<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(MARK)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
PERIOD ENDED MARCH 31, 1999.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 000-24019
---------
United Road Services, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3278455
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 Computer Drive West
Albany, New York 12205
---------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 446-0140
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No_____
-------
As of May 14, 1999, the registrant had 17,791,372 shares of common stock
issued and outstanding.
<PAGE>
UNITED ROAD SERVICES, INC.
--------------------------
Form 10-Q For The Quarterly Period Ended March 31, 1999
Index Page
Part I. - Financial Information
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations
For the Three Months Ended
March 31, 1999 and March 31, 1998 4
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999 and
March 31, 1998 5
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosures about Market Risk 21
Part II. - Other Information
Item 2 Changes in Securities and Use of Proceeds 22
Item 4 Submission of Matters to a Vote of Security Holders 22
Item 6 Exhibits and Reports on Form 8-K 23
Signatures 24
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<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share amounts)
ASSETS March 31,1999 December 31,1998
- ------ -------------- ----------------
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 1,491 3,381
Trade receivables, net of allowance for doubtful
accounts of $1,340 and $1,132, at March 31, 1999
and December 31, 1998, respectively 27,531 16,440
Other receivables 537 1,495
Prepaid expenses and other current assets 2,983 2,217
Current portion of rights to equipment under finance contracts 634 547
-------- -------
Total current assets 33,176 24,080
Vehicles and equipment, net 75,010 46,814
Rights to equipment under finance contracts, excluding current portion 1,833 2,025
Deferred financing costs, net 4,712 3,552
Goodwill, net 212,075 171,953
Other non-current assets 190 308
-------- -------
Total assets $326,996 248,732
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current installments of obligations under capital leases $ 340 338
Current installments of obligations for equipment under
finance contracts 634 547
Notes payable 609 17
Accounts payable 7,975 6,904
Accrued expenses 5,886 4,690
Income taxes payable 1,378 -
Acquisitions payable 5,695 -
Due to related parties 660 2,254
-------- -------
Total current liabilities 23,177 14,750
Obligations under capital leases, excluding current installments 468 698
Obligations for equipment under finance contracts, excluding
current installments 1,833 2,025
Long-term debt 107,912 62,532
Deferred income taxes 5,412 4,961
-------- -------
Total liabilities 138,802 84,966
-------- -------
Stockholders' equity:
Preferred stock; 5,000,000 shares authorized; no shares
issued or outstanding - -
Common stock, $0.001 par value; 35,000,000 shares
authorized; 17,746,141 and 15,707,085
shares issued and outstanding at March 31, 1999
and December 31, 1998, respectively 18 16
Additional paid-in capital 181,948 159,532
Retained earnings 6,228 4,218
-------- -------
Total stockholders' equity 188,194 163,766
-------- -------
Total liabilities and stockholders' equity $326,996 248,732
======== =======
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended
March 31,
1999 1998
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Net revenue $59,453 -
Cost of revenue, excluding depreciation 42,843 -
Amortization of goodwill 1,279 -
Depreciation 1,891 2
Selling, general and administrative expenses 7,564 388
------- -----
Income (loss) from operations 5,876 (390)
Other income (expense):
Interest income 11 5
Interest expense (2,023) -
Other (70) -
------- -----
Income (loss) before income taxes 3,794 (385)
Income tax expense (benefit) 1,784 (153)
------- -----
Net income (loss) $ 2,010 (232)
======= =====
Per share amounts:
Basic earnings (loss) $0.12 (0.08)
======= =====
Diluted earnings (loss) $0.12 (0.08)
======= =====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Net income (loss) $ 2,010 (232)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 1,891 2
Amortization of goodwill 1,279 -
Amortization of deferred financing costs 207 -
Provision for doubtful accounts 219 -
Deferred income taxes 451 (153)
Interest expense, paid-in-kind 980 -
Changes in operating assets and liabilities, net of
effects of acquisitions:
Increase in trade receivables (5,322) -
Decrease in other receivables 1,254 -
Increase in prepaid expenses and
other current assets (680) (3)
Decrease in other non-current assets 118 -
Increase (decrease) in accounts payable (869) 1,241
Increase in accrued expenses 367 -
Increase in income taxes payable 1,085 -
-------- ---
Net cash provided by operating activities 2,990 855
-------- ----
Investing activities:
Acquisitions, net of cash acquired (24,824) (473)
Deposit on vehicles (1,691) -
Purchases of vehicles and equipment (5,174) (388)
Proceeds from sale of vehicles and equipment 100 -
Amounts payable to related parties (1,626) 109
-------- ---
Net cash used in investing activities (33,215) (752)
-------- ----
Financing activities:
Proceeds from issuance of common stock, net - (58)
Proceeds from issuance of convertible subordinated debentures 31,500 -
Borrowings on revolving credit facility 42,900 -
Repayments of revolving credit facility (30,000) -
Payments of deferred financing costs (1,367) (30)
Payments on long-term debt and capital leases assumed
in acquisitions (14,698) -
-------- ----
Net cash provided by (used in) financing activities 28,335 (88)
-------- ----
Increase (decrease) in cash and cash equivalents (1,890) 15
Cash and cash equivalents at beginning of period 3,381 50
-------- ---
Cash and cash equivalents at end of period $ 1,491 65
======== ====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In thousands)
(Unaudited)
Three months ended
March 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 665 -
======== ====
Income taxes $ 79 -
======== ====
Supplemental disclosure of non-cash investing
and financing activity:
Issuance of common stock for acquisitions $ 24,821 -
======== ====
Warrant issued to lender as partial loan fee $ - 471
======== ====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1999
(1) Summary of Significant Accounting Policies
(a) Interim Financial Statements
The unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote
disclosures, normally included in annual consolidated financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows have been included. The
results of operations for the interim periods are not necessarily
indicative of the results for the entire fiscal year.
