UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
McClendon Transportation Group, Inc.
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(Name of Small Business in its Charter)
Nevada 22-3714235
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
121 South Lafayette Street, Lafayette, Alabama 36362
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (334-864-9311)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be to registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock par value $.001
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(Title of class)
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(Title of class)
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TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business 1
ITEM 2. Management's Discussion and Analysis or Plan of Operation 4
ITEM 3. Description of Property 6
ITEM 4. Security Ownership of Certain Beneficial Owners and Management 7
ITEM 5. Directors, Executive Officers, Promoters and Control Persons 7
ITEM 6. Executive Compensation 8
ITEM 7. Certain Relationships and Related Transactions 8
ITEM 8. Description of Securities 8
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters 9
ITEM 2. Legal Proceedings 9
ITEM 3. Changes in and Disagreements with Accountants 9
ITEM 4. Recent Sales of Unregistered Securities 10
ITEM 5. Indemnification of Directors and Officers 10
PART F/S 10
PART III
ITEM 1. Index to Exhibits 10
ITEM 2. Description of Exhibits 10
Signature Page 11
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PART I
ITEM 1. Description of Business.
McClendon Transportation Group, Inc. (Transportation") was incorporated
in the State of Delaware on February 20, 1996 as RDA Services, Inc. ("RDA"). In
November, 1999, RDA acquired 100% of the assets of Glenn McClendon Trucking
Company, Inc., an Alabama corporation ("McClendon Trucking") in a reverse merger
transaction and RDA changed its name to McClendon Transportation Group, Inc
("Transportation"). In March, 2000 Transportation merged into its wholly owned
subsidiary, a Nevada corporation with the same name. The merger was effected
solely for the purpose of changing the Company's state of domicile to Nevada.
Transportation has no operations and acts as a holding company. Operations are
conducted through Transportation's subsidiary, McClendon Trucking . Unless
otherwise indicated herein, all references to the "Company" or "McClendon"
include both Transportation and McClendon Trucking.
The Company operates a medium-haul, irregular route, truckload carrying
business of general commodities. The McClendon Trucking fleet transports freight
primarily throughout the eastern United States.
Headquartered in LaFayette, Alabama, McClendon Trucking grew from one
truck at inception in 1933 to today's fleet of approximately 200 company owned
trucks, 900 dry-van trailers, three maintenance and storage terminals, and over
230 owner-operator contract drivers, servicing customers throughout the United
States. McClendon has affiliations with 147 trucking companies which gives us
access to over 5,000 additional trucks nationwide. McClendon Trucking offers dry
load transportation services in the truckload carrier market primarily to
high-volume, time-sensitive customers.
We have secured and maintained strong customer relationships by (1)
focusing on technology; (2) operating premium, late model equipment; (3) hiring
experienced drivers; and (4) maintaining an efficient cost structure. We have
written contracts with most of our customers. The contracts generally require
the customer to use McClendon Trucking for a specified minimum amount of
shipments each year.
Through the use of our satellite-based communication system, which is
complemented by our fully integrated mainframe computer system, dispatchers
monitor the location and delivery schedules of all shipments and equipment to
coordinate routes and maximize utilization of our equipment and drivers. Our
electronic data interchange systems enable us to exchange data directly with a
third party or with a customer's freight payment agent or bank.
Our productive, cost-efficient use of technology is a differentiating
factor in our market share battle. We utilize a satellite based tracking and
communications system to monitor operating efficiency, fleet management and
customer service and to maintain direct communication between our drivers and
fleet managers. Our electronic data interchange system allows customers and the
company to communicate electronically providing real-time information flow such
as delivery, local distribution, and account payment instructions; customers can
receive updates on cargo position, estimated delivery time and other
information. In addition, we monitor engine idle time, speed, performance and
other factors affecting operating efficiency.
McClendon's driver training and safety program
We mandate a stringent driver training and safety program to ensure our
drivers are well-trained, carefully screened and commercial drivers' license
qualified. Our program has included pre-employment and periodic drug testing
since 1987.
1
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McClendon focuses on customer service
McClendon Trucking organized customer service teams that are assigned
geographically and connect the Sales Force and Operations Division directly to
the customer. The customer service teams offer our customers the following:
o Customer service 24-hours a day, 7 days a week through
toll-free WATS, with the flexibility and authority to provide
immediate response.
o Access to on-line dispatch and satellite tracking systems
centralized into McClendon Trucking's mainframe information
system, to give the customer instantaneous responses to
questions on virtually any aspect of their shipment.
o Modern equipment that is well maintained and backed by a
preventative maintenance program.
Our Growth Strategy
Our current strategy is to capitalize on the trends toward core carrier
consolidation, private fleet conversions, dedicated fleets and just-in-time
(time definite) supply-chain inventory management. Core carrier consolidation is
a result of shippers attempting to lower costs by reducing the number of
carriers used. Private fleet conversions are taking place due to the number of
smaller carriers that cannot compete on a long-term basis with the larger
carriers. The dedicated trend occurred due to shippers choosing to use an
outside provider for trucking service needed on demand. The trend most directly
affecting McClendon Trucking is just-in-time inventory management. An increasing
number of companies are having inventory arrive just in time in an effort to
lower warehousing costs. Increasing the owner-operator segment of our fleet,
coupled with the strategic acquisition of contract carriers will allow McClendon
Trucking to leverage its 98% on time performance and service reputation in
penetration of this growth segment of the market.
Our strategy is to identify and acquire mid-size trucking companies,
primarily with annual revenues between $10 million and $100 million, that
possess strong market positions, sound management and a commitment to a high
level of service and quality. We have no assurance that we will be able to
identify appropriate candidates or that such candidates will be available on
terms acceptable to us. In the alternative, even if we do locate suitable
candidates, we may not have the capital to finance the acquisition on terms
agreeable to us, if at all.
CONCERNS AND CONSIDERATIONS ASSOCIATED WITH OUR BUSINESS
McClendon Trucking is dependent on fuel availability
Motor carrier service is dependent upon the availability of diesel
fuel. Historically, our fuel expenses have been at or below industry norms.
McClendon Trucking continually monitors fuel usage, miles per gallon, cost per
mile and cost per gallon. We have not experienced any difficulty in maintaining
fuel supplies sufficient to support our operations. Shortages of fuel and
rationing of petroleum products could have a material adverse effect on our
operations and profitability. We are protected by a fuel surcharge clause in our
contract, and in the event of increases in fuel prices or fuel tax rates, we
pass these increases on to our customers.
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Competition in the trucking industry
The trucking industry is highly competitive and fragmented. McClendon
Trucking competes primarily with other dry-load contract carriers, internal
shipping conducted by existing and potential customers and, to a lesser extent,
railroads. Deregulation of the trucking industry during the 1980's created an
influx of new truckload carriers which, along with certain other factors,
continues to create substantial downward pressure on the industry's rate
structure. Competition for the freight transported is based primarily on service
and efficiency and, to a lesser degree, on freight rates. Our revenues and
operating results will be adversely affected if we fail to compete successfully
Our business is subject to governmental regulation
The trucking industry is subject to regulatory oversight and
legislative changes that can affect the economics of the industry by requiring
certain operating practices or influencing the demand for, and the costs of
providing services to shippers. The Intermodal Surface Transportation Board
(ISTB) and various state agencies have broad powers, generally governing such
matters as authority to engage in motor carrier operations, rates and charges,
accounting systems, certain mergers, consolidations and acquisitions and
periodic financial reporting.
