SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1 to Annual Report
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to
____________________.
Commission file number 0-14060
Intrenet, Inc.
(Exact name of registrant as specified in charter)
Indiana 35-1597565
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 TechneCenter Drive, Suite 200,
Milford, Ohio 45150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 576-6666
Securities registered pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of class)
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 such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
<PAGE>
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common stock (based upon the
closing sale price on such date) held by non-affiliates of the
registrant as of March 1, 1995, was approximately $13,400,000.
Applicable only to registrants involved in bankruptcy
proceedings during the preceding five years: Indicate by
check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court. Yes [X]
No [ ]
(Applicable only to corporate registrants) Indicate the
number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 1, 1995, there were 9,172,164 shares issued and
outstanding.
Documents Incorporated By Reference: Portions of the
following documents have been incorporated by reference into
this report:
Identity of Document Parts of Form 10-K Into
Which
Proxy Statement to be filed Document is Incorporated
for the 1995 Annual Meeting
of Shareholders of Registrant Part III
<PAGE>
Intrenet, Inc. hereby amends Part II, Item 8 of its
Annual Report on Form 10-K for the fiscal year ended December
31, 1994, which was filed in paper format with the Securities
Exchange Commission on March 29, 1995. The amendment is being
made to correct a number of clerical errors, primarily to the
Liabilities and Shareholders' Equity portion of the
Consolidated Balance Sheet as of December 31, 1994. An
updated Exhibit 23, Consent of Independent Public Accountants,
is also included with this amendment. This amendment to a
paper filing is being filed electronically pursuant to Rule
101(a)(2)(i) of Regulation S-T, 17 C.F.R. Section
232.101(a)(2)(i).
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Page
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to
be signed on its behalf by the undersigned, thereunto duly
authorized.
INTRENET, INC.
By: /s/ Jonathan G. User
Jonathan G. Usher
Vice President-Finance, Chief
Financial Officer, Secretary
and Treasurer
Date: May 15, 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and Board of Directors
of Intrenet, Inc.:
We have audited the accompanying consolidated balance sheets
of INTRENET, INC. (an Indiana corporation) and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31,
1994. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedules 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 consolidated financial statements referred
to above present fairly, in all material respects, the
financial position of Intrenet, Inc. and subsidiaries as of
December 31, 1994, and 1993, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole.
The schedule listed in Item 14 (a) 2 is presented for purposes
of complying with the Securities and Exchange Commission's
rules and are not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth
therein in relation to the basic consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
February 20, 1995.
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Years Ended December 31, 1994 and 1993
(In Thousands of dollars)
Assets 1994 1993
Current assets:
Cash and cash equivalents $ 2,734 $ 2,356
Receivables, principally
freight revenue less
allowance for doubtful
accounts of $1,363 in 1994
and $1,481 in 1993 20,177 18,165
Prepaid expenses and other 6,409 6,685
Total current assets 29,320 27,206
Property and equipment, at cost
less accumulated depreciation
of $ 11,164 in 1994 and $ 11,048
in 1993 27,976 24,922
Reorganization value in excess
of amounts allocated to
identifiable assets, net of
accumulated amortization of
$ 1,680 in 1994 and $ 1,260 in 1993 8,451 11,901
Deferred tax assets, net of valuation
allowance of $ 4,884 in 1994 and
$ 11,273 in 1993 2,525 0
Other assets 786 607
Total assets $ 69,058 $ 64,636
Liabilities and Shareholders' Equity
Current liabilities:
Current notes payable to banks $ 2,000 $ 0
Current equipment borrowings
and capital lease obligations 5,425 6,795
Accounts payable and cash
overdrafts 8,553 8,720
Current accrued claim liabilities 5,681 3,801
Other accrued expenses 6,670 4,854
Total current liabilities 28,329 24,170