It is suggested that these condensed consolidated financial statements
be read in conjunction with the audited consolidated financial
statements and notes thereto included in United Road Services, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998, as
filed with the SEC.
(b) Organization and Business
United Road Services, Inc., a Delaware corporation (the "Company"), was
formed in July 1997 to become a leading national provider of motor
vehicle and equipment towing and transport services. As such, it has a
limited combined operating history and its future success is dependent
upon a number of factors which include, among others, the ability to
successfully integrate existing operations, reliance on the
identification and integration of satisfactory acquisition candidates,
the availability of acquisition financing, and the ability to manage
growth and attract and retain quality management.
From inception through March 31, 1999, the Company acquired 54
businesses (the "Acquisitions"), seven of which (the "Founding
Companies") were acquired on May 6, 1998 simultaneously with the
consummation of an initial public offering (the "Offering") of the
Company's common stock (the "Common Stock"). All of these acquisitions
were accounted for utilizing the purchase method of accounting.
-7-
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
(1) - Continued
(c) Basis of Presentation
The accompanying condensed consolidated financial statements include
the accounts of the Company and its subsidiaries. The results of
operations of the Acquisitions have been included in the Company's
results of operations from their respective acquisition dates. All
significant intercompany transactions have been eliminated in
consolidations. Certain reclassifications have been made in prior
periods to conform with the current presentation.
(d) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
unaudited interim consolidated financial statements in conformity
with generally accepted accounting principles. Actual results could
differ from those estimates.
(e) Per Share Amounts
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that shared in the
earnings of the Company (such as stock options, warrants and the
convertible subordinated debentures).
The following table provides calculations of both basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three-months ended March 31, 1999
---------------------------------
Weighted Per
Net average share
Income shares amounts
------ ------ -------
<S> <C> <C> <C>
Basic $2,010,000 16,498,352 $0.12
========== ========== =====
Diluted $2,010,000 17,378,406 $0.12
========== ========== =====
</TABLE>
Shares issuable upon conversion of the convertible subordinated debentures have
been excluded at March 31, 1999, as the effect would be antidilutive due to the
adjustment (increase in net income) for interest expense.
-8-
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
<TABLE>
<CAPTION>
Three-months ended March 31, 1998
- ---------------------------------
Weighted Per
Net average share
Loss shares amounts
---- ------ -------
<S> <C> <C> <C>
Basic $ (232) 2,822,736 $(0.08)
======= ========= ========
Diluted $ (232) 2,822,736 $(0.08)
======= ========= ========
</TABLE>
The impact of the Company's options have been excluded at March 31, 1998
as the effect would be antidilutive.
(f) Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999.
Management is currently evaluating the impact of SFAS No. 133 on the
Company's consolidated financial statements.
(2) Stockholders' Equity
Pursuant to its amended and restated certificate of incorporation filed on
February 23, 1998, the Company increased the authorized number of shares of
its capital stock from 1,000,000 shares to 40,000,000 shares (35,000,000
common shares and 5,000,000 preferred shares). Also, on February 23, 1998,
the Company effected a 3.72 for 1 stock split. Common Stock has been
retroactively reflected in the condensed consolidated financial statements.
In January 1998, the Company issued 29,760 shares of Common Stock to a
member of the board of directors for a purchase price of $3.36 per share.
On May 6, 1998, the Company completed the initial public offering of its
Common Stock by issuing 7,590,000 shares, 990,000 of which were issued
pursuant to an underwriters' over-allotment provision, at a price of $13.00
per share. Prior to the offering, there was no public market for the
Company's Common Stock. The net proceeds of the offering, after deducting
applicable offering costs of $9.2 million were $89.5 million. The net
proceeds were used by the Company to finance acquisitions and for general
corporate purposes.
-9-
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
During the period from May 6, 1998 through December 31, 1998 the Company
acquired the Founding Companies and an additional 34 businesses using a
combination of Common Stock and cash. The total number of shares issued in
connection with these acquisitions was 5,294,349. During the period from
January 1, 1999 to March 31, 1999, the Company acquired 13 additional
businesses using a combination of Common Stock and cash. The total number
of shares issued in connection with these acquisitions was 2,039,056 valued
at $32.5 million.
(3) Due to Related Parties
The Company is obligated to make certain earn-out payments to the
former owners of the Founding Companies and one other Acquired
Company. For each of the years 1998 through 2002, the Company will be
required to make an earn-out payment to the former owners of each of
these companies that achieves certain net revenue targets. The net
revenue target for 1998 was generally 110% of 1997 net revenue of the
particular company, and for the years 1999 through 2002 the net
revenue target is 110% of the greater of the prior year's actual net
revenue or target net revenue. If the net revenue target is achieved
for a particular year, an initial payment, generally equal to 5% of
the excess of actual net revenue over the net revenue target, is due.
In addition, upon achievement of the net revenue target for a
particular year, subsequent and equal payments will also be due for
each year through 2002, provided that the actual net revenue for the
respective subsequent year exceeds the actual net revenue for the year
that the net revenue target was first achieved. At March 31, 1999 and
December 31, 1998, the Company has recorded additional goodwill and a
liability within accrued expenses on the accompanying condensed
consolidated balance sheets in the amount of $426,000 and $362,000,
respectively, to reflect earn-out payments due.
(4) Segment and Related Information
The Company's divisions operate under a common management structure that
evaluates each division's performance. The Company's divisions have been
aggregated into two reportable segments: (1) Transport and (2) Towing and
Recovery. The reportable segments are considered by management to be
strategic business units that offer different services and each of whose
respective long-term financial performance is affected by similar economic
conditions.