The Federal Motor Carrier Act of 1980 commenced a program to increase
competition among motor carriers and to diminish the level of regulation in the
industry. Following this deregulation, applicants have more easily been able to
obtain operating authority, and interstate motor carriers such as McClendon
Trucking have been able to implement certain rate changes without federal
approval.
We are, and will continue to be, subject to intense competition in our
targeted markets. Significant competitive factors which will affect future sales
in the marketplace include regulatory approvals, performance and pricing.
We are required to adhere to a wide variety of other regulations
governing the operation of our business. Noncompliance with local, state or
federal requirements can result in serious penalties that could harm our
business. Although we believe that our operations comply with applicable
regulations, there can be no assurance that subsequent adoption of laws or
interpretations of existing laws will not regulate, restrict or otherwise
adversely affect our business.
OUR EMPLOYEES
We currently have 247 full-time employees. The personnel is distributed
as follows: officers - 6; managers - 9; clerical - 75; salesmen - 3; mechanics -
31; drivers -123.
ADDITIONAL INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") that requires us to file reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New
York, New York, 10048; and 5670 Wilshire Boulevard, Los Angeles, California
90036. Copies of such material can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C.
20549 at prescribed rates.
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ITEM 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and the related notes appearing subsequently in Part F/S. This
discussion contains forward-looking statements based upon current expectations
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
be aware that our actual results and the timing of certain events could differ
materially from those anticipated in these forward-looking statements and could
have an adverse effect on our business, results of operations and financial
conditions.
The Company cautions readers that any such forward-looking statements
made by or on behalf of the Company are based on management's current
expectations and beliefs, but are not guarantees of future performance. Actual
results could differ materially from those expressed or implied in the
forward-looking statements.
The following financial analysis reflects the operations of Glenn
McClendon Trucking Company Inc. since prior to the reverse merger RDA was a
shell structure and had no assets or liabilities.
RESULTS OF OPERATIONS
Total revenues for year ended December 31, 1999 compared to year ended
December 31, 1998
Total revenues decreased from $61,748,800 in 1998 to $48,448,406 in
1999. This decrease in revenues resulted primarily from the shrinking of the
operating territory from all 48 contiguous states at the beginning of 1998 to
approximately 26 states in the Midwest, East and Southeast at the end of 1999.
This resulting change reduced the total fleet size, customer base and resulting
revenues. This decrease was made to help increase the fleet utilization in the
Company's more profitable traffic lanes.
Cost of Sales (operating expenses) decreased from $62,827,975 in 1998
to $48,547,127 in 1999, a decrease of $14,280,848. This decrease resulted from
the reduced operating territories and the resulting increase in total fleet
utilization
Salaries, Wages and Benefit Expenses decreased from $19,581,373 in 1998
to $13,159,108 in 1999, a decrease of $6,422,265. This decrease was primarily
due to two factors. The main factor is the previously mentioned decrease in
fleet size. This resulted in a decrease in both the number of company drivers
and support personnel. The second factor is the continued shifting from company
drivers who are employees to lease drivers who are not employees; therefore,
their compensation is not reflected as salaries.
Operations and Maintenance Expense decreased from $12,052,533 in 1998
to $8,024,183 in 1999, a decrease of $4,028,350. This decrease is a result of
the decreased number of tractors in the fleet. This decrease in the fleet caused
a reduction in fuel expense, repairs and maintenance expense, and recruiting
expense. These expenses represent the majority of the variable expenses and are
directly linked to the number of tractors in service.
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Taxes and License Expenses decreased from $1,360,007 in 1998 to
$885,851 in 1999, a decrease of $474,156. This item is composed mainly of state
and federal fuel taxes as well as the tag expense for the tractors. This
decrease is a direct result of the decrease in the number of tractors.
Insurance and Claims Expense decreased from $3,773,905 in 1998 to
$2,537,758 in 1999, a decrease of $1,236,147. This decrease is primarily due to
a reduction in actual losses. The Company is self- insured for the first
$100,000 on all liability and cargo claims. More stringent hiring practices
instituted in 1997 as well as other safety policy changes implemented in the
past several years combined to dramatically decrease the actual number and
severity of accidents and losses in the current year.
Communications and Utilities Expense decreased from $884,696 in 1998 to
$623,083 in 1999, a decrease of $261,613. Approximately $132,000 of this
decrease is related to decreased satellite tracking costs on the tractors. This
decrease in costs resulted from the decrease in the number of tractors. The
remaining decrease resulted from the overall decrease in the cost of long
distance service.
Depreciation Expense decreased from $5,357,246 in 1998 to $3,535,824 in
1999, a decrease of $1,821,422. This decrease is primarily due to the decrease
in Company owned tractors from 455 units at the beginning of 1998 to 178 units
at the end of 1999 combined with an approximate decrease of 330 Company owned
trailers over the same time period.
Rent and Purchased Transportation Expense increased from $19,474,901 in
1998 to $20,465,177 in 1999, an increase of $990,276. The largest component of
this category is the expense for leased drivers. These drivers are not employees
of the Company and own their own tractors and pay their own maintenance and fuel
bills. The number of leased drivers increased from 157 at the beginning of 1998
to 201 at the end of 1999.
During 1999 the Company had a $683,857 gain on the disposal of assets.
This resulted from the sale of over 60 tractors and over 250 trailers during
1999.
Interest Expense decreased from $2,660,403 in 1998 to $1,786,011 in
1999, a decrease of $874,392. This decrease was accomplished through the
decrease in the outstanding loan balance with Navistar on equipment from
$17,243,699 at the beginning of 1998 to $13,861,824 at December 31, 1998 to
$8,927,960 at December 31, 1999. This reduction was achieved through the sale of
equipment and the retirement of the related debt. The majority of the equipment
was sold for a price that was at or near the debt balance owed on it.
During 1999 the Company was able to book a settlement with its former
liability insurance carrier, Carolina Casualty. This one-time settlement allowed
the Company to write off non-cash insurance liability reserves and accounts
payable balances resulting in an extraordinary gain of $1,106,951.
Net cash decreased from $512,298 at December 31, 1998 to $20,290 at
December 31, 1999, a decrease of $492,008. Working Capital was at a deficit of
$16,818,412 at December 31, 1998 as compared to a deficit of $7,798,394 at
December 31, 1999, a decrease in deficit of $9,020,018. The Company's source of
funding operations included an operating line of credit through Systran
Financial Services Corporation secured by the Company's accounts receivable as
well as loans through Columbus Bank and trust Company secured by various other
assets.
Earnings per share in 1999 were ($.33) before extraordinary gain and
($.11) per share after extraordinary gain.
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The Company currently believes that it has adequate cash resources to
fund current operations. There can be no assurance, however, that the Company's
actual capital needs will not exceed anticipated levels, or that the Company
will generate sufficient revenues to fund its operations in the absence of other
sources. To finance its growth plan, the Company is considering a number of
alternatives, including additional equity financing. There can be no assurance
that any such transactions will be available at terms acceptable to the Company
or that the Company will have sufficient working capital to fund its growth
plan.