Long-term notes payable to banks 5,000 9,949
7% convertible subordinated debentures 5,988 5,984
Long-term equipment borrowings and
capital lease obligations 11,303 10,290
Long-term accrued claim liabilities 2,000 3,000
Total liabilities 52,620 53,393
<PAGE>
Shareholders' equity:
Common Stock, without par value;
20,000,000 shares authorized;
9,087,164 and 9,067,164 shares
issued and outstanding at
December 31, respectively 9,453 9,423
Retained earnings since
January 1, 1991 6,985 1,820
Total shareholders' equity 16,438 11,243
Total liabilities and
shareholders' equity $ 69,058 $ 64,636
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION> INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1994, 1993 and 1992
(In Thousands of dollars, Except Per Share Data)
1994 1993 1992
<S> <C> <C> <C>
Operating revenues $ 214,838 $ 191,390 $ 174,801
Operating expenses:
Purchased transportation
and equipment rents 79,946 73,071 73,741
Fuel and other operating expenses 49,749 45,194 39,467
Salaries, wages, and benefits 48,309 40,247 34,196
Insurance and claims 7,680 8,622 8,010
Operating taxes and licenses 9,846 7,196 4,459
Depreciation 4,826 5,386 5,478
Other operating expenses 4,077 4,941 4,728
204,433 184,657 170,079
Operating Income 10,405 6,733 4,722
Interest expense (3,557) (3,949) (4,622)
Other expense, net (357) (352) (344)
Earnings (loss) before
income taxes and 6,491 2,432 (244)
extraordinary items
Provision for Income taxes (1,326) (922) -
Earnings (loss) before
extraordinary items 5,165 1,510 (244)
Extraordinary gain on retirement
of debt, net of related income
taxes of $612 - 1,188 -
Net earnings (loss) $ 5,165 $ 2,698 $ (244)
Earnings (loss) per common and
common equivalent share
Primary:
Before extraordinary items $ 0.52 $ 0.16 $ (0.05)
Extraordinary gain, net $ - $ 0.12 $ -
Net earnings (loss) $ 0.52 $ 0.28 $ (0.05)
Fully diluted:
Before extraordinary items $ 0.40 $ 0.14 $ (0.05)
Extraordinary gain, net $ - $ 0.09 $ -
Net earnings (loss) $ 0.40 $ 0.23 $ (0.05)
<PAGE>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders Equity
Years Ended December 31, 1994, 1993 and 1992
(In Thousands of dollars)
Retained Share-
Earnings holders'
Common Stock (Deficit) Equity
Shares Dollars
<S> <C> <C> <C> <C>
Balance, December 31, 1991 4,977,164 $ 3,308 $ (634) $ 2,674
Net Loss for 1992 -- -- (244) (244)
Balance, December 31, 1992 4,977,164 3,308 (878) 2,430
Issuance of Common Stock,
net of costs 4,000,000 5,980 - 5,980
Exercise of Stock Options 90,000 135 - 135
Net Earnings for 1993 - -- 2,698 2,698
Balance, December 31, 1993 9,067,164 9,423 1,820 11,243
Exercise of Stock Options 20,000 30 - 30
Net Earnings for 1994 - - 5,165 5,165
Balance, December 31, 1994 9,087,164 $ 9,453 $ 6,985 $ 16,438
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
(In Thousands of dollars)
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 5,165 $ 2,698 $ (244)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Income taxes 1,326 922 -
Extraordinary gain on retirement of
debt, net - (1,188) -
Depreciation and amortization 5,246 5,806 6,206
Provision for doubtful accounts 93 701 866
Changes in assets and liabilities, net
Receivables (2,105) (3,654) 1,376
Prepaid expenses 215 1,220 (220)
Accounts payable and accrued expenses 1,774 (873) (1,510)
Other (178) (20) 231
Net cash provided by operating activities 11,536 5,612 6,705
Cash flows from financing activities:
Net repayments on line of credit (2,949) (9,950) (1,510)
Secured equipment borrowings 1,825 2,513 4,948
Principal payments on capital leases and
equipment borrowings (10,186) (9,689) (5,611)
Proceeds from sale of common stock and
7% convertible subordinated debentures - 12,000 -
Proceeds from exercise of stock options 30 135 -
Increase in claim liability collateral funds - (1,500) (200)
Other, net - - 600
Net cash (used in) financing activities (11,280) (6,491) (1,773)
Cash flows from investing activities:
Purchases of property and equipment (3,244) (3,639) (6,170)
Disposals of property and equipment 3,366 5,481 728
Net cash provided by (used in)
investing activities 122 1,842 (5,442)
Net increase (decrease) in cash
and cash equivalents 378 963 (510)
Cash and cash equivalents:
Beginning of period 2,356 1,393 1,903
End of period $ 2,734 $ 2,356 $ 1,393
<PAGE>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Intrenet, Inc., and all of its
subsidiaries (the Company). Truckload carrier subsidiaries at
December 31, 1994 were Roadrunner Trucking, Inc. (RRT), Eck
Miller Transportation Corporation (EMT), Advanced Distribution
System, Inc. (ADS) , Roadrunner Distribution Services, Inc.