The Transport segment provides transport services to a broad range of
customers in the new and used vehicle markets. The Towing and Recovery
segment provides towing, impounding and storing, lien sales and auto
auctions of abandoned vehicles. In addition, the Towing and Recovery
segment provides recovery and relocation services for heavy-duty commercial
vehicles and construction equipment.
-10-
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
The accounting policies of each of the segments are the same as those of the
Company, as outlined in note 1 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1998. The Company evaluates the performance
of its operating segments based on income before income taxes. Intersegment
revenues and transfers are not significant.
Summarized financial information concerning the Company's reportable segments
is shown in the following table:
<TABLE>
<CAPTION>
Towing and
Transport Recovery Other Total
--------- ---------- ------- ------
<S> <C> <C> <C> <C>
Net revenues from external customers $36,102 23,351 - 59,453
Cost of revenue 27,432 17,302 - 44,734
Income before income taxes 5,714 2,777 (4,697) 3,794
</TABLE>
The following are reconciliations of the information used by the chief
operating decision-maker to the Company's consolidated totals.
Reconciliation of income before income taxes:
Total profit from reportable segments $ 8,491
Unallocated amounts:
Interest expense, net (1,999)
Depreciation and amortization (176)
Other selling, general and administrative costs (2,522)
-------
Income before income taxes $ 3,794
=======
(5) Long-Term Debt
As of March 31, 1999, the Company had a total of $31.7 million outstanding
under the revolving credit facility.
On March 16, 1999, the Company issued $31.5 million aggregate principal
amount of the Company's 8% convertible subordinated debentures due 2008
(the "Debentures") to Charter URS LLC ("Charterhouse"). This was the second
closing under a Purchase Agreement with Charterhouse providing for the
issuance of up to $75.0 million aggregate principal amount of Debentures.
As of March 31, 1999, the Company had $76.2 million aggregate principal
amount of Debentures outstanding, including interest on the Debentures
paid-in-kind.
(6) Acquisitions
On May 6, 1998, the Company acquired the seven businesses referred to as
the Founding Companies. Between May 7, 1998 and March 31, 1999, the Company
acquired 47 other businesses for aggregate consideration (excluding assumed
indebtedness) of approximately $109.2 million in cash and 4,957,664 shares
of Common Stock with a recorded value of $77.1 million. The acquired
companies are located throughout the United States, with the majority
located in the Western
-11-
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
region of the country. These companies are engaged in the business of motor
vehicle and equipment towing, recovery and transport services. The
acquisitions have been accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the
assets acquired, including certain direct costs associated with the
acquisitions, of $215.1 million has been recorded as goodwill and is being
amortized on a straight-line basis over 40 years.
The following unaudited pro forma financial information presents the
combined results of operations of the Company as if all the acquisitions
that were completed through March 31, 1999 had occurred as of January 1,
1998, after giving effect to certain adjustments, including amortization of
goodwill, additional depreciation expense, agreed-upon reductions in
salaries and bonuses to former owners/shareholders and related income tax
effects. This pro forma financial information does not necessarily reflect
the results of operations that would have occurred had a single entity
operated during such periods.
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Net revenue $67,169 $278,845
======= ========
Net income $ 3,090 $ 14,987
======= ========
Basic net income per share $ 0.18 $ 0.88
======= ========
Diluted net income per share $ 0.17 $ 0.84
======= ========
</TABLE>
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<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Item 1
of this Quarterly Report.
Cautionary Statements
- ---------------------
From time to time, in written reports and oral statements, management may
discuss their expectations regarding United Road Services, Inc.'s future
performance. These "forward-looking statements" are based on currently
available competitive, financial and economic data and management's operating
plans and involve risks and uncertainties that could render actual results
materially different from management's expectations. Such risks and
uncertainties include, without limitation, general economic conditions, changes
in applicable regulations, including but not limited to, various federal, state
and local laws and regulations regarding equipment, driver certification,
training and recordkeeping and workplace safety, the loss of significant
customers and contracts, risks related to the Company's acquisition strategy and
its ability to integrate acquired companies, changes in the level of demand for
towing and transport services, price changes in response to competitive factors,
seasonal and cyclical variations and the timing of expenditures for new
equipment and dispositions of used equipment. Investors must recognize that
events could turn out to be significantly different from what management
expects.
Overview
- --------
United Road Services, Inc. ("United Road" or the "Company") offers a broad range
of towing, recovery and transport services. These services include: towing,
impounding and storing motor vehicles; conducting lien sales and auctions of
abandoned vehicles; recovering heavy-duty commercial and recreational vehicles;
towing heavy equipment; and transporting new and used vehicles. The Company's
customers include commercial entities, such as automobile leasing companies,
insurance companies, automobile auction companies, automobile dealers, repair
shops and fleet operators; law enforcement agencies such as police, sheriff and
highway patrol departments; and individual motorists.
The Company derives revenue from towing and transport services based on
distance, time or fixed charges and from related impounding and storage fees.
If an impounded vehicle is not claimed within a period prescribed by law
(typically between 30 and 90 days), the Company initiates and completes lien
proceedings and the vehicle is sold at auction or to a scrap metal facility,
depending on the value of the vehicle. Depending on the jurisdiction, the
Company may either keep all the proceeds from the vehicle sales, or keep the
proceeds up to the amount of the towing and storage fees and pay the remainder
to the municipality or law enforcement agency. Services are provided in some
cases under contracts with towing and transport customers. In other cases,
services are provided to towing and transport customers without a long-term
contract. The prices charged for towing and storage of impounded vehicles for
municipalities or law enforcement agencies are limited by contractual provisions
or local regulation.
