SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14060
INTRENET, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1597565
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
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
Not Applicable
Former name, former address and former fiscal year,if changed since last report
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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, without par value, 13,412,138 shares issued and
outstanding at November 1, 1996
INTRENET, INC.
FORM 10-Q
SEPTEMBER 30, 1996
INDEX
PAGE
Part I - Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 ...... 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended ....................4
September 30, 1996 and 1995
Condensed Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 1996 ................5
Condensed Consolidated Statements of Cash Flows
Three Months and Nine Months Ended ................... 6
September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statement 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 8
Part II - Other Information:
Item 1. Legal Proceedings ................... 11
Item 2. Changes in Securities ................... 11
Item 3. Defaults Upon Senior Securities ............... 11
Item 4. Submission of Matters to a Vote
of Security Holders ................... 11
Item 5. Other Information ................... 11
Item 6. Exhibits and Reports on Form 8-K............... 11
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
(In Thousands of Dollars)
<CAPTION>
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,217 $ 171
Receivables, principally freight revenue less
allowance for doubtful accounts of $714 in 1996
and $572 in 1995 26,612 20,972
Prepaid expenses and other 5,052 5,573
Total current assets 32,881 26,716
Property and equipment, at cost, less accumulated
depreciation 35,701 29,577
Reorganization value in excess of amounts allocated
to identifiable assets, net of accumulated amortization 7,716 8,031
Deferred income taxes, net 2,723 2,723
Other assets 681 591
Total assets $ 79,702 $ 67,638
Liabilities and Shareholders' Equity
Current liabilities:
Current debt and capital lease obligations $ 6,720 $ 6,134
Accounts payable and cash overdrafts 9,289 7,744
Current accrued claim liabilities 7,824 7,031
Other accrued expenses 7,873 6,430
Total current liabilities 31,706 27,339
Long-term debt and capital lease obligations 24,439 14,981
Long-term accrued claim liabilities 2,700 2,300
Total liabilities 58,845 44,620
Shareholders' equity:
Common stock, without par value; 20,000,000
shares authorized; 13,227,338 and 13,197,728 shares
issued and outstanding, respectively 16,294 16,245
Retained earnings since January 1, 1991 4,563 6,773
Total shareholders' equity 20,857 23,018
Total liabilities and shareholders' equity $ 79,702 $ 67,638
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(In Thousands of Dollars, Except Per Share Data)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues $ 57,797 $ 53,097 $ 168,112 $ 162,796
Operating expenses:
Purchased transportation
and equipment rents 22,330 20,667 64,932 60,901
Salaries, wages, and benefits 15,775 14,009 45,440 43,781
Fuel and other operating expenses 12,328 11,799 36,861 34,949
Operating taxes and licenses 2,781 2,478 8,046 7,477
Insurance and claims 2,394 1,643 6,422 5,546
Depreciation 1,587 1,175 3,732 3,502
Other operating expenses 774 531 2,762 2,763
57,969 52,302 168,195 158,919
Operating income (loss) (172) 795 (83) 3,877
Interest expense (622) (713) (1,812) (2,234)
Other expense, net (96) 258 (315) 27
Earnings (loss) before income taxes (890) 340 (2,210) 1,670
Provision for income taxes - (102) - (501)
Net earnings (loss) $ (890) $ 238 $ (2,210) $ 1,169
Earnings (loss) per common and common
equivalent share $ (0.07) $ 0.02 $ (0.16) $ 0.09
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 1996
(In Thousands of Dollars)
<CAPTION>
Retained Shareholders'
Common Stock Earnings Equity
Shares Dollars
<S> <C> <C> <C> <C>
Balance, December 31, 1995 13,197,728 $16,245 $6,773 $23,018
Exercise of stock options 29,610 49 - 49
Net loss for 1996 - - (2,210) (2,210)
Balance, September 30, 1996 13,227,338 $16,294 $4,563 $20,857
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (890) $ 238 $ (2,210) $ 1,169
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Deferred income taxes - 102 - 501
Depreciation and amortization 1,692 1,280 4,047 3,817
Provision for doubtful accounts 98 (141) 254 159
Changes in assets and liabilities, net:
Receivables 726 (1,519) (5,894) (2,756)
Prepaid expenses 995 943 520 (318)
Accounts payable and accrued expenses 1,543 (566) 3,926 1,382
Other - 482 - 703
Net cash provided by
operating activities 4,164 819 643 4,657
Cash flows from financing activities:
Net borrowings (repayments) on line of credit, net (1,606) (2,708) 2,336 (1,000)
Principal payments on long-term debt (1,928) (1,896) (5,483) (4,696)
Issuance of long term debt - 2,299 - 2,299
Proceeds from exercise of stock options - - 49 304
Net cash (used in) financing activities (3,534) (2,305) (3,098) (3,093)
Cash flows from investing activities:
Additions to property and equipment (389) (1,946) (1,079) (6,174)
Disposals of property and equipment 754 28 4,580 559
Sale of operating assets of C.I. Whitten - 2,913 - 2,913
Net cash provided by (used in)
investing activities 365 995 3,501 (2,702)
Net increase (decrease) in cash
and cash equivalents 995 (491) 1,046 (1,138)
Cash and cash equivalents:
Beginning of period 222 2,087 171 2,734
End of period $ 1,217 $ 1,596 $ 1,217 $ 1,596
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
(1) Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
include the accounts of Intrenet, Inc. and all of its
subsidiaries (collectively, the Company). Operating subsidiaries
at September 30, 1996 were Roadrunner Trucking, Inc. (RRT), Eck
Miller Transportation Corporation (EMT), Advanced Distribution
System, Inc. (ADS), Roadrunner Distribution Services, Inc.