(RDS) and C.I. Whitten Transfer Company, (CIW). All
significant intercompany transactions are eliminated in
consolidation. Through its subsidiaries, the Company provides
general and specialized truckload carrier services on a
regional basis throughout the forty-eight continental states
and Canada.
Revenue Recognition
Operating revenues are recognized upon receipt of the
freight. Related transportation expenses, including driver
wages, purchased transportation, fuel and fuel taxes, agent
commissions, and insurance premiums are accrued when the
revenue is recognized.
Property and Equipment
Property and equipment is carried at cost less an
allowance for depreciation. Major additions and betterments
are capitalized, while maintenance and repairs that do not
improve or extend the life of the respective asset, are
expensed as incurred. Improvements to leased premises are
amortized on a straight-line basis over the terms of the
respective lease. Operating lease tractor rentals are
expensed as a part of purchased transportation and equipment
rents. Depreciation of property and equipment is provided,
principally on a straight-line basis over the following
estimated useful lives of the respective assets, or life of
the lease for equipment under capital leases:
Buildings and Improvements . . . . 10 - 40 years
Revenue Equipment . . . . . . . . . . . 3 - 8 years
Other Property . . . . . . . . . . . . 3 - 7 years
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Reorganization Value in Excess of Amounts Allocated to
Identifiable Assets
Reorganization Value in Excess of Amounts Allocated to
Identifiable Assets, resulting from the reorganization of the
Company in 1990, is being amortized on a straight-line basis
over 35 years. Benefits from utilization of
pre-reorganization net operating loss carryforwards (see Note
6) are reported as reductions of the Reorganization Value, and
thus reduce its effective life. The estimated remaining
effective life was approximately 10 years at December 31,
1994.
Debt Issuance Costs and Bank Fees
Debt issuance costs and bank fees are amortized over the
period of the related debt agreements.
Income Taxes
The Company and its subsidiaries file a consolidated
Federal income tax return. Effective January 1, 1993, the
Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109 - Accounting for Income
Taxes. Under SFAS 109, the Company recognizes income taxes
under the liability method of accounting for income taxes.
The liability method recognizes tax assets and liabilities for
future taxable income or deductions resulting from differences
in the tax and financial reporting basis of assets and
liabilities reflected in the balance sheet and the expected
tax impact of carryforwards for tax purposes. The effects of
adopting this Statement did not have a material impact on the
results of operations or financial position of the Company.
Earnings (Loss) Per Share
Earnings (loss) per common and common equivalent share
have been computed using the weighted average common shares
outstanding during the periods (9.1 million in 1994, 8.8
million in 1993, and 5.0 million in 1992). No effect has been
included for options or warrants outstanding, if the effect
would be antidilutive. Fully diluted earnings per share have
been computed under the assumption that the Debentures (See
Note 2) were converted into common stock on the date of their
issuance, using the if-converted method.
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Credit Risk
Financial investments that subject the Company to
concentrations of credit risk consist primarily of trade
accounts receivable. Concentrations of credit risk with
respect to customer receivables are limited due to the
Company's diverse customer base, with no one customer,
industry, or geographic region comprising a large percentage
of customer receivables or revenues.
Statements of Cash Flows
Cash equivalents consist of highly liquid investments
such as certificates of deposit or money market funds with
original maturities of three months or less, including $ 1.75
million required to be maintained in an investment account
with the Company's bank. See Note 3 of Notes to Consolidated
Financial Statements.