Cost of revenue consists primarily of the following: salaries and benefits of
drivers, dispatchers, supervisors and other employees; fees charged by
subcontractors; fuel; depreciation, repairs and maintenance; insurance; parts
and supplies; other vehicle expenses; and equipment rentals.
Selling, general and administrative expenses consist primarily of the following:
compensation and benefits to sales and administrative employees; fees for
professional services; depreciation of administrative equipment and software;
advertising; and other general office expenses.
-13-
<PAGE>
In the case of law enforcement and private impound towing, payment is obtained
either from the owner of the impounded vehicle when the owner claims the vehicle
or from the proceeds of lien sales, scrap sales or auctions. With respect to
other operations, customers are billed upon completion of services provided,
with payment generally due within 30 days. Revenue is recognized as follows:
towing and recovery revenue is recognized at the completion of each engagement;
transport revenue is recognized upon the delivery of the vehicle or equipment to
its final destination; revenue from lien sales or auctions is recognized when
title to the vehicle has been transferred; and revenue from scrap sales is
recognized when the scrap metal is sold.
Expenses related to the generation of revenue are recognized as incurred.
At the time of its initial public offering in May 1998, the Company acquired the
seven Founding Companies. Between May 7, 1998 and December 31, 1998, the Company
acquired a total of 34 additional towing, recovery and transport businesses.
Between December 31, 1998 and March 31, 1999, the Company acquired 13 additional
towing, recovery and transport businesses.
Results of Operations - Three Months ended March 31, 1999
- ---------------------------------------------------------
Net Revenue. Net revenue was $59.4 million for the three months ended March
31, 1999, of which $36.1 million, or 60.8% of net revenue, related to transport
services and $23.3 million, or 39.2% of net revenue, related to towing and
recovery services. Transport revenue was derived from three transport businesses
acquired in conjunction with the initial public offering and 18 additional
transport businesses acquired prior to March 31, 1999. The Founding Companies
involved in transport services experienced an internal growth rate of 23.9% in
net revenue in the three months ended March 31, 1999, as compared to the three
months ended March 31, 1998, as a result of incremental business development and
enhanced capacity. Towing and recovery revenue was derived from four companies
acquired in conjunction with the initial public offering and 29 additional
towing and recovery businesses acquired prior to March 31, 1999. The Founding
Companies involved in towing and recovery services experienced an internal
growth rate of 7.1% in net revenue in the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998, as a result of an increased
focus on heavy-duty and higher margin services, coupled with limited price
increases.
Gross Profit. Cost of revenue, including depreciation of $1.7 million, was
$44.7 million, or 75.3% of net revenue, for the three months ended March 31,
1999, resulting in gross profit of $14.7 million, or 24.7% of net revenue.
Transport cost of revenue was $27.4 million, or 75.9% of transport net revenue,
for the three months ended March 31, 1999, resulting in transport gross profit
of $8.7 million. The most significant components of transport cost of revenue
consisted of labor, subcontractor/broker costs, fuel, and depreciation. Towing
and recovery cost of revenue was $17.3 million, or 74.3% of towing and recovery
net revenue, for the three months ended March 31, 1999, resulting in towing and
recovery gross profit of $6.0 million. The most significant components of towing
and recovery cost of revenue consisted of labor, subcontractor/broker costs,
fuel and preparation for auctions and lien sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $7.6 million, or 12.8% of net revenue, for the
three months ended March 31, 1999. Transport selling, general and administrative
expenses were $2.4 million, or 9.2% of transport net revenue, for the three
months ended March 31, 1999. The most significant component of transport
selling, general and administrative expenses consisted of administrative
salaries and benefits of $2.0 million. Towing and recovery selling, general and
administrative expenses were $2.7 million, or 11.6% of towing and recovery net
revenue, for the three months ended March 31, 1999. The most significant
component of towing and recovery selling, general and administrative expenses
consisted of administrative salaries and benefits of $2.0 million. Selling,
general and administrative expenses related to corporate headquarters were $2.5
million, or 4.9% of net revenue, for the three months ended March 31, 1999. The
most significant components of corporate headquarters selling,
-14-
<PAGE>
general and administrative expenses consisted of administrative salaries and
benefits, data center operational expenses, professional fees and travel.
Income from Operations. Income from operations was $5.9 million, or 9.9% of
net revenue, for the three months ended March 31, 1999, of which $5.7 million
related to transport services and $2.7 million related to towing and recovery
services, offset by corporate headquarters selling, general and administrative
expenses of $2.5 million.
Income Tax Expense. Income tax was $1.8 million, for an effective tax rate of
47%. The Company's effective tax rate has increased during the three months
ended March 31, 1999, primarily as a result in the increase in non-deductible
goodwill amortization.
Results of Operations - Three months ended March 31, 1998
- ---------------------------------------------------------
The Company conducted no operations and generated no net revenue for the
period July 25, 1997 (inception) through May 6, 1998. Selling, general
and administrative expenses were incurred during the three months ended March
31, 1998 in order to establish corporate operations and to prepare for the
Company's initial public offering. Such selling, general and administrative
expenses consisted primarily of operating lease costs associated with the
corporate office and other general operating expenses such as clerical,
communications and operating supplies.
An income tax benefit was recorded by the Company during the three months
ended March 31, 1998, because management believed that losses would be
recoverable through the generation of taxable income resulting from operations
subsequent to the initial public offering. The income tax benefit has been
recorded at the effective tax rate expected by United Road for the year ending
December 31, 1998.