Our operations were not affected by Year 2000 compliance issues
To date, we have not been affected by Year 2000 compliance problems. We
conducted a comprehensive Year 2000 initiative with respect to our internal
business-critical systems. This initiative encompassed information technology
systems and applications, as well as non-information technology systems and
equipment with embedded technology, such as fax machines and telephone systems.
None of these systems were affected by the passage into the Year 2000.
Nonetheless, we have no assurance that we will not experience isolated system
failures as a result of customer or other third party technical problems. If so,
our business could be harmed and we could suffer disruptions in our ability to
schedule or receive payment for our services.
ITEM 3. Description of Property.
The corporate offices for McClendon Trucking are located at 121 South
Lafayette Street, Lafayette, AL 36362. The telephone number is (334) 864-9311.
The offices are leased for a five-year term from January 1, 2000 through
December 31, 2005 at a monthly rental of $11,000. (See "Certain Relationship and
Related Transactions")
Our operations center, located at 810 South LaFayette Street,
LaFayette, Alabama, is our main maintenance terminal and training facility. The
property is collateral for a $480,000 note to be paid in installments and
maturing on October 1, 2004.
We own two additional maintenance facilities at 1516 Alduc Court,
Montgomery, Alabama and 33 Market Street, Charleston, Tennessee. These
facilities are pledged to Navistar Financial Corporation as collateral security
for a loan.
Our properties at the following locations are for sale. These
properties were pledged as security for lines of credit, and upon sale, the net
proceeds after expenses will be utilized to satisfy the credit lines:
1. U.S. #17 and A1A (S.R. #200), Yulee, Florida
2. Lawrence Country Road #48 (Route 1, Box 165-A), Courtland, Alabama
3. Northern By-pass, Montgomery, Alabama
4. Albany, Georgia (under sale)
5. Georgia Highway No. 194, Durand, Georgia
6. Findowrie Street (Route 3, Box 712), Eden, North Carolina
7. 102 Anderson Drive, US Highway 76 By-pass, Laurens, South Carolina
These parcels were operated as terminals for our trucks when alternate parking
accommodations were not available. However, there is no need for such facilities
at the present time.
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ITEM 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 31, 2000, certain
information regarding beneficial ownership of the common stock by (i) those
persons beneficially holding more than five percent of McClendon
Transportation's common stock, (ii) McClendon Transportation's directors who
beneficially own shares of the common stock, (iii) the officers named in the
Compensation table below, and (iv) all of McClendon Transportation's directors
and officers as a group.
Name and Address Amount of Shares Percent
Of Beneficial Owner (1) of Beneficial Owner of Class
----------------------- ------------------- --------
Hugh F. McClendon 7,795,000 39.9%
James W. McClendon 7,795,000 39.9%
H. Glenn Scarborough -0- -0-
All Officers and Directors
As a Group (3 persons) 15,590,000 79.8%
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(1) For purposes of this table, a person is considered to "beneficially own" any
shares with respect to which he/she directly or indirectly has or shares voting
or investment power or of which he or she has the right to acquire the
beneficial ownership within 60 days. Unless otherwise indicated and subject to
applicable community property law, voting power and investment power are
exercised solely by the person named above or shared with members of his or her
household.
ITEM 5. Directors, Executive Officers, Promoters and Control Persons.
The McClendon Transportation directors and executive officers and their
ages as of the date of this document are as follows:
Name Age Position
---- --- --------
Hugh F. McClendon 42 Chairman, Chief Executive Officer
James W. McClendon 40 President, Chief Operating Officer, Director
H. Glenn Scarborough 35 Vice President of Finance, Director
Biographical Information
Hugh F. McClendon --Hugh F. McClendon has been Chairman of the Board and Chief
Executive Officer for the past 6 years. He formerly served as Executive Vice
President. He began his career with McClendon Trucking in 1979. Mr. McClendon
has served on the Board of Directors of the Alabama Trucking Association and the
Truckload Carriers Conference of the American Trucking Association. Mr.
McClendon received his B.A. from Auburn University in 1979.
James W. McClendon --James W. McClendon has been President and Chief Operating
Officer since 1995 and Vice Chairman of the Board since 1993. He has been with
McClendon Trucking since 1980. He formerly served as Secretary-Treasurer and
Vice President of Administration from 1983-1988. Mr. McClendon received his B.A.
from Auburn University in 1980.
H. Glenn Scarborough --Mr. Scarborough has been Vice President of Finance since
1998. Mr. Scarborough is a CPA who began his career in public accounting. He
also worked in the hospitality, manufacturing and telecommunications industries
before joining McClendon in December, 1998. Mr. Scarborough received his B.A.
from the University of Georgia in 1986.
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ITEM 6. Executive Compensation.
Compensation for the officers and directors of the Company is presented
below. There are no other benefits or compensation provided.
Aggregated Option Exercises in last Fiscal year and Fiscal year-end Option Value
The Company does not have any officer or director stock option plan.
The Company intends to incorporate one after a public offering. The Company does
not have an employee stock option plan (ESOP). The Company intends to
incorporate one after a public offering.
The following table shows all the cash compensation paid by the Company
as well as certain other compensation paid during the fiscal years indicated, to
the President and others who received total annual salary and bonus in excess of
$100,000.
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------------------------
Annual compensation Awards Payouts
------------------- ------------------------------------------------ --------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name and Annual Restricted All Other
Principal Compen Stock Options LTIP Compen-
Position Year Salary Bonus sation($) Awards($) SARs Payouts($) sation($)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hugh F. McClendon
Chairman, CEO 1999 $403,266 N/A---------------------------------------------------------------------
James W. McClendon
President, COO 1999 144,373 N/A---------------------------------------------------------------------
H. Glenn Scarborough
Vice President-Finance 1999 102,680 N/A---------------------------------------------------------------------
</TABLE>
ITEM 7. Certain Relationships and Related Transactions.
The Company's offices located at 121 South LaFayette Street, LaFayette,
Alabama 36862 are leased pursuant to an agreement with McClendon Enterprises.
McClendon Enterprises is an Alabama partnership owned by James and Hugh
McClendon. The rent of $11,000 per month is consistent with market rates for
similar properties in the area.
ITEM 8. Description of Securities.
COMMON STOCK
The Company has 100,000,000 shares of Common Stock, par value $.001
authorized. Each outstanding share of common stock is entitled to one vote,
either in person or by proxy, on all matters that may be voted upon by the
owners thereof at meetings of the shareholders.
The holders of common stock (i) have equal ratable rights to dividends
from funds legally available therefor, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of common stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which shareholders may vote at all meetings of
shareholders.
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The Company's transfer agent is Manhattan Transfer Registrar Co., 58
Dorchester Road, Lake Ronkonkoma, New York.
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Stockholder Matters.
There has been no established public trading market for the Company's
securities since its inception on February 26, 1996. However, the Company's
securities are traded on the national Quotation Bureau pink sheets with no bid
and no offer. The Company's trading symbol is MCLG. As of April 30, 2000 there
were 19,548,000 shares outstanding, and the Company has 27 shareholders of
record. No dividends have been paid to date, and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable future.