Cash payments for interest were $ 3.5 million, $4.1
million, and $4.5 million in 1994, 1993, and 1992,
respectively. Cash payments for Federal alternative minimum
income taxes were $ 0.2 million in 1994. No Federal tax
payments were made in 1993 or 1992.
Capital lease obligations of $ 8.0 million, $3.8 million
and $6.0 million were incurred in 1994, 1993 and 1992,
respectively, primarily for revenue equipment.
Reclassifications
Certain prior 1993 and 1992 amounts have been
reclassified for purposes of comparison to the related 1994
amounts.
(2) 1993 Recapitalization
On January 19, 1993, the Company sold certain equity and
debt securities in a private offering. A total of eighteen
investors purchased an aggregate of 5,000 Units, each Unit
consisting of 800 shares of Common Stock, without par value,
and $1,200 principal amount in 7% Convertible Subordinated
Debentures due 1998 (Debentures) yielding proceeds of $12.0
million. An aggregate of 4 million shares of common stock and
$6.0 million principal amount in Debentures were issued in the
offering. The Common Stock in the Units was sold at $1.50 per
share and the Debentures were sold at par. The Debentures bear
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
interest at 7% per annum and mature on January 1, 1998. There
is no sinking fund. The Debentures are convertible into Common
Stock at a price of $1.65 per share. The Debentures are
redeemable, at the Company's option, on or after February 1,
1995 at various premiums declining to par after January 31,
1997. See Note 11 of Notes to Consolidated Financial
Statements.
In addition to the private offering, on January 19, 1993,
the Company restructured its bank credit facilities. The
Company applied approximately $5.4 million of the proceeds of
the private offering to retire in full approximately $7.2
million in outstanding bank loans. The Company also entered
into a revised bank agreement with one of its lending banks
which provides the Company with a $22.0 million long-term bank
credit facility.
(3) Bank Credit Facility
The Company has a $ 22 million bank credit facility with
a bank consisting of a $15.0 million revolving line of credit
which expires January 15, 1996, and a $7.0 million term loan
with a final maturity on December 31, 1997. The line of
credit includes provisions for the issuance of up to $15.0
million in standby letters of credit which, as issued, would
reduce available borrowings under the line of credit.
Borrowings under the bank agreement totaled $ 7.0 million at
December 31, 1994, and outstanding letters of credit totaled
$ 9.5 million, leaving $ 5.5 million of available credit under
the $22.0 million facility.
Interest on the outstanding principal balance of loans
under the bank agreement is payable monthly at a variable rate
of 1.25% over the bank's prime rate. The interest rate was
9.75% and 7.25% at December 31, 1994 and 1993, respectively.
Principal of the $7.0 million term loan is not required to be
paid prior to April 1995. At that time, quarterly payments
ranging from $0.5 million to $0.75 million commence, with
total payments of $2.0 million in each of 1995 and 1996, and
$3.0 million in 1997. The bank agreement requires the Company
to maintain a minimum of $1.75 million in an investment
account with the bank, to meet certain minimum net worth
requirements, prohibits the payment of dividends and limits
capital expenditures to the amounts included in the Company's
operating plans. Obligations under the bank agreement are
secured by liens on or security interests in all of the
otherwise unencumbered assets of the Company and its
subsidiaries.
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
In connection with the bank agreement, the Company also
issued to the bank warrants to purchase 300,000 shares of
common stock at a price of $1.65 per share. The warrants are
exercisable at any time prior to December 31, 1998.
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(4) Leases and Other Long-Term Obligations
The Company finances a majority of its revenue equipment
under various capital and non-cancelable operating leases, and
with secured equipment borrowings. Secured equipment
borrowings range in term from 48 to 60 months with interest
rates at December 31, 1994 of 7.33% to 11.55%.