(RDS) and INET Logistics, Inc. (INL). All significant
intercompany transactions are eliminated in consolidation.
Through its subsidiaries, the Company provides general and
specialized truckload carrier and intermodal brokerage services
on a regional basis throughout the forty-eight continental
states and Canada.
The consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). In management's opinion, these
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation
of the results of operations for the interim periods presented.
Pursuant to SEC rules and regulations, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements
unless significant changes have taken place since the end of the
most recent fiscal year. For this reason, the accompanying
consolidated financial statements and notes thereto should be
read in conjunction with the financial statements and notes for
the year ended December 31, 1995 included in the Company's 1995
Annual Report on Form 10-K.
The results for the three month and nine month periods ended
September 30, 1996 are not necessarily indicative of the results
to be expected for the entire year.
(2) Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share have been
computed on the basis of the weighted average common shares
outstanding during the periods. No effect has been included for
options or warrants outstanding, if the effect would be
antidilutive.
(3) Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year. In 1996,
however, as a result of the year-to-date pre-tax losses, and the
uncertainty related to forecasting future operating results in
the current competitive operating environment, the Company has
not recorded any income tax benefit in the nine months ended
September 30, 1996. The tax benefit from the losses will be
recorded when earnings recover, and the tax benefit becomes
realizable.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Introduction
The Company reported a net loss of $ 890,000 ($ 0.07 per share)
on revenues of $ 57.8 million in the three months and a net loss
of $ 2.2 million ($ 0.16 per share) on revenues of $ 168.1
million in the nine months ended September 30, 1996. This
compares with net earnings of $ 238,000 on revenues of $ 53.1
million, and net earnings of $ 1.2 million on revenues of $
162.8 million in the comparable periods of 1995, respectively.
In the three months ended September 30, 1996, the Company
recorded approximately $ 1.2 million in charges: to account for
certain corporate personnel severance arrangements ($ 0.2
million); to write-off certain computer equipment ($ 0.3
million); to record the settlement and legal costs of previously
disclosed litigation ($ 0.1 million); to reserve for unfavorable
developments in several workers compensation and vehicle
accident claim reserves ($ 0.4 million); and to account for
certain other charges ($ 0.2 million). The 1995 nine month
results include a $ 1.8 million pre-tax loss from the operations
of the Company's former munitions carrier, C.I. Whitten Transfer
Company (CIW), which was sold in August, 1995.
As discussed more fully below, the Company's performance
throughout 1996 reflects the soft market trends which began in
late 1995 and continued into 1996. Over-capacity in the
truckload industry, severe weather conditions and higher fuel
costs combined to produce lower freight rates, reduced equipment
utilization, and significantly higher operating costs in the
first quarter of 1996. These factors led to reduced profit
margins, resulting in an inability to cover other fixed costs in
the first quarter period. Although business strengthened in the
second and third quarters as better weather, a stronger U.S.
economy and a resumption of construction activity in the country
increased demand for transportation services, substantially
higher fuel prices, competitive pressures on freight rates, and
other increased costs continued to negatively impact the
Company's profit margins. In addition to these operating
factors, as discussed in the first paragraph above, the Company
recorded approximately $ 1.2 million of charges in the third
quarter to account for the effects of several items.
A discussion of the impact of the above and other factors on
the results of operations in the three months and nine months
ended September 30, 1996 as compared to the comparable periods
of 1995 follows.