ITEM 2. Legal Proceedings.
The following matters represent contingent liabilities which might
exceed $25,000:
1. Navistar Financial Corporation vs. Glenn McClendon Trucking
Company, Inc., et al. This action is in the Circuit Court for
Montgomery County, Alabama. It has been on the administrative
docket since August, 1998, subject to terms of a forbearance
and settlement agreement between the parties.
2. State of Alabama Department of Revenue vs.Glenn McClendon
Trucking Co., Inc., is a 1999 administrative proceeding
assessing approximately $54,000 in state use taxes is pending
departmental conference(s).
3. McClendon operates a self-insured workers' compensation
program under the supervision of the Alabama Department of
Industrial Relations. Open claims include 18 cases in the
Circuit Courts of Chambers and Montgomery counties in Alabama
and 2 litigated cases in Georgia. This matter is ongoing and
standard within the industry. The Company believes that its
maximum liability on the aggregate 20 pending claims is
$700,000.
4. Under our current Liberty Mutual insurance coverage for
vehicle liability claims, we continue a self-insurance
retention level of $100,000 per incident.
McClendon Transportation is not presently a party to any other material
litigation, nor is any such litigation threatened to our knowledge.
ITEM 3. Changes in and Disagreements with Accountants.
We have had no changes in or disagreements with accountants on
accounting or financial disclosure matters.
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ITEM 4. Recent Sales of Unregistered Securities.
The following unregistered securities of the Company have been issued
in the past three years.
1. On November 11, 1999, the Company issued 95,000 restricted
shares to each of four affiliates for an aggregate of 380,000
shares. Said shares were issued pursuant to an exemption from
registration pursuant to Section 4(2) of the Securities Act of
a933, as amended (the "Act").
2. On March 27, 2000, the Company issued 17,000 restricted shares
to a non-affiliate in consideration of $4.00 per share. Said
shares were issued pursuant to an exemption from registration
under Section 4(2) of the Act.
3. On March 27, 2000, the Company issued 11,000,000 shares to two
affiliates pursuant to an exemption from registration under
Section 4(2) of the Act.
4. On April 6, 2000, the Company issued 31,000 restricted shares
to three non-affiliates in consideration of $5.00 per shares.
Said shares were issued pursuant to an exemption from
registration pursuant to Section 4(2) of the Act.
5. On April 6, 2000 the Company issued 3,400,000 restricted
shares to a non-affiliate as collateral security for a loan
in the principal amount of $3,250,000. Said shares were issued
pursuant to an exemption from registration under Section 4(2)
of the Act.
ITEM 5. Indemnification of Directors and Officers.
The Bylaws of the Company provide that the Company will indemnify its officers
and directors for costs and expenses incurred in connection with the defense of
actions, suits or proceedings where the officer or director acted in good faith
an in the manner he reasonably believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, absent a finding
of negligence or misconduct in the performance of his duties.
PART F/S
The Financial Statements of McClendon Transportation Group, Inc., required by
Regulation S-B commence on page F-1 hereof and are incorporated herein by
reference.
PART III
ITEM 1 & 2. Index to Exhibits and Description of Exhibits.
3.1. Articles of Incorporation.
3.2. By-Laws.
10.1 Lease for 121 South Lafayette Street
10.2 Form of Equipment and Service Agreement with contract drivers
10.3 Renewal Term Note with Columbus Bank & Trust Company
.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
MCCLENDON TRANSPORTATION GROUP, INC.
Date: April 30, 2000 By: /s/ James W. McClendon
------------------------------
James W. McClendon, President
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<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
BALANCE SHEETS
MARCH 31, 2000 AND 1999
INTERNAL INTERNAL
2000 1999
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................ $ 663,255 $ 577,659
Restricted investments ................................... 1,125,000 100,213
Accounts receivable
Trade .................................................. 3,935,912 4,623,412
Other .................................................. 164,480 415,274
Inventories .............................................. 199,552 248,993
Prepaid expenses 1,860,650 3,090,474
----------- -----------
Total current assets ............................. 7,948,849 9,056,025
FIXED ASSETS (net of accumulated
depreciation and amortization) ........................... 8,665,709 12,346,862
OTHER ASSETS 293,151 456,234
----------- -----------
Total assets ..................................... $16,907,709 $21,859,121
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Bank overdraft ........................................... $ 1,839,612 $ 475,930
Short-term borrowings .................................... 6,783,607 5,333,000
Current maturities of long-term debt ..................... 3,766,888 4,756,809
Accounts payable ......................................... 1,956,209 2,645,322
Accrued taxes other than income .......................... 190,119 174,689
Other accrued expenses ................................... 2,268,631 3,491,392
Estimated income taxes payable (155,375) (260,074)
----------- -----------
Total current liabilities ........................ 16,649,691 16,617,068
LONG-TERM DEBT (less current maturities) ................... 8,193,345 10,946,775
DEFERRED INCOME TAXES ...................................... 2,824,390 3,066,918
----------- -----------
Total liabilities ................................ 27,667,426 30,630,761
----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK ............................................... 10,000 10,000
PAID-IN CAPITAL ............................................ 144,883 94,883
RETAINED EARNINGS .......................................... (10,914,600) (8,876,523)
----------- -----------
Total stockholders' equity ....................... (10,759,717) (8,771,640)
Total liabilities and stockholders' equity ....... $ 16,907,709 $21,859,121
========== ===========
</TABLE>
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
INTERNAL INTERNAL
2000 1999
--------------- -------------
Balance, January 1 ........................ $ (10,033,314) $ (9,256,772)
Net income (loss)........................ (881,286) 454,982
Dividends declared ...................... - (74,733)
--------------- -------------
Balance, March 31 ......................... $ (10,914,600) $ (8,876,523)
=============== =============
<PAGE>
<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF INCOME
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
INTERNAL INTERNAL
2000 1999
----------- -----------
<S> <C> <C>
OPERATING REVENUES
Freight revenues ............................................. $10,026,085 $12,543,336
Other revenues ............................................... 53,137 25,782
----------- -----------
Total revenues ....................................... 10,079,222 12,569,118
----------- -----------
OPERATING EXPENSES
Salaries, wages and benefits ................................. 2,698,838 3,884,616
Operations and maintenance ................................... 1,917,164 2,209,002
Taxes and licenses ........................................... 175,953 242,583
Insurance and claims ......................................... 588,956 861,928
Communications and utilities ................................. 136,730 176,030
Depreciation and amortization ................................ 538,895 990,000
Rent and purchased transportation ............................ 4,627,761 4,513,821
(Gain) loss on sale of fixed assets and other ................ 0 (199,795)
----------- -----------
Total operating expenses ............................. 10,684,297 12,678,185
----------- -----------
Operating income (loss) .............................. (605,075) (109,067)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income .............................................. 79,536 34,701
Interest expense ............................................. (331,382) (563,807)
Miscellaneous expense ........................................ (24,365) (13,796)
----------- -----------
Total other income (expense) ......................... (276,211) (542,902)
----------- -----------
Loss before provision for income tax expense
(benefit) and extraordinary item ................... (881,286) (651,969)
EXTRAORDINARY ITEM (Insurance settlement with Carolina Casualty) 0 1,106,951