Scheduled annual payments on the Company's capital and
operating leases and secured equipment borrowings at December
31, 1994 were as follows (in thousands of dollars):
Secured
Capital Lease Equipment Operating
Obligations Borrowings Leases
1995 $ 4,029 $ 2,788 $ 16,216
1996 3,876 2,122 14,096
1997 3,030 1,120 7,968
1998 1,421 317 3,072
1999 766 18 -
Total minimum payments $ 13,122 $ 6,365 $ 41,352
Less amount
representing interest (2,078) (681)
Present value of minimum
lease payments $ 11,044 $ 5,684
Less amount classified
as current (3,068) (2,357)
Long-term obligations
under capital
leases $ 7,976 $ 3,327
Included in the $ 4,029 of capital lease payments
scheduled for 1995 is $ 78 of residual value payments which
typically are satisfied through the sales proceeds of the
related leased equipment.
Total rental expense under non-cancelable operating
leases was $14,728, $10,924, and $ 7,024 in 1994, 1993, and
1992 respectively. The Company presently intends to lease
approximately 370 tractors under operating leases and 278
trailers under capital leases in 1995.
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Purchased transportation and equipment rents expense
includes payments to owner-operators of equipment under
various short-term lease arrangements.
(5) Litigation and Contingencies
The Company is a party to routine litigation incidental
to its business, primarily involving claims for personal
injury and property damage incurred in the transporting of
freight. The Company maintains insurance which at December
31, 1994 covered the first $25.0 million of liability
resulting from such transportation related claims, subject to
deductibles for the first $ 25,000 to $ 250,000 of exposure
for each incident. The Company is not aware of any claims or
threatened claims that might materially affect the Company's
operating or financial results.
(6) Income Taxes
The provision for income taxes for the years ended
December 31, 1994 and 1993 was as follows:
1994 1993
Current $ 200 $ -
Deferred:
Income from operations 1,126 922
Extraordinary gain on
retirement of debt - 612
Total Provision $ 1,326 $ 1,534
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Income tax expense attributable to income from operations
differs from the amounts computed by applying the U. S.
Federal statutory tax rate of 34% to pre-tax income from
operations as a result of the following:
1994 1993 1992
Taxes at statutory rate $ 2,207 $ 827 $ (66)
Increase (decrease) resulting from:
Non-deductible amortization 143 143 143
Non-deductible driver
subsistence pay 1,489 499 -
Release of valuation allowance
held against post-reorganization
net deferred tax assets (2,538) (547) -
Other, net 25 - ( 77)
Provision for Income Taxes $ 1,326 $ 922 $ -
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
The tax effects of temporary differences that give rise
to significant portions of deferred tax assets and deferred
tax liabilities at December 31, 1994 and 1993 are as follows:
1994 1993
Deferred Tax Assets
Insurance claim liabilities $ 2,896 $ 2,554
Reserve for doubtful accounts 463 504
Other 123 208
3,482 3,266
Deferred Tax Liabilities
Property differences,
primarily depreciation (2,493) (1,249)
Other (474) (532)
(2,967) (1,781)
Net Temporary Differences 515 1,485
Carryforwards -
Pre-reorganization, limited,
net operating loss
carryforwards
(Expiring 2004-2006) 5,330 6,816
Post-reorganization net
operating loss
carryforwards
(Expiring 2006-2009) 1,564 2,972
Total Carryforwards 6,894 9,788
Net Deferred Tax Assets 7,409 11,273
Valuation Allowance (4,884) (11,273)
Recorded Net Deferred Tax Assets $ 2,525 $ -
Net changes to the valuation allowance were as follows:
Valuation allowance, balance
at beginning of year $ 11,273 $ 13,354
Release of allowance held
against pre-reorganization
deferred tax assets, and
charged against Reorganization
Value (3,851) (1,534)
Release of allowance held
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
against post-reorganization
deferred tax assets, and
taken to income (2,538) (547)
Valuation allowance, balance
at end of year $ 4,884 $ 11,273
The amounts disclosed above for 1993 differ from those
previously disclosed as a result of the amendment of the
Company's 1988 to 1992 Federal income tax returns.
