three month period ended March 31, 1999, compared to usage of
approximately $1.1 million in the comparable period ended March 31, 1998. This
decrease in usage arose mainly from the incurrence of net income during the 1999
period as compared to a net loss during the comparable period in 1998 and a
$400,000 increase in accounts payable and accrued expenses offset by a $1.4
increase in accounts receivable. Cash used in investing activities decreased
approximately $2.9 million primarily due the acquisition of approximately $2.6
million of property and equipment during the three month period ended March 31,
1998. The Company expended no funds on property and equipment in the first
quarter of 1999. The Company retired approximately $600,000 of debt and received
equity proceeds of $299,000 during the three month period ended March 31, 1999.
The Company has available a combined $9.0 million line of credit with a
lending institution 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). At March 31, 1999, the Company had $6.5
million outstanding under the line of credit with no availability remaining
pursuant to the terms of the agreement. This facility, which was originally
scheduled to mature on December 31, 1998, has been extended by the bank until
May 31, 1999. The Company has received verbal assurances from the bank that it
will extend the current facility past May 31, 1999 while the Company attempts to
enter into new arrangements with it or another lending institution. However,
there can be no assurance that the Company will be able to further extend or
enter into new arrangements with the bank or another lending institution on
terms favorable to the Company, if at all, which might necessitate that the
Company raise additional funds through the issuance of equity or convertible
debt securities. Pursuant to the loan agreement with the bank, the Company must
satisfy certain financial and other covenants. As of March 31, 1999, the Company
was in default under several non-monetary covenants. The Company has requested
from the bank waivers of compliance with these covenants.
As stated above, the Company is currently negotiating with its current
lender and various others the terms of new credit arrangements which it
anticipates it will enter into within the next few months to replace its current
line of credit. The Company believes that these new arrangements, if entered
into, along with the continued improvement in cash flows from operations, as a
result of the operating changes discussed above, 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. If the company is unable to replace its existing
line of credit prior to any extended maturity date, the Company's business,
financial condition and results of operations would be materially adversely
affected. As a result of this uncertainty, the Company's independent certified
public accountants added an explanatory paragraph to their report on the
Company's financial statements for the year ended December 31, 1998 which makes
references to the uncertainties regarding the Company's ability to continue as a
going concern. Certain of the statements in this paragraph are "forward-looking"
statements which are subject to the risks and uncertainties discussed above.
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
The Company's business and relationships with its customers depends
significantly on a number of computer software programs, internal operating
systems and connections to other networks. If any of these software programs,
systems or networks are not programmed to recognize and properly process dates
after
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December 31, 1999 (the "Year 2000" issue), significant system failures or errors
may result which could have a material adverse effect on the business, financial
condition, or results of operations of both the effected customers and the
Company. The Company has conducted a preliminary review of its internal
accounting and operating programs and systems and currently believes that these
programs and systems and the network connections it maintains are adequately
programmed to address the Year 2000 issue or can be modified or replaced to
address the Year 2000 issue without incurring costs or delays which would have a
material adverse effect on the Company's financial condition. However if the
Company and third parties upon which it relies are unable to address this issue
in a timely manner it could result in a material financial risks to the Company.
The Company plans to devote all resources required to resolve any significant
Year 2000 issues in a timely manner.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
LITIGATION
An involuntary bankruptcy petition was filed on or about May 26, 1998
against Continental American, the parent corporation of Carpet Transport, Inc.
("CTI"), in the case styled In re: Continental American Transportation, Inc.,
Case No. 98-41900 HR, U.S. Bankruptcy Court for the Northern District of Georgia
(Rome Division). This action was initiated by several parties purporting to be
creditors of Continental American. The involuntary bankruptcy petition resulted
in the appointment of a trustee. The trustee has pursued certain claims against
the Company as described in the discussion of the CTI Properties, Inc.
bankruptcy. See below.
An involuntary bankruptcy petition was filed on or about August 7, 1998
against CTI Properties, Inc. a wholly-owned subsidiary of Continental American,
in the case styled In re: CTI Properties, Inc., Case No. R98-42886-HR, U.S.