PROVISION FOR INCOME TAX EXPENSE
(BENEFIT) .................................................... - -
----------- -----------
Net income (loss) .................................... $ (881,286) $ 454,982
=========== ===========
<PAGE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
INTERNAL INTERNAL
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ................................................. $(881,286) $ 454,892
--------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .......................... 538,895 990,000
Deferred income taxes .................................. 5,130 275,218
(Gain) loss on sale of fixed assets .................... 0 (199,795)
Changes in current assets and liabilities:
Accounts receivable .................................. 327,509 89,913
Inventories .......................................... 11,045 43,889
Prepaid expenses ..................................... 1,161,085 49,610
Accounts payable ..................................... (77,770) 206,775
Other current liabilities ............................ (363,010) (682,687)
----------- -----------
Total adjustments .................................. 1,602,884 772,923
----------- -----------
Net cash provided by operating activities .......... 721,598 1,227,905
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets ................................ (5,867) (976,215)
Proceeds from sale of fixed assets ......................... 0 619,000
Other assets - net ......................................... 31,723 (53,767)
----------- -----------
Net cash provided by investing activities .......... 25,856 (410,982)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - net ....................................... 909,005 (194,006)
Restricted investments - net ............................... (1,000,000) 0
Short-term borrowings - net ................................ 923,105 (193,904)
Proceeds of long-term debt ................................. 0 2,312,500
Principal payments on long-term debt ....................... (936,599) (2,601,419)
Dividends paid ............................................. - (74,733)
----------- -----------
Net cash used in financing activities .............. (104,489) (751,562)
----------- -----------
Net increase (decrease) in cash and cash equivalents 642,965 65,361
Cash and cash equivalents, January 1 ............... 20,290 512,298
----------- -----------
Cash and cash equivalents, March 31 ................ $ 663,255 $ 577,659
=========== ===========
</TABLE>
<PAGE>
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT ........................... 1
FINANCIAL STATEMENT
Balance Sheets ......................................... 2
Statements of Retained Earnings ........................ 3
Statements of Income ................................... 4
Statements of Cash Flows ............................... 5
Notes to Financial Statements .......................... 6 - 20
<PAGE>
Robinson, Members
Grimes & - SEC and Private Companies
Company, P.C. Certified Public Accountants Practice Sections of the
American Institute of C.P.A.s
- Georgia Society of C.P.A.s
Independent Auditors' Report
The Directors and Stockholders
Glenn McClendon Trucking Company, Inc.
LaFayette, Alabama
We have audited the accompanying balance sheets of Glenn McClendon Trucking
Company, Inc. as of December 31, 1998 and 1997, and the related statements of
retained earnings, income, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glenn McClendon Trucking
Company, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 17 to the
financial statements, the Company has experienced significant operating losses
and is currently in default on certain debt. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 17 and 18. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Robinson, Grimes & Company, P.C.
Certified Public Accountants
July 8, 1999
(except for Notes 10,16, 17
and 18 as to which the date
is May 8, 2000)
<PAGE>
<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
---------------------------
1998 1997
----- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents ............................. $ 512,298 $ 550,200
Restricted investments ................................ 100,213 575,213
Accounts receivable
Trade ............................................... 4,716,114 5,697,250
Other ............................................... 412,485 1,209,223
Inventories ........................................... 292,882 356,387
Prepaid expenses ...................................... 3,140,084 1,829
------------ ------------
Total current assets .......................... 9,174,076 10,217,576
FIXED ASSETS (net of accumulated
depreciation) ......................................... 12,779,860 20,376,016
OTHER ASSETS ............................................ 402,459 470,547
------------ ------------
Total assets .................................. $ 22,356,395 $ 31,064,139
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
CURRENT LIABILITIES
Bank overdraft ........................................ $ 669,936 $ 867,812
Short-term borrowings ................................. 5,526,904 5,789,377
Current maturities of Iong-term debt .................. 13,268,407 6,751,207
Accounts payable ...................................... 2,438,547 2,808,041
Accrued taxes other than income ....................... 168,270 181,616
Other accrued expenses ................................ 3,709,633 3,513,501
Estimated income taxes payable ........................ 210,791 126,086
------------ ------------
Total current liabilities ..................... 25,992,488 20,037,640
LONG-TERM DEBT (less current maturities) ................ 2,724,096 13,056,273
DEFERRED INCOME TAXES ................................... 2,791,700 3,675,271
------------ ------------
Total liabilities ............................. 31,508,284 36,769,184
------------ ------------
COMMON STOCK (par value $1, 35,000 shares authorized,
10,000 shares issued and outstanding) ................. 10,000 10,000
PAID-IN CAPITAL ......................................... 94,883 94,883
ACCUMULATED DEFICIT ..................................... (9,256,772) (5,809,928)
------------ ------------
Total stockholders' equity .................... (9,151,889) (5,705,045)
------------ ------------
Total liabilities and stockholders' equity .... $ 22,356,395 $ 31,064,139
============ ============
</TABLE>
See Notes to Financial Statements.
- 2-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
------------------------------------------------
1998 1997
---- ----
Balance, January 1 . $(5,809,928) $ (1,590,285)
Net loss ......... (3,131,753) (3,856,069)
Dividends declared (315,091) (363,574)
----------- --------------
Balance, December 31 $(9,256,772) $(5,809,928.00)
=========== ==============
See Notes to Financial Statements.
- 3-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
-----------------------------------------------
1998 1997
---- ----
OPERATING REVENUES
Freight revenues ............................. $ 61,626,123 $ 65,773,452
Other revenues ............................... 122,677 141,268
------------ ------------
Total revenues ....................... 61,748,800 65,914,720
------------ ------------
OPERATING EXPENSES
Salaries, wages and benefits, ................ 19,581,373 26,107,625
Purchased transportation (owner-operators) ... 16,982,430 4,661,863
Other rent expense ........................... 2,492,471 2,598,345
Operations and maintenance ................... 12,052,533 18,371,443
Taxes and licenses ........................... 1,360,007 1,617,737
Insurance and claims ......................... 3,773,905 4,189,017
Communications and utilities ................. 844,696 1,029,643
Depreciation and amortization ................ 5,357,246 7,509,843
Loss on sale of fixed assets and other ....... 383,314 318,034
------------ ------------
Total operating expenses ............. 62,827,975 66,403,550
------------ ------------
Operating loss ....................... (1,079,175) (488,830)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income .............................. 85,337 158,791
Interest expense ............................. (2,660,403) (2,981,641)
Miscellaneous expense ........................ (137,107) (182,538)
------------ ------------
Total other income (expense) ......... (2,712,173) (3,005,388)
------------ ------------
Loss before provision for income tax expense
(benefit) .......................... (3,791,348) (3,494,218)
PROVISION FOR INCOME TAX EXPENSE
(BENEFIT) .................................... (659,595) 361,851
------------ ------------
Net loss ............................. $ (3,131,753) $ (3,856,069)
============ ============
See Notes to Financial Statements.