Liquidity and Capital Resources
As of March 31, 1999, the Company had approximately:
. $1.5 million of cash and cash equivalents,
. $10.0 million of working capital, and
. $110.2 million of outstanding indebtedness, excluding current installments.
In the three months ended March 31, 1999, the Company generated $3.0 million
of cash from operations. Cash provided by operations was offset by a net
increase in receivables of $4.0 million. During the first quarter of 1999, the
Company used $33.2 million of cash in investing activities ($30.5 million of
which related to acquisitions of businesses, $6.8 million of which related to
deposits and purchases associated with new vehicles and equipment offset by the
increase in amounts payable to related parties of $4.1 million), and generated
$28.3 million of cash through financing activities. Financing activities
consisted of payments on long-term debt and capital lease obligations assumed in
acquisitions of $14.7 million and payments of deferred financing costs of $1.4
million, offset by the proceeds from the issuance to Charter URS, LLC
("Charterhouse") of $31.5 million aggregate principal amount of the Company's 8%
convertible subordinated debentures due 2008 (the "Debentures")
The Company has a credit facility with a group of banks that enables the
Company to borrow up to $90.0 million on a revolving basis. The credit facility
terminates in October 2001, at which time all outstanding indebtedness will be
due. Borrowings under the credit facility accrue interest, at the Company's
option, at either (a) the base rate (which is equal to the greater of (i) the
federal funds rate plus 0.5% and (ii) Bank of America's reference rate), or (b)
the eurodollar rate (which is equal to Bank of America's reserve adjusted
eurodollar rate plus a margin ranging from 1.5% to 2.5% per annum).
-15-
<PAGE>
Obligations under the credit facility are guaranteed by the Company's
subsidiaries. The Company's obligations and the obligations of the Company's
subsidiaries under the credit facility and related guarantees are secured by
substantially all of the Company's assets, the assets of the Company's
subsidiaries and the stock of the Company's subsidiaries. Under the credit
facility, the Company must comply with various loan covenants, including
maintenance of certain financial ratios, restrictions on additional
indebtedness, and restrictions on liens, guarantees, advances and dividends. In
addition, the Company's ability to borrow under the credit facility is subject
to customary drawing conditions. The credit facility also requires prior
approval by the banks of certain acquisitions. In connection with the credit
facility, the Company issued to Bank of America a warrant to purchase 117,789
shares of Common Stock at an exercise price of $13.00 per share, subject to
adjustment as provided in the Warrant Agreement. The warrant expires on June 16,
2003.
On November 19, 1998, the Company entered into a Purchase Agreement with
Charterhouse providing for the issuance to Charterhouse of up to $75.0 million
aggregate principal amount of Debentures. The Debentures are convertible into
Common Stock at any time, at Charterhouse's option, at an initial exercise price
of $15.00 per share, subject to adjustment as provided in the Purchase
Agreement. The conversion price exceeded the fair market value of the Common
Stock on the date of execution of the Purchase Agreement. Following five years
after the date of first issuance, the Debentures are redeemable at the Company's
option at 100% of their principal amount if the average closing price of the
Company's Common Stock exceeds 150% of the conversion price over a thirty day
period. The Company issued $43.5 million aggregate principal amount of
Debentures to Charterhouse at a first closing on December 7, 1998. The Company
issued the remaining $31.5 million aggregate principal amount of Debentures to
Charterhouse at a second closing on March 16, 1999. The Debentures bear interest
at a rate of 8% annually, payable in kind for the first five years following
issuance, and thereafter either in kind or in cash, at the Company's discretion.
Pursuant to the Purchase Agreement, the Company paid Charterhouse a fee of 1% of
the principal amount of the Debentures issued at each closing. The Company also
agreed to pay certain fees and expenses incurred by Charterhouse in connection
with the transaction.
The Company's accounting and financial reporting activities are centralized in
Albany, New York. The Company is in the process of implementing its proprietary
National Transportation Management System for its transport operations and a
standardized operating system for its towing and recovery operations. As of
March 31, 1999, approximately $4.9 million had been spent to develop and install
the integrated financial and information systems. Although it is expected that
the Company will need to upgrade and expand these systems in the future, the
Company cannot currently quantify the amount that will be spent to do so.
The Company spent $5.2 million on purchases of vehicles and equipment
(including $1.0 million spent in connection with installation of information
systems) during the three-months ended March 31, 1999. Other than expenditures
relating to the information systems, these expenditures were primarily for
transport and towing and recovery vehicles. During the first quarter of 1999,
the Company made expenditures of $1.3 million on towing and recovery vehicles
and $2.5 million on transport vehicles. These expenditures were financed
primarily with cash flow from operations and debt. During the first quarter of
1999, the Company committed to purchase up to 100 transport, towing and recovery
vehicles for delivery at various times through the year 2000, and in connection
therewith made a deposit of approximately $1.6 million to the vehicle
manufacturer.
During the period from January 1, 1999 to March 31, 1999, the Company acquired
13 businesses using a combination of Common Stock and cash. The total number of
shares issued in connection with these acquisitions was 2,039,056 with a
recorded fair value of $32.5 million. The cash portion of these acquisitions was
funded through proceeds from operations and long-term borrowings.
-16-
<PAGE>
The Company expects to fund its ongoing liquidity needs through cash flow from
operations, borrowings, including use of amounts available under the credit
facility, and, depending upon market conditions, through the issuance of
additional Common Stock.
In the past, the Company has financed its acquisitions by using a combination
of Common Stock, cash and debt. If the Common Stock does not maintain a
sufficient market value, or if the owners of the businesses the Company wishes
to acquire are unwilling to accept Common Stock as part of the purchase price,
the Company may be required to use more of its cash resources, if available, or
seek additional financing, in order to pursue its acquisition program. The
consideration for each future acquisition will vary on a case-by-case basis,
primarily determined by the historical operating results and future prospects of
the business to be acquired and the ability of that business to complement the
services the Company offers.
