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 March 31, 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, 13,227,338 shares issued and
outstanding at May 1, 1996
INTRENET, INC.
FORM 10-Q
MARCH 31, 1996
INDEX
PAGE
Part I - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 ...................
Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995 ....................
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1996 ...................
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 ....................
Notes to Consolidated Financial Statements ....................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................
Part II - Other Information:
Item 1. Legal Proceedings ...................
Item 2. Changes in Securities ...................
Item 3. Defaults Upon Senior Securities ...................
Item 4. Submission of Matters to a
Vote of Security Holders ...................
Item 5. Other Information ...................
Item 6. Exhibits and Reports on Form 8-K ...................
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
(In Thousands of Dollars)
<CAPTION>
Assets 1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 310 $ 171
Receivables, principally freight revenue less
allowance for doubtful accounts of $676 in 1996
and $572 in 1995 23,376 20,972
Prepaid expenses and other 7,691 5,573
Total current assets 31,377 26,716
Property and equipment, at cost, less accumulated
depreciation 29,716 29,577
Reorganization value in excess of amounts allocated
to identifiable assets, net of accumulated amortization 7,926 8,031
Deferred income taxes, net 2,723 2,723
Other assets 635 591
Total assets $ 72,377 $ 67,638
Liabilities and Shareholders' Equity
Current liabilities:
Current debt and capital lease obligations $ 7,006 $ 6,134
Accounts payable and cash overdrafts 8,379 7,744
Current accrued claim liabilities 6,863 7,031
Other accrued expenses 7,240 6,430
Total current liabilities 29,488 27,339
Long-term debt and capital lease obligations 18,996 14,981
Long-term accrued claim liabilities 2,300 2,300
Total liabilities 50,784 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 5,299 6,773
Total shareholders' equity 21,593 23,018
Total liabilities and shareholders' equity $ 72,377 $ 67,638
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995
(In Thousands of Dollars, Except Per Share Data)
<CAPTION>
1996 1995
<S> <C> <C>
Operating revenues $ 52,700 $ 54,750
Operating expenses:
Purchased transportation
and equipment rents 20,415 19,785
Salaries, wages, and benefits 14,433 14,835
Fuel and other operating expenses 11,954 11,936
Operating taxes and licenses 2,607 2,385
Insurance and claims 1,911 2,121
Depreciation 1,079 1,086
Other operating expenses 1,091 1,323
53,490 53,471
Operating income (loss) (790) 1,279
Interest expense (575) (788)
Other expense, net (109) (115)
Earnings (loss) before income taxes (1,474) 376
Provision for income taxes 0 (113)
Net earnings (loss) $ (1,474) $ 263
Earnings (loss) per common and common
equivalent share $ (0.11) $ 0.03
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 1996
(In Thousands of Dollars)
<CAPTION>
Retained Shareholde
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 - - (1,474) (1,474)
Balance, March 31, 1996 13,227,338 $16,294 $5,299 $21,593
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(In Thousands of Dollars)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,474) $ 263
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Deferred income taxes 0 113
Depreciation and amortization 1,184 1,191
Provision for doubtful accounts 83 212
Changes in assets and liabilities, net:
Receivables (2,487) (1,265)
Prepaid expenses (2,119) (1,702)
Accounts payable and accrued expenses 1,233 2,695
Other 0 (56)
Net cash provided by (used in) operating activities (3,580) 1,451
Cash flows from financing activities:
Net borrowings on line of credit, net 4,753 1,376
Principal payments on long-term debt (1,849) (1,382)
Proceeds from exercise of stock options 49 251
Net cash provided by financing activities 2,953 245
Cash flows from investing activities:
Additions to property and equipment (407) (2,081)
Disposals of property and equipment 1,173 145
Net cash provided by (used in) investing activities 766 (1,936)
Net increase (decrease) in cash and cash equivalents 139 (240)
Cash and cash equivalents:
Beginning of period 171 2,734
End of period $ 310 $ 2,494
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 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 March 31, 1996 were Roadrunner Trucking, Inc.
(RRT), Eck Miller Transportation Corporation (EMT), Advanced
Distribution System, Inc. (ADS), and Roadrunner Distribution
Services, Inc. (RDS). 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.
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 period ended March 31, 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 first quarter 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 three months
ended March 31, 1996. The tax benefit from the first quarter
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 $ 1.5 million on revenues of
$ 52.7 million in the three month period ended March 31, 1996.