- 4-
<PAGE>
<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss .......................................... $ (3,131,753) $ (3,856,069)
------------ ------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ................. 5,357,246 7,509,843
Deferred income taxes ......................... (883,571) 235,765
Loss on sale of fixed assets .................. 227,124 224,726
Changes in current assets and liabilities:
Accounts receivable ........................ 1,777,874 856,113
Inventories -- ............................. 63,505 68,903
Prepaid expenses ........................... (1,310,781) (885,309)
Accounts payable ........................... (369,494) (726,759)
Other current liabilities .................. 267,491 475,654
------------ ------------
Total adjustments ....................... 5,129,394 (6,807,628)
------------ ------------
Net cash provided by operatin- activities 1,997,641 2,951,559
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets ..................... (1,922,025) (17,955)
Proceeds from sale of fixed assets .............. 2,028,811 5,897,159
Other assets - net .............................. 68,088 (68,846)
------------ ------------
Net cash provided by investing activities 174,874 (5,810,358)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - net ............................ (197,876) 17,639
Restricted investments - net .................... 475,000 649,247
Short-term borrowings - net ..................... (262,473) 289,377
Proceeds of long-term debt ...................... 1,861,525 0
Principal payments on long-ten-n debt ........... (3,771,502) (10,130,830)
Dividends paid .................................. (315,091) (363,574)
------------ ------------
Net cash used in financing activities ... (2,210,417) (9,538,141)
------------ ------------
Net decrease in cash and cash equivalents (37,902) (776,224)
Cash and cash equivalents, January 1 ..... 550,200 1,326,424
Cash and cash equivalents, December 31 .. $ 512,298 $ 550,200
============ ============
</TABLE>
See Notes to Financial Statements.
- 5-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
------------------------------------------------
NOTE 1: Nature of Operations
The Company is a medium-haul, irregular route, truckload carrier
of general commodities which transports freight primarily
throughout the Southeastern and Eastern United States.
NOTE 2: Summary of Significant Accounting Policies
Accounts Receivable - Trade - Trade receivable represent amounts
due from various companies for shipment services. Bad debts are
normally accounted for using the allowance method.
Inventories - Inventories consist of fuel, tires, and repair
parts and are valued at the lower of cost or market, with cost
being determined by the first-in, first-out method.
Fixed Assets and Related Depreciation and Amortization - Fixed
assets are stated at cost and are depreciated on the
straight-line method for financial reporting- purposes. For
income tax reporting, the Company uses accelerated methods. The
cost of revenue equipment includes items such as tires, air
deflators, and communication equipment used in or on the
tractors and trailers. Maintenance, repairs and minor renewals
are expensed as incurred, while additions and major air
deflectors, and communication equipment used in or renewals are
capitalized. The useful lives presently employed for computing
depreciation on principal classes of fixed assets for financial
reporting purposes are:
Buildings and land improvements .............10 - 40 years
Revenue equipment:
Tractors .................................6 years
Trailers .................................8 years
Furniture and fixtures ......................5 - 10 years
Other fixed assets ..........................5 - 20 years
Revenue equipment is depreciated to a 20% salvage value for
trailers and a 15% salvage value for tractors.
Revenue Recognition - Revenue is recognized when the shipment is
completed and bills of lading received.
-6-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
-----------------------------------------------
NOTE 2: Summary of Significant Accounting Policies (Continued)
Income Taxes - Deferred income taxes are provided for
differences in the timing of reporting income for financial
statement and tax purposes, and result primarily from
differences in depreciation methods.
Statements of Cash Flows - For purposes of the statements of
cash flows, the Company considers all highly liquid debt
instruments purchased Aith a maturity of three months or less to
be cash equivalents.
Reclassifications - Certain items in the 1997 financial
statements have been reclassified in order to be in conformity
with the 1998 statement presentation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during, the reporting period. Actual results could
differ from those estimates.
NOTE 3: Accounts Receivable
Trade accounts receivable are summarized as follows:
1998 1997
--------- ---------
Trade accounts receivable ............. 4,828,995 5,810,131
Allowance for doubtful accounts ....... (112,881) (112,881)
--------- ---------
Total accounts receivable - trade $4,716,114 $5,697,250
========== ==========
-7-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 3: Accounts Receivable (Continued)
Accounts receivable other than trade are summarized as follows:
1998 1997
---------- ----------
Officers and employees (Note 13) ................. $ 210,668 $ 643,624
Insurance premium refunds ........................ 64,325 285,697
Miscellaneous .................................... 137,492 279,902
---------- ----------
Total accounts receivable - other .... $ 412,485 $1,209,223
========== ==========
NOTE 4: Inventories
Major classifications of inventories are summarized as follows:
1998 1997
-------- --------
Tires ........................................ $ 66,965 $ 79,650
Parts and supplies ........................... 211,872 257,250
Terminal fuel ................................ 14,045 19,487
-------- --------
Total inventories ................ $292,882 $356,387
======== ========
NOTE 5: Prepaid Expenses
Prepaid expenses are summarized as follows:
1998 1997
---------- ----------
Insurance, including deposits ................ $2,437,342 $1,403,214
Taxes, licenses and permits .................. 532,845 395,138
Other ........................................ 169,897 30,951
Total prepaid expenses ........... $3,140,084 $1,829,303
========== ==========
-8-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 6: Fixed Assets and Related Depreciation
Major classes of fixed assets and accumulated depreciation are
summarized as follows:
1998 1997
------------ ------------
Land ....................................... $ 338,944 $ 513,943
Buildings and land improvements ............ 1,696,967 1,696,967
Revenue equipment .......................... 31,821,424 45,635,512
Furniture, fixtures and other .............. 3,389,061 3,481,210
------------ ------------
37,246,396 51,327,632
Accumulated depreciation ................... (24,466,536) (30,951,616)
------------ ------------
Fixed assets - net ......... $ 12,779,860 $ 20,376,016
============ ============
NOTE 7: Other Assets
Other assets are comprised of the following:
1998 1997
-------- --------
Notes receivable (less current portion):
Former stockholder, payable quarterly,
interest at 10% ............................... $ 56,046 $ 96,158
McClendon Enterprises, payable monthly,
interest at 7.5% (See Note 13) ................ 76,795 104,506
Other notes receivable, real estate as
collateral, payable monthly, interest
at 9% ......................................... 124,994 136,002
-------- --------
Total notes receivable ............... 257,835 336,666
Other assets ....................................... 144,624 133,881
-------- --------
Total other assets .................... $402,459 $470,547
======== ========
-9-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 8: Short-Term Borrowings
Short-term borrowings consists of the following:
<TABLE>
1998 1997
---------- ----------
<S> <C> <C>
$5,500,000 line of credit from Columbus Bank &
Trust Company, accounts receivable and stock-
holder endorsement as collateral, interest at
prime plus 1 1/2% ....................................... $4,373,368 $5,000,000
Demand note from Compass Bank-, equipment as
collateral, interest at prime plus I% .................. 637,036 789,377
Short-term note from Columbus Bank- & Trust
Company, real estate and stockholder guarantees
as collateral, interest at prime plus 3% ............... 480,000 0
Other ....................................................... 36,500 0
------------
$ 5,526,904 $ 5,789,377
============ ===========
</TABLE>
NOTE 9: Other Accrued Expenses
Other accrued expenses are summarized as follows:
1998 1997
---------- ----------
Accrued self-insured liability claims (See below) $1,795,560 $1,350,093
Accrued workers' compensation (Note 16) .......... 1,416,543 1,486,985
Accrued salaries ................................. 244,207 495,475
Accrued leasemen expenses ........................ 241,727 165,248
Other accrued expenses ........................... 11,596 15,700
---------- ----------
Total other accrued expenses ...... 3,709,633 3,513,501
========== ==========
During 1998, the Company negotiated with its previous liability
insurance carrier for forgiveness of $1,106,950 of outstanding
claims under its old policy. The forgiveness was accepted,
subject to certain contingencies which were not resolved at
December 31, 1998. Accordingly, it is anticipated that this debt
forgiveness income will be recognized in 1999.