Benefits from realization of pre-reorganization net
deferred tax assets are reported as a reduction of
Reorganization Value in Excess of Amounts Allocated to
Identifiable Assets. Conversely, realization of
post-reorganization net deferred tax assets are recognized as
a reduction of income tax expense. In 1993 and 1994, the
Company released valuation allowances held against both pre-
and post-reorganization net deferred tax assets to the extent
those assets were realized in the Company's tax returns for
those years. In addition, in 1994, based upon current and
anticipated future operating results, the Company concluded
that future realization of a portion of the pre-reorganization
net deferred tax assets was more likely than not. As a result,
the Company released approximately $2.5 million of valuation
allowances held against those assets, and reduced the
Reorganization Value in Excess of Amounts Allocated to
Identifiable Assets by a corresponding amount.
While management is optimistic that all net deferred tax
assets will be realized, such realization is dependent upon
future taxable earnings. The Company's carryforwards expire at
specific future dates and utilization of certain carryforwards
is limited to specific amounts each year. Further limitations
on carryforward utilization is likely to result from the
potential ownership change discussed more fully in Note 11 of
Notes to Consolidated Financial Statements. Accordingly, the
Company has recorded a valuation allowance against a portion
of those net deferred tax assets.
(7) Stock Options and Employee Compensation
On August 15, 1992, the Company adopted the 1992
Non-Qualified Stock Option Plan (the 1992 Option Plan). The
1992 Option Plan allows the Company to grant options to
purchase up to 590,000 shares of Common Stock to employees
and independent contractors of the Company and its operating
subsidiaries. On the same date the 1992 Option Plan was
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
approved, the Company granted all of the options available
under the 1992 Option Plan.
All of the options granted vested immediately and are
exercisable at prices ranging from $1.00 to $1.50 per share.
The Company recorded $105,000 of compensation expense in
connection with the 1992 Option Plan in its 1992 consolidated
financial statements.
In 1993, the Company adopted the 1993 Stock Option and
Incentive Plan (the 1993 Option Plan). The 1993 Option Plan
allows the Company to grant options to purchase up to
1,000,000 shares of Common Stock to officers and key employees
of the Company and its operating subsidiaries. Options issued
to date under the 1993 Option Plan have an exercise price
equal to market value on the date of grant, and are generally
exercisable for a ten year period.
The activity in the Company's 1992 and 1993 Option Plans in
1992, 1993, and 1994 was as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price Per Share
<S> <C> <C>
Balance at December 31, 1991 587,138 $1.89 to $3.78
Granted 590,000 $1.00 to $1.50
Exercised -
Canceled (587,138) $1.89 to $3.78
Balance at December 31, 1992 590,000 $1.00 to $1.50
Granted 100,000 $2.75
Exercised (90,000) $1.50
Canceled (20,000) $1.50
Balance at December 31, 1993 580,000 $1.00 to $2.75
Granted 104,000 $3.625
Exercised (20,000) $1.50
Canceled (9,000) $3.625
Balance at December 31, 1994 655,000 $1.00 to $3.625
</TABLE>
In addition to those options granted above, on January
19, 1993, the Company granted non-qualified options to
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
purchase 200,000 shares of Common Stock to an executive
officer of the Company, at $ 1.50 per share. These options
vest 1/3 on July 1, 1993, 1/3 on July 1, 1994 and 1/3 on July
1, 1995. If the executive is not an employee on the vesting
date, the options lapse.
In connection with the 1990 reorganization, and in
addition to those options granted above, the Company entered
into a Stock Option Agreement (the Option Agreement) with
Compton Management Corporation, a company that provided
management services to the Company. The Option Agreement
provides for the grant of an option to purchase 264,212 shares
of Common Stock at a purchase price of $ 0.125 per share. The
option may be exercised, in whole or in part, at any time
prior to January 16, 1996. The Option Agreement provides
Compton with certain registration rights to permit resale in
the public market.