This compares with earnings of $ 263,000 on revenues of $ 54.8
million in the comparable period of 1995. As further discussed
below, the Company's performance in the first quarter of 1996
reflects the soft market trends which began in the third and
fourth quarters of 1995. Severe weather conditions, higher fuel
costs and over-capacity in the truckload industry combined to
produce lower freight rates and equipment utilization, and
significantly higher operating costs in 1996. These factors
combined to reduce the Company's margins, resulting in an
inability to cover other fixed costs in 1996. The 1995 results
include a $ 1.2 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.
Freight rates and volumes began to improve in March as the
weather in much of the country improved, and as manufacturing
and construction activity increased. These positive revenue
trends have continued into the early second quarter. However,
significantly higher fuel prices, and the difficulty of securing
offsetting fuel surcharge revenues from customers, have resulted
in significantly higher net fuel costs per mile. These increased
costs have offset much of the favorable effect of the increased
freight rates and volumes. Management is implementing a number
of actions intended to improve the Company's competitive
position, including increasing its marketing efforts, reducing
non-driver headcounts, disposing of under-utilized tractors and
trailers, and combining certain aspects of the administrative
functions at RRT and RDS. Management believes that these actions
are yielding positive results, and expects the Company to return
to profitability in the second quarter.
A discussion of the impact of the above and other factors on
the results of operations in the three months ended March 31,
1996 as compared to the comparable period of 1995 follows.
1996 Compared to 1995
Three Months Ended March 31
Key Operating Statistics 1996 1995 % Change
Operating Revenues ($ millions) $ 52.7 $ 54.8 (3.8 %)
Net Earnings (Loss) ($ 000's) ($ 1,474) $ 263 NM
Average Number of Tractors 2,102 1,867 * 12.6 %
Total Loads (000's) 61.9 60.1 * 3.0 %
Revenue Miles (millions) 39.1 37.4 * 4.5 %
Average Revenue per Revenue Mile $ 1.35 $ 1.39 * (2.9 %)
* 1995 amounts exclude the effects of a former subsidiary
carrier, whose assets were sold in 1995.
Operating Revenues
Operating revenues for the three months ended March 31, 1996
totaled $ 52.7 million as compared to $54.8 million for the same
period in 1995, reflecting an overall soft market in the first
quarter of 1996, and the effects of the sale of CIW, in August
of 1995. Despite intense competitive conditions in the
truckload industry, the Company's four carriers continued to
grow in 1996. Revenue at these carriers was up $ 0.4 million or
2.2 % in the three months ended March 31, 1996 over the
comparable 1995 period.
The approximately 3.1 % increase in revenue miles (volume) in
1996 from 1995 (excluding the impact of CIW), is attributable to
a 12.6 % increase in the average number of tractors deployed,
offset by lower equipment utilization resulting from excess
capacity in the truckload industry. The increased number of
tractors in 1996 over 1995 is the result of the Company's
internal growth plans implemented in 1995 and 1994 when the
Company added additional company-operated tractors, coupled with
an increase in the average number of owner-operator tractors.
Approximately 61 % of the Company's revenue in the three month
period ended March 31, 1996 was generated by company-operated
equipment, and 35 % by owner-operator equipment. This compares
to approximately 62 % and 32 %, respectively, in the 1995
period. The remaining revenues were from freight brokered to
other carriers.
The decline in the average revenue per revenue mile (price) of
2.9 % in 1996 as compared to 1995, is a result of 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 months
ended March 31. The reduced per mile freight rates in 1996
account partially for the increase in operating expenses
expressed as a percentage of revenue.
Three Months Ended March 31
1996 1995
Operating revenues 100 % 100 %
Operating expenses:
Purchased transportation
and equipment rents 38.7 36.1
Salaries, wages and benefits 27.4 27.1
Fuel and other operating expenses 22.7 21.8
Insurance and claims 3.6 3.9
Operating taxes and licenses 4.9 4.4
Depreciation 2.0 2.0
Other operating expenses 2.2 2.4
Total operating expenses 101.5% 97.7%
Purchased transportation and equipment rents increased in 1996
over 1995 as a percentage of revenue due to the increased use of
owner-operators, and to increased Company-operated equipment
rents as a percentage of revenue. Salaries and wages increased
as a result of driver wage increases implemented in 1995 in
response to competitive conditions. Fuel and other operating
expenses, and operating taxes and licenses, increased as a
percentage of revenue in the 1996 period as compared to 1995,
due to an increase in the number of total miles relative to
revenue miles. Fuel costs per mile increased two cents per
total mile in 1996 versus 1995 as a result of the approximately
eight cent per gallon increase in the cost of diesel fuel. The
Company estimates the increased fuel costs added over $ 500,000
to the 1996 operating expenses. Insurance and claims expense
continued to decline in 1996 over 1995 as a result of favorable
trends in insurance premiums and accident claims as a percentage
of revenue. Other operating expenses decreased in 1996 over
1995 due to lower provisions for doubtful accounts, and reduced
communication expenses, offset by increased professional
expenses.