-10-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 10: Long-Term Debt
Long-term debt consists of the following:
<TABLE>
1998 1997
-------------------------- -------------------------
Maturities Maturities
-------------------------- -------------------------
Current Long Term Current Long Term
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Note payable - equipment: Navistar
Financial Corporation. See below .................................. $12,277,748 $ 0 $ 0 $ 0
Note payable - equipment: Navistar
Financial Corporation, monthly payments total $9,205 as of
December 31, 1998, including interest at 9.50%, final
payment due December, 2002 ........................................ 517,676 1,233,173 0 0
Note payable - equipment: Navistar
Financial Corporation, monthly payments total $595,557 as of
December 31, 1997, including interest at 9.30% to 9.50%,
final payments due during 2001 .................................... 0 0 6,057,611 10,864,767
Note payable equipment: Navistar Financial Corporation,
monthly payments total $28,093 as of December 31, 1997,
including interest at 9.30%, final payment due November, 1999 ..... 0 0 294,622 295,127
Notes payable - equipment:
Associates Commercial Corporation, monthly payments total
$42,118 as of December 3 1, 1998, including interest at
9.25%, final payment due April, 2001 .............................. 467,757 628,676 394,179 986,070
Other notes .......................................................... 5,226 840 4,795 6,066
Accrued workers' compensation
(Note 16) .......................................................... 0 861,407 0 904,243
----------- ----------- ----------- -----------
Total notes payable ............................... $13,268,407 $ 2,724,096 $ 6,751,207 $13,056,273
=========== =========== =========== ===========
</TABLE>
-11-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 10: Long-Term Debt
During 1998, the Company restructured certain of its debt
obligations with Navistar Financial Corporation. Terms of the
restructuring allowed for cancellation of $3,131,348 of the debt
in exchange for accelerated payments and additional collateral
for the remaining obligations. The adjusted loan balance, after
the planned cancellation, was $11,583,000 as of August 1998. The
terms required that a certain amount be repaid by February 28,
1999, at which time the above amount would be canceled. While
the Company reduced its fleet and has paid down on the debt
significantly, the total had not been retired by that date.
Accordingly all applicable amounts have been reflected as
current maturities above, since, according to the agreement,
Navistar could elect to reinstate the total debt. However,
Navistar formally agreed to an extension and the Company is
presently making additional payments in an effort to comply with
the terms of the agreement. As of April 30, 2000 the outstanding
balance of the loan in question was $2,316,027. The $3,131,848
will be recognized as debt forgiveness income at such time as
the parties agree that the terms of the agreement have been
satisfied. Accordingly, the $12,277,748 balance at December 31,
1998 has not yet been reduced by the anticipated forgiveness
amount.
Notes payable - equipment are collateralized by substantially
all revenue equipment with a total book value of $10,940,920.
Personal endorsements by the Company's principal stockholders
are also used as collateral on certain notes.
In summary, the Company had the following long-term debt at
December 31:
1998 1997
----------- -----------
Navistar Financial Corporation .. $14,028,597 $17,512,127
Associates Commercial Corporation 1,096,433 1,380,249
Other ........................... 864,473 915,104
----------- -----------
Totals ............... $15,992,503 $19,807,480
=========== ===========
-12-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 10: Long-Term Debt
Aggregate maturities under these arrangements for years
subsequent to December 31, 1998 are as follows:
1999 ...................... $13,268,407
2000 ...................... $ 1,707,871
2001 ...................... 578,577
2002 ...................... 437,648 2,724,096
----------- -----------
Total ............ $15,992,503
===========
NOTE 11: Operating Leases
The Company has acquired trailers through operating leases with
various leasing companies with an option to purchase the
equipment at its fair market value at the end of the lease. The
leases are for periods of 6 - 7 years; however, after 3 years
the lease may be canceled by the Company upon meeting, specified
conditions in the contract. Under a terminal rental adjustment
clause, the Company guarantees a 20% residual value.
The Company also leases certain real estate properties from
McClendon Enterprises (a related party). See Note 13. Below is a
schedule of future minimum payments under the above operating
leases:
MCCLENDON TOTAL
TRAILER ENTERPRISES OPERATING
LEASES LEASES LEASES
--------- ----------- ----------
Amounts due during:
1999 $1,082,053 $ 229,500 $1,311,553
2000 820,776 229,500 1,050,276
2001 760,357 229,500 989,857
2002 48,627 229,500 278,127
2003 0 229,500 229,500
---------- ---------- ----------
Total five year payments $2,711,813 $1,147,500 $3,859,313
========== ========== ==========
-13-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 11: Operating Leases (Continued)
During 1997, the Company started a program whereby the Company
leases tractors with qualified drivers from independent
operators, ("owner-operators"). Owner-operator expense amounted
to $16,982,430 and $4,661,863 for 1998 and 1997, respectively
and is reflected on the Statements of Income as Purchased
Transportation.
Other rent expense is summarized as follows:
1998 1997
---------- ----------
Trailer leases ............. $1,351,372 $1,461,380
McClendon Enterprises leases 229,500 229,500
Spotting service ........... 541,435 627,608
Other rents ................ 370,164 279,857
---------- ----------
Total ....... $2,492,471 $2,598,345
========== ==========
Note 12: Income Taxes
The Company's net carrying basis of long-term assets exceeded
its tax basis for such assets by approximately $9,427,000 at
December 31, 1998. See Note 2.
Deferred income tax provisions have been made net of available
investment tax credits and net operating losses available for
tax purposes. As of December 31, 1997, the Company had available
unused investment tax credits and net operating losses of
$581,266 and $1,136,167, respectively, for federal tax Purposes.
As of December 31, 1998 the Company had available unused
investment tax credits of $165,900. All of the net operating
losses were used during 1998.
-14-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
Note 12: Income Taxes (Continued)
Net deferred tax liabilities in the accompanying balance sheets
include the following components:
<TABLE>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax liabilities arising from:
Temporary differences - principally depreciation
of fixed assets .................................. $ 2,957,600 $ 4,641,500
Deferred tax assets arising from:
Net operating loss carry forwards ................ 0 $ (346,434)
Investment tax credits ........................... (165,900) (581,266)
----------- -----------
Alternative minimum tax credits .................. 0 38,529
Net deferred income tax liability .......... $ 2,791,700 $ 3,675,271
=========== ===========
Provision for income tax expense (benefit)
is summarized as follows:
1998 1997
----------- -----------
Current tax expense:
Federal ........................................... $104,758.00 0
State ............................................. 119,218 110,251
Deferred tax expense (benefit) ...................... (833,571) 251,600
----------- -----------
Net provision for income tax expense
(benefit) ............................... $ (659,595) $ 361,851
=========== ===========
</TABLE>
The income tax (benefits) differs from the income tax (benefit)
that would result from applying statutory rates to pretax
income. This is due primarily to the payment of per diems to
drivers, which are only partly tax deductible.