1996 Compared to 1995
Three Months Ended 9/30 % Nine Months Ended 9/30 %
Key Operating Statistics 1996 1995 Change 1996 1995 Change
Operating Revenues ($ millions) $ 57.8 $53.1 8.8% $168.1 $162.8 3.3%
Net Earnings (Loss) ($ 000's) $(890) $238 NM $(2,210) $1,169 NM
Average Number of Tractors 2,041 2,011* 1.5% 2,061 1,944* 6.0%
Total Loads (000's) 66.6 61.2* 8.8% 194.7 182.1* 6.9%
Revenue Miles (millions) 42.4 37.7* 12.6% 124.1 113.4* 9.4%
Average Revenue per
Revenue Mile $1.28 $1.29* (0.8%) $1.28 $1.30* (1.5%)
* Certain 1995 amounts exclude the effects of CIW, which was
sold in August, 1995.
Operating Revenues
Operating revenues for the three months and nine months ended
September 30, 1996 totaled $ 57.8 million and $ 168.1 million,
respectively, as compared to $ 53.1 million and $ 162.8 million
for the same periods in 1995. Despite intense competitive
conditions in the truckload industry, the Company's four
truckload carriers have continued to grow throughout 1996.
Revenue at these carriers was up $ 5.8 million, or 11.2%, in the
three months, and $ 11.4 million, or 7.3%, in the nine months
ended September 30, 1996, over the comparable 1995 periods.
The approximately 9.4 % increase in revenue miles (volume) in
1996 over 1995 (excluding CIW), is attributable to a 6.0 %
increase in the average number of tractors deployed, and an
increase in average length of haul. Volumes in the second and
third quarters of 1996 were substantially better than in the
first quarter of 1996, as a result of a strengthening U.S.
economy and a return to more normal operating efficiencies.
Revenue miles in the third quarter of 1996 were up 12.6 % over
the comparable 1995 quarter as a result of stronger shipper
demand reflecting the relatively strong U.S. economy. The
increased number of tractors in 1996 over 1995 is the result of
the Company's internal growth plans which resulted in an
increase in the number of company-operated tractors, coupled
with an increase in the average number of owner-operator
tractors under contract. Approximately 60 % of the Company's
revenue in the three month and nine month periods ended
September 30, 1996 was generated by company-operated equipment,
and 35 % by owner-operator equipment. This relationship is
essentially unchanged from the comparable 1995 periods. The
remaining 5% of revenues was from freight brokered to other
carriers.
The decline in the average revenue per revenue mile (price) of
1.5 % in 1996 as compared to 1995, is the result of generally
lower transportation rates due to increased competitive
conditions, and to reduced traffic opportunities in 1996 due to
excess industry capacity, which required the Company to move
more equipment with lower-priced spot market loads.
Operating Expenses
The following table sets forth the percentage relationship of
operating expenses to operating revenues for the three month and
nine month periods ended September 30. The reduced per mile
freight rates in 1996 account partially for the increase in
operating expenses when expressed as a percentage of revenue.
Three Months Ended 9/30 Nine Months Ended 9/30
1996 1995 1996 1995
Operating revenues 100 % 100 % 100 % 100 %
Operating expenses:
Purchased Transportation
and equipment rents 38.6 38.9 38.6 37.4
Salaries, wages and benefits 27.3 26.4 27.0 26.9
Fuel and other operating expenses 21.3 22.2 21.9 21.5
Operating taxes and licenses 4.8 4.7 4.8 4.6
Insurance and claims 4.1 3.1 3.8 3.4
Depreciation 2.8 2.2 2.2 2.1
Other operating expenses 1.3 1.0 1.7 1.7
Total operating expenses 100.2% 98.5% 100.0% 97.6%
Purchased transportation and equipment rents increased in 1996
over 1995 as a percentage of revenue due to the lower revenue
per mile in 1996 over 1995. Salaries and wages increased as a
result of driver wage increases implemented in 1995 in response
to competitive conditions, to the costs of certain corporate
personnel severance arrangements, and to unfavorable developments in
several workers compensation claim reserves recorded in the
third quarter of 1996. Fuel and other operating expenses
increased as fuel costs were approximately two cents per total
mile higher in 1996 versus 1995, as a result of the
approximately ten cent per gallon increase in the cost of diesel
fuel. While the effects of the higher fuel costs have been
blunted, to a degree, through the implementation of fuel
surcharges, competitive conditions have limited the Company's
ability to implement surcharges to only a portion of its
revenues. Management estimates that the higher fuel costs,
increased fuel expenses by
approximately $ 0.6 million in the three months and $ 1.9
million in the nine months ended September 30, 1996, when
compared to fuel prices paid in the comparable periods of 1995.
Insurance and claims expense was higher in 1996 over 1995 as a
result of higher accident levels, and the recording of reserves
for unfavorable developments in several vehicle accident claim
reserves. Depreciation increased primarily as a result of the
addition of a new 53 foot dry van trailer fleet at RDS in 1996
which is being financed under capital leases . Other operating
expenses remained relatively constant in 1996 over 1995.