Bankruptcy Court for the Northern District of Georgia (Rome Division). The same
trustee has been appointed for both Continental American and CTI Properties. The
trustee has filed an adversary proceeding against the Company asserting that the
Company's first priority security deed may be avoided as a preference. The
Company intends to deny that its first priority security interest may be
avoided, but even if the trustee's argument is accepted by the court, the
Company has title insurance on the property as well as the personal guarantee of
one of the owners of the property.
On or about June 17, 1998, a lawsuit was filed against Timely North and
the Company in the case styled CIT Finance Group, Inc. v. Timely North, Inc. and
Professional Transportation Group Ltd., Inc., Case No. 98-CV2280-2, Superior
Court of Clayton County, Georgia. This action was filed by a lessor of rolling
stock to CTI. The complaint alleges generally that Timely North and the Company
are indebted to CIT in an amount to be determined at trial, but that CIT alleges
to be approximately $350,000, an amount disputed by the Company. While neither
Timely North nor the Company has had any contractual relationship with CIT, CIT
asserts in its complaint that the use of its rolling stock entitles CIT to
receive from Timely North and the Company the fair rental value of the rolling
stock during the period of time that Timely North used the rolling stock. Timely
North and the Company have timely filed answers to CIT's complaint, and intend
to contest the case vigorously. Discovery in the case is progressing.
An involuntary bankruptcy petition was filed on or about June 17, 1998
against CTI in the case styled In re: Carpet Transport, Inc., Case No. 98-42224
HR, U.S. Bankruptcy Court for the Northern District of Georgia (Rome Division).
This action was filed by several parties purporting to be creditors of CTI and
alleges among other things that Timely North or its affiliates had collected a
portion of CTI's receivables, that a representative of the Company had caused
CTI's withholding tax payments to the IRS to be diverted to Timely North's
benefit (to pay Form 2290 taxes), and that Timely North had sold portions of
CTI's equipment without an accounting for the sales proceeds. A trustee has been
appointed and is investigating these potential claims. The trustee has also
questioned the receipt by the Company of a payment it received for a consulting
and non-competition agreement. The trustee also questioned the fully-secured
status and priority of the Company's September 12, 1997 secured loan to CTI and
its affiliates of $1.5 million. The Company denies that its first priority
secured status should be challenged, but even if this challenge is successful,
the Company has title insurance on the property and a personal guarantee of one
of the owners of the property. The trustee also questioned whether the Company
was entitled to the proceeds of the sale of certain rolling stock formerly
leased by CTI. In the event that the trustee should pursue any of these claims
against the Company or its affiliates, the Company and/or its affiliates will
file a timely response to any such claim denying all of the material allegations
and any liability on its part, and will vigorously defend against any such
claim.
13
<PAGE> 14
On or about July 30, 1998, an action was brought against Timely and
other defendants in the case styled The CIT Group/Equipment Financing, Inc. v.
Timely Transportation, Inc. et al., Case No. 98-14395, Court of Common Pleas of
Montgomery County, Pennsylvania. The plaintiff as a secured creditor of various
defendants other than Timely alleges that those defendants defaulted in their
installment payments to the plaintiff, that the plaintiff sold the collateral in
a foreclosure sale, that the plaintiff has been damaged in the amount of
approximately $151,000, and that Timely is a "successor" to the other defendants
and therefore owes to CIT Group its damages. Timely was not a party to any of
the documents under which the plaintiff bases its cases, has filed a timely
answer to the complaint denying all of the material allegations and any
liability on its part, and intends to vigorously defend this action.
On or about September 4, 1998, an action was filed against the Company,
Timely and Timely North in the case styled U.S. Bancorp Leasing & Financial v.