-15-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
Note 12: Income Taxes (Continued)
Estimated income taxes payable are summarized as follows:
1998 1997
--------- ---------
Provision for income tax expense (benefit) $(659,595) $ 361,851
(Over) under provision ................... (13,185) 15,835
Deferred tax provision ................... 883,571 (251,600)
--------- ---------
Estimated income taxes payable ...... $ 210,791 $ 126,086
========= =========
NOTE 13: Related Party Transactions
McClendon Enterprises
The Company leases its present operating facility and other real
estate from McClendon Enterprises, a partnership comprised of
the two Company stockholders. For both financial statement and
tax purposes, the leases have been classified as operating
leases. Total rent expense on these leases was $229,500 for 1998
and 1997, respectively.
The Company had $131,200 outstanding at December 31, 1998 from
McClendon Enterprises for a loan made for building
improvements. The noncurrent portion of this note has been
included with other assets in the accompanying financial
statements. (See Note 7)
Other
The Company's two stockholders are obligated to a previously
redeemed stockholder on notes executed to acquire the previous
stockholder's stock. The balance of these notes as of December
31, 1998 was $595,687 with quarterly principal and interest
payments due through 2001. The Company has declared periodic
dividends to the stockholders to assist in these payments.
-16-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 13: Related Party Transactions (Continued)
The Company also has various loans and other receivables from
certain officers and stockholders, summarized as follows:
1998 1997
-------- --------
Stockholder note receivable, interest at 5% $173,000 $526,500
Other stockholder receivables ............. 19,694 50,098
Other officer and employee receivables .... 17,974 67,026
-------- --------
Total ...................... $210,668 $643,624
======== ========
NOTE 14: Profit Sharing Plan
The Company maintains a qualified defined contribution profit
sharing plan with 401 (k) provisions covering substantially all
employees with over one year of service.
Contributions based on a percentage of compensation are
determined annually by the board of directors The Company made a
401(K) contribution totaling $50,755 and $9,098 to the Plan for
the years ending December 1, 1998 and 1997, respectively.
NOTE 15: Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
1998 1997
------------- ----------
Interest $ 2,660,403 $2,981,641
Taxes $ 0 $ 110,251
Non-Cash Financing Activity - The Company refinanced parts of
certain loans with Navistar Financial Corporation as disclosed
in Note 10. As part of this refinancing, certain equipment with
agreed values was turned in to Navistar as payment on the debt
in the amount of $1,905,000.
-17-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 16: Contingencies
Self-Insurance Plans
The Company is partially self-insured with respect to various
risk areas as follows:
Liability, Cargo and Physical Damage
For automobile liability, the Company is responsible for any
claims less than $100,000 and for claims in excess of the
$1,000,000 policy limit. The Company also has a $4,000,000
umbrella policy per occurrence.
For general liability, the Company is responsible for any
claims less than $10,000 and for claims in excess of $
1,000,000 per occurrence. The policy has a $2,000,000 annual
aggregate limit. The Company also has a $4,000,000 annual
aggregate umbrella policy.
For cargo damage, the Company is responsible for any claims
less than $100,000 and for claims in excess of the $300,000
policy limit.
For physical damage to the revenue equipment, the Company is
responsible for any claims less than $1,000.
Worker's Compensation
The Company is also self-insured with respect to worker's
compensation. Claims in excess of $500,000 ($300,000 effective
September 23, 1999) are covered by an insurance policy. The
Company is responsible for any claims less than $500,000. Due
to the uncertainty of estimated outstanding claims, such
claims were accounted for on a cash basis prior to 1996. As a
result of state requirements, an actuarial valuation was
obtained in 1996 which estimated the expected future claims.
Accordingly, the Company accrued, in 1996, the estimated
present value of claims outstanding and those incurred but not
reported. These values have subsequently been adjusted based
on increases and decreases to estimated claims as computed by
the Company's insurance carrier.
-18-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 16: Contingencies (Continued)
Group Health
The Company has elected to self-insure for its group health
insurance coverage. Blue Cross-Blue Shield acts as
administrator for the plan whereby the Company is responsible
for all health claims, not to exceed $50,000 annually, per
insured individual. The claims are accounted for on a cash
basis.
Credit Risks
The Company maintains cash balances at several financial
institutions located in Alabama and Georgia. Accounts at each
institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1998, the
Company's uninsured cash balances total $ 327,972.
The Company extends credit across different industries and
geographic areas and requires no collateral from its
customers.
NOTE 17: Going Concern
As shown in the accompanying financial statements, the Company
has experienced significant operating losses and has deficits
in working capital and net worth. As a result, the Company is
in violation of various covenants of loan agreements with one
creditor. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
Management is working with its primary lenders to monitor the
status of its indebtedness and is currently evaluating methods
to reduce costs and improve results of operations. The Atlanta
terminal facility was closed and sold during 1997 at a price
of $2.9 million which is expected to reduce operating costs by
approximately $1.5 million annually. During 1998, the Company
has refinanced certain debt with Navistar Corporation (See
Note I0) and certain liabilities with its liability insurance
carrier reflecting a total reduction of amounts due of
approximately $4.2 million, although neither has yet been
reported for financial statement purposes due to contingencies
existing at December 31, 1998. In addition, certain equipment
and other idle facilities have been sold and/or listed for
disposition.
-19-
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
NOTE 17: Going Concern (Continued)
Finally, subsequent to December 31, 1998 the Company has signed
certain agreements to effect a reorganization plan and has
refinanced certain other debt obligations. See Note 18.
If the Company is unsuccessful in its efforts, it may be
necessary to undertake such other actions as may be appropriate
to preserve asset value. The financial statements do not include
any adjustments, other than the current classification of
certain long-term debt in default, that might result from the
outcome of this uncertainty.
NOTE 18: Subsequent Events
During June, 1999, the Company executed a consulting agreement
to iniate a plan of reorganization. To date, the results of this
plan, include:
A) Refinanciang certain portions of the line-of-credit
agreement.
B) A reverse merger transaction with RDA Services, Inc.
in November, 1999 whereby RDA Services, Inc.
purchassed Glenn McClendon Trucking Company, Inc.
through issuance of its stock. RDA Services, Inc.
changed its name to McClendon Transportation Group,
Inc. and is the holding company for Glenn McClendon
Trucking Company, Inc.
C) Tentative commitments from two major creditors to
convert a substantial portion of existing debt to
equity in the newly merged company.
D) Execution of an agreement in December, 1999 with
Carib Securities, Ltd. Who has agreed to promote and
market the sale of shares of the newly merged
company.
To date, certain of the above items are still contingent upon
completion of other matters. The overall plan of reorganization
is expected to continue through the year 2000.
-20-