Interest Expense
Interest expense decreased in 1996 over 1995, primarily as a
result of lower average borrowings at lower
average interest rates under the Company's bank credit facility
in 1996 than in 1995. Further, a $ 105,000 decline in interest
costs is attributable to the conversion of the Company's 7%
convertible subordinated debentures on March 31, 1995.
Provision for Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year. In 1996,
however, as a result of the year-to-date pre-tax losses, and the
uncertainty related to forecasting future operating results in
the current competitive operating environment, the Company has
not recorded any income tax benefit in the nine months ended
September 30, 1996. The tax benefit attributable to the losses
will be recorded when earnings recover, and the tax benefit
becomes realizable.
Liquidity and Capital Resources
The Company generated $ 1.0 million of cash in the first nine
months of 1996. As reflected in the accompanying Consolidated
Statements of Cash Flows, the Company generated $ 0.6 million of
cash from operating activities, and $ 3.5 million from
investing activities, primarily from the sale of 48 foot van
trailers at RDS. Approximately $ 3.1 million, net, of this cash
was used in financing activities for principal payments on
long-term debt. In March 1996, the Company began to reduce the
sale of certain customer accounts receivable to a collection
clearing house, a process which was completed on June 30, 1996.
This resulted in an increased use of cash from operating
activities to finance approximately $ 4.0 million of accounts
receivable, net, which would otherwise have been sold to the
clearing house.
The Company's day-to-day financing is provided by borrowings
under its bank credit facility. The credit facility consists of
a $ 5 million term loan with a final maturity of December 31,
1999, and a $ 28 million revolving line of credit which expires
January 15, 1999. Quarterly principal payments of $ 312,500 on
the term loan commenced on April 1, 1996. The line of credit
includes provisions for the issuance of up to $ 12 million in
stand-by letters of credit which, as issued, reduce available
borrowings under the line of credit. Borrowings under the line
of credit are limited to amounts determined by a formula tied to
the Company's eligible accounts receivable and inventories, as
defined in the credit facility. Borrowings under the revolving
line of credit totaled $ 3.0 million at September 30, 1996, and
outstanding letters of credit totaled $ 5.6 million at that
date. The combination of these two bank credits totaled $ 8.6
million, leaving approximately $11.5 million of borrowing
capacity under the credit facility at September 30, 1996.
Borrowing capacity since then and through the date of this
report has been in the $ 12.0 million to $ 13.0 million range.
The Company believes that cash generated from operations, and
cash available to it under the bank credit facility will be
sufficient to meet the Company's needs for the foreseeable
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In July, 1996, the Company settled the previously reported
litigation filed against it in the United States District Court
for the District of New Jersey by Compton Management Corporation
("Compton"). The complaint sought compensatory damages of not
less than $1,000,000 and punitive damages of at least
$5,000,000. The Company paid Compton $ 25,000 in settlement of
all claims and the complaint was dismissed with prejudice on
September 25, 1996. Management believes the amount paid to
Compton was less than the likely cost of defense.
There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party of or which any of
their property is the subject other than 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 covers
liability resulting from transportation related claims in
amounts management believes are prudent and consistent with
accepted industry practices, subject to deductibles for the
first $100,000 to $250,000 of exposure for each incident. The
Company is not aware of any claims or threatened claims that
might materially affect the Company's operating or financial
results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INTRENET, INC.
(Registrant)
November 13, 1996 /s/ Jonathan G. Usher
Jonathan G. Usher,
Vice President - Finance,
Treasurer and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE>
INTRENET, INC.
STATEMENT RE: COMPUTATION
OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Weighted average shares outstanding 13,227,338 13,197,728 13,223,448 13,197,728
during period
Assumed exercise of options and 153,731 454,286 170,432 512,118
warrants
Shares assumed for fully diluted earnings 13,381,069 13,652,014 13,393,880 13,709,846
per share
Earnings for the period:
($ in Thousands)
Net earnings (Loss) $ (890) $ 238 $ (2,210) $ 1,169
Earnings per common and common
equivalent share $ (0.07) $ 0.02 $ (0.16) $ 0.09
Exhibit 11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000778161
<NAME> INTRENET, INC.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,217
<SECURITIES> 0
<RECEIVABLES> 27,326
<ALLOWANCES> (714)
<INVENTORY> 0
<CURRENT-ASSETS> 32,881
<PP&E> 35,701
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,702
<CURRENT-LIABILITIES> 31,706
<BONDS> 24,439
0
0
<COMMON> 16,294
<OTHER-SE> 4,563
<TOTAL-LIABILITY-AND-EQUITY> 79,702
<SALES> 0
<TOTAL-REVENUES> 168,112
<CGS> 0
<TOTAL-COSTS> 168,195
<OTHER-EXPENSES> 315
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,812
<INCOME-PRETAX> (2,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,210)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