Seasonality; Cyclicality
The Company may experience significant fluctuations in its quarterly operating
results due to seasonal, cyclical and other variations in the demand for towing,
recovery and transport services. Specifically, the demand for towing and
recovery services is generally highest in extreme weather, such as heat, cold,
rain and snow. Although the demand for automobile transport tends to be
strongest in the months with the mildest weather, since inclement weather tends
to slow the delivery of vehicles, the demand for automobile transport is also a
function of the timing and volume of lease originations, dealer inventories and
new and used auto sales.
General Economic Conditions and Inflation
The Company's future operating results may be adversely affected by (i)
changes in general economic conditions, including various federal, state and
local laws and regulations regarding equipment, driver certification, training
and recordkeeping and workplace safety, (ii) the loss of significant customers
or contracts, (iii) success in integrating acquired companies and future
acquisitions, (iv) price changes in response to competitive factors, and (v) the
timing of expenditures for new equipment and the disposition of used equipment.
Although the Company cannot accurately anticipate the effect of inflation on its
operations, management believes that inflation has not had, and is not likely in
the foreseeable future to have, a material impact on its results of operations.
Year 2000 Readiness
The "Year 2000 problem" exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as "99" for "1999." As a result, certain of these systems may
not properly recognize that the year that follows "1999" is "2000" and not
"1900." If the Year 2000 problems are not corrected, such systems could fail or
produce erroneous results. No one knows the extent of the potential impact of
the Year 2000 problem generally.
The Company's State of Readiness.
The Company has implemented an enterprise-wide Year 2000 readiness project
consisting of the following phases:
-17-
<PAGE>
Assessment and Impact Analysis
The Company has identified certain systems, equipment, and applications,
including embedded systems and other "non-information technology," that are
utilized in its towing and transport operations, or in its finance, payroll, and
administration departments and that are necessary to operate its business
without disruption (the "Mission Critical Systems"). These Mission Critical
Systems include servers, desktop and notebook computers, data communication
equipment, peripherals, network and desktop operating systems (collectively, "IT
Infrastructure"), desktop application suites, payroll and financial software,
towing and transportation applications, and interfaces with the Company's
financial systems.
The Company and its various divisions also utilize certain other hardware and
software, operating systems, relationships and services in their day-to-day
operations which are not necessarily critical to their operations. The Company
is in the process of identifying and evaluating these systems and functions and
will include in its Year 2000 readiness project any systems that are deemed
material to the Company's business (collectively, "Important Functions").
The Company is in the process of sending Year 2000 questionnaires to all of
its significant suppliers, customers, service providers and other business
partners. As the responses are received, they will be catalogued and assessed
for possible impact on the Company's operations. The Company has sent
approximately 200 questionnaires to suppliers and has received approximately 34
responses. The Company has also sent approximately 60 questionnaires to
customers and has received four responses to date.
As of the date of this Report, the Company has identified and assessed the
impact of Year 2000 problems with respect to all of its Mission Critical
Systems. By the end of July 1999, it expects to have determined which of its
other systems and functions should be deemed Important Functions and included
within the Year 2000 readiness project and to have assessed the impact of all
related responses to Year 2000 questionnaires that have been returned by that
date. With respect to the remaining Year 2000 questionnaires and any additional
acquisitions that the Company may complete during 1999, this phase is expected
to continue throughout the year.
Test Planning
Based on the results of its Impact Analysis, the Company and its outside Year
2000 consultant will identify the steps necessary to ensure Year 2000 readiness
of all Mission Critical Systems and Important Functions. This analysis will
determine whether the system or function will be tested using Year 2000 scanning
software, manually tested or checked through website or personal letter
confirmation. The Company has completed this process with respect to its Mission
Critical Systems and expects to complete this process with respect to Important
Functions at all of its existing locations by the end of July 1999. With respect
to any additional acquisitions that the Company may complete during 1999, this
process is expected to continue throughout the year.
Testing
This phase consists of implementing the testing procedures that were developed
during the Test Planning phase with respect to all Mission Critical Systems and
Important Functions. The Company is in various stages of completion of this
phase with respect to its Mission Critical Systems, as more fully described
below. With respect to Important Functions at its existing locations, the
Company expects that this phase will be complete by the end of September 1999.
With respect to any additional acquisitions that the Company may complete during
1999, this process is expected to continue throughout the year.
-18-
<PAGE>
When the Company was formed, management assessed the appropriateness of
various computer hardware and software technologies in light of the Company's
strategic objectives. Because this occurred in the latter half of 1998,
management was able to select hardware and financial software that was
represented by the vendors to be Year 2000 ready.
The software that the Company uses to operate its centralized accounting and
financial reporting functions has been tested by the supplier, and the supplier
has provided preliminary indications that the software will be Year 2000 ready.
With the assistance of its outside Year 2000 consultant, the Company plans to
confirm the Year 2000 readiness of these systems through additional testing
prior to September 30, 1999.
The Company's payroll operations are managed by a national payroll processor,
which has provided the Company with written assurances that its systems are Year
2000 ready.
In order to increase the functionality of its transport operations systems,
the Company has developed a National Transportation Management System to replace
the local systems that are currently in use at its transport locations. The
software consultant that assisted the Company in developing the National
Transportation Management System has provided the Company with written
assurances that the system is designed to be Year 2000 ready and has advised the
Company that it will fully test the software and provide written certification
of Year 2000 readiness by the end of September 1999. The Company has begun
installing this software at several locations, and currently expects to install
it at all of its existing transport locations prior to December 31, 1999.