Interest Expense
Interest expense declined in 1996 over 1995, primarily as a
result of a $ 105,000 decline in interest costs attributable to
the conversion of the Company's 7% convertible subordinated
debentures on March 31, 1995. Further, the Company's bank credit
facility, amended January 15, 1996, carried lower interest rates
and fees in 1996 than in 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 first quarter 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 three months
ended March 31, 1996. The tax benefit from the first quarter
losses will be recorded when earnings recover, and the tax
benefit becomes realizable.
Liquidity and Capital Resources
The Company generated $ 0.1 million of cash in the first three
months of 1996. As reflected in the accompanying Consolidated
Statement of Cash Flows, the Company used $ 3.6 million of cash
in operating activities, primarily to finance increased accounts
receivable and to purchase plates and permits for the Company's
fleet. This cash use was offset by $ 3.0 million of cash
generated by financing activities, primarily bank borrowings,
and $ 0.8 million from investing activities. In March 1996, the
Company began to reduce the sale of certain customer accounts
receivable to a collection clearing house. This resulted in an
increased use of cash from operating activities to finance
approximately $ 1.0 million of accounts receivable which would
otherwise have been sold. The Company expects to continue to
reduce its reliance on this method of financing its working
capital needs in the second quarter of 1996, and instead will
rely on its bank credit facility discussed below.
The Company's day-to-day financing is provided by borrowings
under a 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 $ 4.8 million at March 31, 1996, and
outstanding letters of credit totaled $ 8.0 million at that
date. The combination of these two bank credits totaled $12.8
million, leaving $ 4.0 million of borrowing capacity available
at March 31, 1996. Since that date, the Company's available
borrowing capacity under the credit facility has increased, and
has averaged approximately $ 5.0 million in the first ten days
of May.
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.
There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or of which any of
their property is the subject, other than routine proceedings
previously reported in the Company's 1995 Annual Report on Form
10-K, and litigation incidental to its business, primarily
involving claims for personal injury and property damage
incurred in the transporting of freight. There have been no
material developments in any previously reported proceedings.
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
$250,000 of exposure for each incident. The Company is not
aware of any claims or threatened claims that might materially
affect the Company's operating or financial results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INTRENET, INC.
(Registrant)
May 13, 1996 /s/ Jonathan G. Usher
Jonathan G. Usher,
Vice President - Finance,
Treasurer and Chief Financial
Officer
(Principal Financial and
Accounting Officer)
INTRENET, INC.
STATEMENT RE: COMPUTATION
OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
<S> <C> <C>
Weighted average shares outstanding during period 13,215,624 9,566,780
Assumed exercise of options and warrants 204,545 619,267
Shares assumed for fully diluted earnings per share 13,420,169 10,186,047
Earnings for the period:
($ in Thousands)
Net earnings $ (1,474) $ 263
Earnings per common and common
equivalent share:
Primary: $ (0.11) $ 0.03
Fully diluted: $ N/A $ N/A
Exhibit 11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000778161
<NAME> INTRENET, INC.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 310
<SECURITIES> 0
<RECEIVABLES> 24,052
<ALLOWANCES> (676)
<INVENTORY> 0
<CURRENT-ASSETS> 31,377
<PP&E> 29,716
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,377
<CURRENT-LIABILITIES> 29,488
<BONDS> 18,996
0
0
<COMMON> 16,294
<OTHER-SE> 5,299
<TOTAL-LIABILITY-AND-EQUITY> 72,377
<SALES> 0
<TOTAL-REVENUES> 52,700
<CGS> 0
<TOTAL-COSTS> 53,490
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 575
<INCOME-PRETAX> (1,474)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,474)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,474)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