(8) Property and Equipment
Property and equipment, substantially all of which is
pledged as security under the bank credit facility (see Note
3), other indebtedness or capital leases, at December 31
follows (in thousands of dollars):
1994 1993
Land $ 1,621 $ 1,626
Buildings and leasehold improvements 2,920 2,461
Revenue equipment 29,279 28,771
Other property 5,320 3,112
39,140 35,970
Less accumulated depreciation (11,164) (11,048)
$ 27,976 $ 24,922
(9) Prepaid and Accrued Expenses
An analysis of prepaid and accrued expenses at December
31, 1994, and 1993 follows (in thousands of dollars):
1994 1993
Prepaid expenses:
Insurance $ 1,406 $ 1,717
Tires 1,051 1,291
Shop and truck supplies 2,080 1,759
Other 1,187 1,172
$ 5,724 $ 5,939
Accrued Expenses:
Salaries and wages $ 1,930 $ 1,829
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Fuel and mileage taxes 469 444
Equipment leases 585 517
Other 3,686 2,064
$ 6,670 $ 4,854
(10) Transactions with Affiliated Parties
In August 1991, the Company sub-leased 35 refrigerated
van trailers to a company affiliated with a member of the
Company's Board of Directors. The sub-lease was structured to
provide sub-lease payments to the Company in an amount equal
to the primary lease payments the Company was obligated to
make. The lease and related sub-lease expired in May, 1992.
The Company recorded approximately $115,000 of sub-lease
income in 1992.
In 1993, the Company entered into a financial consulting
agreement with an affiliate of a member of the Company's Board
of Directors. This agreement, which expired on January 31,
1994, provided for payments totaling $275,000 for consulting
services rendered.
In 1994, 1993 and 1992, the Company leased approximately
150, 430 and 180 tractors, respectively, from unaffiliated
leasing companies which had purchased the trucks from a
dealership affiliated with a member of the Company's Board of
Directors. The lessors paid a selling commission to the
dealership. The terms of the leases were the result of
arms-length negotiations between the Company and the lessors.
The Company believes the involvement of the selling dealership
did not result in lease terms that are more or less favorable
to the Company than would otherwise be available to it. The
Company also purchases maintenance parts and services from the
dealership from time to time. Total payments to the dealership
for these services was $ 307,000 in 1994 and $ 123,000 in
1993.
(11) Event (Unaudited) Subsequent to Date of Auditors' Report
On March 7, 1995, the Company issued a redemption notice
for the Debentures. (See Note 2 of Notes to Consolidated
Financial Statements) The Debenture holders have the option
of accepting cash equal to 107% of par, or converting the
Debentures into Common Stock at a price of $ 1.65 per share.
If the Debenture holders convert their Debentures into Common
Stock, the Company will issue approximately 3,636,352 new
shares. If none of the Debentures are converted, the Company
<PAGE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
will retire the Debentures with cash payments totaling
$ 6,420,000. The Debenture holders have until April 6, 1995
to surrender their Debentures for conversion, although the
Company has requested that they do so prior to March 31, 1995.
As the Common Stock has been trading at a price in excess of $
1.65 per share, management expects that all Debenture holders
will convert their Debentures into Common Stock.
In the event a significant portion of the Debentures are
converted, an "ownership change" for tax purposes is likely
to occur. This will result in a limitation of the amount of
tax net operating loss carryforwards the Company may utilize
in any single year. Management does not anticipate that this
limitation will have a material impact on the Company's future
tax payments.
<PAGE>
Schedule II
INTRENET, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Additions
Additions
Charged to Charged
Beginning Costs and to Other Ending
Balance Expenses Accounts Deductions Balance
Year Ended
December 31, 1994:
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $ 1,481 $ 93 $ - $ (211) $ 1,363
Deferred Tax Asset
Valuation Allowance $ (11,273) $ - $ - $(6,389) $(4,884)
Year Ended
December 31, 1993:
Allowance for
doubtful accounts $ 1,368 $ 701 $ - $ (588) $ 1,481
Deferred Tax Asset
Valuation Allowance [A]$(13,354) $ - $ - $(2,081) $(11,273)
Year Ended
December 31, 1992:
Allowance for
doubtful accounts $ 998 $ 866 $ - $ (496) $ 1,368
</TABLE>
[A] Amounts differ from those previously disclosed as a result
of the amendment of the Company's 1988 to 1992 tax returns.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K/A,
into the Company's previously filed Registration Statement
File No. 33-69882.
Arthur Andersen LLP
Indianapolis, Indiana
May 12, 1995
EXHIBIT 23
<PAGE>