In order to increase the functionality of its towing operations systems, the
Company intends to replace substantially all of the local operating systems
utilized at its towing locations with standardized operational software. The
vendor that developed this software has provided the Company with written
assurances that this software is Year 2000 ready. The Company has completed
installation of this software at several locations, and currently expects to
complete installation at substantially all of its existing towing locations
before December 31, 1999. With respect to the remaining towing locations, the
Company plans to continue to utilize the existing systems and supply an
interface to the Company's standardized operating system.
The Company has also installed interfaces between its various software
applications and its financial systems. The Company's outside Year 2000
consultant will test these interfaces for Year 2000 readiness and provide
written certification of such readiness by the end of September 1999.
The Company's IT Infrastructure has both centralized, datacenter elements and
remote elements at each location. Datacenter infrastructure is comprised of
equipment and software that is all less than one year old, and the Company has
received written assurances from its infrastructure vendors that these systems
are Year 2000 ready. The Company's outside Year 2000 consultant will also test
the Company's datacenter infrastructure and provide written certification of
Year 2000 readiness by the end of September 1999.
In order to improve the efficiency of its acquired businesses and to include
their systems within the Company's wide area network, the Company upgrades or
replaces the remote infrastructure of its acquired entities to meet corporate
standards as soon as reasonably practicable following the Company's acquisition
of such entities. Remote infrastructure upgrades and replacements for all
locations acquired on or before December 31, 1998 are expected to be completed
by the end of May 1999.
The Company plans to survey and, where appropriate, conduct website
confirmation, of the Year 2000 readiness of its telecommunications equipment and
service vendors. The Company expects that this process will be complete by the
end of September 1999.
-19-
<PAGE>
Remediation
During this phase, the Company intends to develop and implement appropriate
corrective procedures for those Mission Critical Systems and Important Functions
that it determines during the Testing phase are not Year 2000 ready. The Company
will determine, on a case-by-case basis, whether such systems and functions
should be upgraded or replaced, or whether a custom remediation plan should be
implemented. In the case of the Company's business partners, remediation may
involve the designation of alternative service providers.
Contingency Planning
As part of the Contingency Planning phase of its Year 2000 readiness project,
the Company intends to develop and test manual contingency plans for its
dispatch operations and for certain of its financial operations. While
computerized systems make the Company more efficient, the Company believes it
can perform all necessary functions manually, although not as efficiently. In
the past, certain of the Company's divisions have operated successfully on a
manual basis. In addition, the Company has successfully interacted with certain
of its vendors and customers on a manual basis.
In the event that any of the Company's other Mission Critical Systems or
Important Functions will not be Year 2000 ready by December 31, 1999, the
Company will identify, consider, and determine appropriate alternatives. The
Company expects that any such contingency plans will be implemented during the
fourth quarter of 1999.
The Costs to Address the Company's Year 2000 Issues
During the first quarter of 1999, the Company has incurred costs of
approximately $1.0 million to develop and install its information systems
described above. Because these systems were developed and installed during the
latter half of 1998, management was able to take Year 2000 readiness into
account in selecting hardware and software technologies that would meet the
Company's objectives. As a result, the Company has not incurred, and does not
expect to incur, material costs to upgrade or replace its information systems to
address Year 2000 issues. The Company currently expects to incur up to $290,000
of consulting fees and other costs related to its Year 2000 readiness project
during the remainder of 1999.
The Risks of the Company's Year 2000 Issues
Installation of the Company's information systems may not be completed at all
of its locations before December 31, 1999. In addition, it is possible that the
systems, when installed, may not function properly. In such event, the Company
would be forced to rely on manual performance of its central administrative
functions along with the local dispatch and operating systems utilized by its
acquired businesses prior to their acquisition by the Company. There can be no
assurance that such systems will be Year 2000 ready, or that the vendors and
other service providers associated with such businesses will be Year 2000 ready.
If the local dispatch and operating systems utilized by its acquired businesses
do not function properly after December 31, 1999, the Company will be required
to perform all critical functions on a manual basis. Any resulting inefficiency
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Because the Company has not yet received responses to its Year 2000
questionnaires from all of its business partners, it is uncertain as to whether
all of its business partners will be Year 2000 ready before December 31, 1999.
The Company is unable to predict the impact that Year 2000 problems at vendors,
customers or financial institutions may have on the Company. The Company intends
to continue to address Year 2000 issues with its business partners, and will
implement contingency plans to the extent necessary.
-20-
<PAGE>
The foregoing constitutes a Year 2000 statement and readiness disclosure
subject to the protections afforded it by the federal Year 2000 Information and
Readiness Disclosure Act of 1998.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes there have been no material changes in the Company's
interest rate risk position since December 31, 1998. Other types of market
risk, such as foreign exchange rate risk and commodity price risk, do not arise
in the normal course of the Company's business activities.
-21-
<PAGE>
Part II OTHER INFORMATION
-----------------
Item 2 Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
- ---------------------------------------
During the first quarter of 1999, the Company issued and sold the
following unregistered securities, the purchasers of which were all accredited
investors.
(1) On February 1, 1999, the Company issued an aggregate of 70,594
shares of Common Stock in connection with its acquisition of
Yellowstone Transport, Inc.
(2) On February 22, 1999, the Company issued an aggregate of 64,678
shares of Common Stock in connection with its acquisition of Kern
Radiator & Towing, Inc. d/b/a B&J Towing.
(3) On February 26, 1999, the Company issued an aggregate of 116,391
shares of Common Stock in connection with its acquisition of
Louisville Auto Transport, Inc. and Louisville-Orlando Auto
Delivery, Inc.