Timely North, Inc., Timely Transportation, Inc. and Professional Transportation
Group Ltd., Inc., Case No. 34611, Superior Court of Gordon County, Georgia. This
action was filed by a lessor of rolling stock to CTI. The complaint alleges
generally that the Company, Timely and Timely North are indebted to U.S. Bancorp
in an amount to be determined at trial. U.S. Bancorp is seeking $290,534.50, an
amount disputed by the Company. While neither Timely, Timely North nor the
Company has had any contractual relationship with U.S. Bancorp, U.S. Bancorp
asserts in its complaint that the use of its rolling stock entitles it to
receive from Timely, Timely North and the Company the fair rental value of the
rolling stock during the period of time that Timely North used the rolling
stock. Timely, Timely North and the Company have filed answers to U.S. Bancorp's
complaint, and intend to contest the case vigorously.
Scott Logistics Corporation v. Timely North, Inc. and Timely
Transportation, Inc., Civil Action File No. 34324, Superior Court of Gordon
County, Georgia. The plaintiff filed suit in response to Timely North's efforts
to collect $9,709.23 due on account from the plaintiff. The plaintiff filed suit
against both Timely North and Timely seeking claims for $8,342.34 for alleged
damages to freight and approximately $60,000 based on allegations of tortious
interference with plaintiff's relationships with one or more of its customers.
Timely and Timely North have filed an answer to the suit and are vigorously
defending against plaintiff's claims. In addition, Timely North has filed a
counterclaim in the amount of $9,709.23 for sums due on account from the
plaintiff.
T.M.B. Inc. v. Timely Transportation Inc. and Timely North, Inc., Case
No. 98-CV-1931, U.S. District Court for the Northern District of Georgia,
Atlanta Division. The plaintiff seeks to recover $99,998.52 for services
rendered and goods supplied. Timely has filed an answer denying liability, and
intends to vigorously defend on the merits.
L.T.D. Logistics, Inc. and Arrow Lines Services, Inc. v. Timely
Transportation, Inc., Timely North, Inc. and Professional Transportation Group
Ltd., Inc., Civil Action File No. 981-6827-99, Superior Court of Cobb County,
Georgia. The plaintiffs claim that they are owed $71,328.30 for services
allegedly rendered. The Company filed an answer denying liability and asserting
that the liability, if any, is solely that of Timely North, Inc. In addition,
Timely North, Inc. has asserted setoffs to the plaintiff's claims..
USF&G v. Timely Transportation, et al, Civil Action No. 98A5879-4,
State Court of Cobb County, Georgia. USF&G is seeking recovery in the amount of
$52,229.66 for alleged workers' compensation insurance audit premiums, dating
back to 1994. Timely has filed an answer denying responsibility for such
premiums and intends to vigorously defend this matter.
The Company is not a party to any other material legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
14
<PAGE> 15
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K. - On January 4, 1999, the Company filed a
report on Form 8-K to report the sale of $500,000 of 9% Convertible
Debentures and warrants to purchase up to 1.1 million shares of the
Company's common stock.
15
<PAGE> 16
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, 1999 By: /s/ Dennis A. Bakal
------------ ----------------------------------------------
Dennis A. Bakal
President, Chief Executive Officer and
Chairman of the Board
(principal executive officer)
Date: May 14, 1999 By: /s/ Susan P. Dial
------------ ----------------------------------------------
Susan P. Dial
Chief Financial Officer and Director
(principal financial and accounting officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ISSUER'S
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
1999, SET FORTH IN THE ACCOMPANYING FORM 10-Q 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.0
<CASH> (383,997)
<SECURITIES> 546,368
<RECEIVABLES> 8,781,212
<ALLOWANCES> (760,765)
<INVENTORY> 0
<CURRENT-ASSETS> 10,899,166
<PP&E> 8,686,974
<DEPRECIATION> (1,993,114)
<TOTAL-ASSETS> 20,637,115
<CURRENT-LIABILITIES> 15,293,639
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,243,597
<TOTAL-LIABILITY-AND-EQUITY> 20,637,115
<SALES> 10,102,224
<TOTAL-REVENUES> 10,102,224
<CGS> 0
<TOTAL-COSTS> 9,815,665
<OTHER-EXPENSES> (72,045)
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 272,436
<INCOME-PRETAX> 86,168
<INCOME-TAX> 0
<INCOME-CONTINUING> 86,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,168
<EPS-PRIMARY> 0.02
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