(4) On March 1, 1999, the Company issued an aggregate of 71,431 shares
of Common Stock in connection with its acquisition of Flynn Motor
Transport, Inc.
(5) On March 2, 1999, the Company issued an aggregate of 25,899 shares
of Common Stock in connection with its acquisition of Let's Move
It, Inc. d/b/a Auto Movers of Ohio.
(6) On March 3, 1999, the Company issued an aggregate of 217,880
shares of Common Stock in connection with its acquisition of
Beartooth Auto Delivery, Inc. and J&C Incorporated.
(7) On March 5, 1999 the Company issued an aggregate of 81,943 shares
of its Common Stock in connection with its acquisition of
Arizona's Towing Professionals, Inc. d/b/a Shamrock Towing.
(8) On March 16, 1999, the Company issued $31,500,000 aggregate
principal amount of the Company's 8% Convertible Subordinated
Debentures due 2008 to Charter URS, LLC.
(9) On March 22, 1999, the Company issued an aggregate of 83,916
shares of its Common Stock in connection with its acquisition of
River City Auto Recovery, Inc., Skipbusters, Inc., ARS Recovery,
Inc. d/b/a American Recovery Services, Inc. and Ability Employee
Leasing, Inc.
The sales of the securities listed above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as transactions by an
issuer not involving a public offering. The recipients of securities in each
such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were attached to the share
certificates issued in such transactions.
Item 4 Submission of Matters to a Vote of Security Holders
A Special Meeting of the stockholders of the Company was held on
February 23, 1999. At the Special Meeting, the sole issue considered was a
proposal by the Company to issue and sell up to $31.5 million aggregate
principal amount of the Company's 8% Convertible Subordinated Debentures due
2008 to Charter URS, LLC. The proposal was approved, and the voting results were
as follows: 12,804,691 shares voting in favor; 514,948 shares voting against; no
shares withheld; and 7,900 shares abstaining.
-22-
<PAGE>
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description of Documents
- ------ ------------------------
11.1 Statement of Computation of Earnings per Share (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the quarterly
period ended March 31, 1999:
Current Report on Form 8-K/A, dated December 9, 1998 and filed January 11,
1999, to report under Item 5, that on January 11, 1999, the Company had
acquired MPG Transco, Ltd. ("MPG"), and to include, under Item 7, financial
statements of Pilot Transport, Inc. and MPG and unaudited pro forma
financial statements of the Company.
-23-
<PAGE>
SIGNATURES
- ----------
Pursuant to 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.
UNITED ROAD SERVICES, INC.
Registrant
Date May 14, 1999 /s/ Edward T. Sheehan
--------------------------- -----------------------------------
Edward T. Sheehan
Chairman and Chief Executive Officer
Date May 14, 1999 /s/ Donald J. Marr
--------------------------- ------------------------------------
Donald J. Marr
Chief Financial Officer
-24-
<PAGE>
Exhibit Index
Number Description of Document
- ------- -----------------------
11.1 Statement of Computation of Earnings per Share (filed herewith).
27.1 Financial Data Schedule (filed herewith).
-25-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1 Weighted Average
Shares
March 31, 1999 Three-month
period ended
March 31, 1999
-------------------
<S> <C> <C> <C>
Shares outstanding at beginning of period 15,390,574 15,390,574
January 11, 1999 Issuance of shares for acquisition 825,834 724,899
January 12, 1999 Issuance of shares for acquisition 64,716 56,087
January 15, 1999 Issuance of shares for acquisition 41,655 34,713
January 27, 1998 Release of holdback shares 55,157 38,610
January 29, 1999 Issuance of shares for acquisition 18,531 12,560
January 29, 1999 Issuance of shares for acquisition 90,864 61,586
February 1, 1999 Issuance of shares for acquisition 63,534 40,944
February 22, 1999 Issuance of shares for acquisition 42,687 17,549
February 26, 1999 Issuance of shares for acquisition 104,752 38,409
March 1, 1999 Issuance of shares for acquisition 43,845 14,615
March 2, 1999 Issuance of shares for acquisition 17,266 5,563
March 5, 1999 Issuance of shares for acquisition 196,092 56,649
March 22, 1999 Issuance of shares for acquisition 55,944 5,594
-------------------
Weighted average shares outstanding for basic earnings per share 16,498,352
Options outstanding at March 31, 1999: 1,142,400 shares; Total exercise
proceeds: 14,078,894; Average price of
option $12.32 204,778
Warrants outstanding at March 31, 1999: 117,789 shares; Exercise
price: $12.91 per share; Average market
value of Company stock $16.06 23,090
Earnout shares held at March 31,1999; Stock price $4.69 90,869
Shares held in escrow related to acquisitions 561,318
----------
Total shares outstanding for fully diluted earnings per share 17,378,406
==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<CAPTION>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,491
<SECURITIES> 0
<RECEIVABLES> 28,871
<ALLOWANCES> 1,340
<INVENTORY> 0
<CURRENT-ASSETS> 33,176
<PP&E> 75,010
<DEPRECIATION> 1,891
<TOTAL-ASSETS> 326,996
<CURRENT-LIABILITIES> 23,177
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 188,176
<TOTAL-LIABILITY-AND-EQUITY> 326,996
<SALES> 59,453
<TOTAL-REVENUES> 59,453
<CGS> 44,734
<TOTAL-COSTS> 53,577
<OTHER-EXPENSES> 70
<LOSS-PROVISION> 219
<INTEREST-EXPENSE> 2,023
<INCOME-PRETAX> 3,794
<INCOME-TAX> 1,784
<INCOME-CONTINUING> 2,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,010
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
