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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Three Months Ended June 30, 1999
Commission File Number: 33-9640-LA
U. S. TRUCKING, INC.
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(Exact Name of Issuer as Specified in its Charter)
COLORADO 68-0133692
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3125 Ashley Phosphate Road, Suite 128, North Charleston, S.C. 29418
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(Address of Principal Executive Offices)
(843) 767-9197
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(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
There were 6,901,258 shares of the Registrant's common stock outstanding as of
June 30, 1999.
Item 1: FINANCIAL STATEMENTS
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U. S. TRUCKING, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets (Unaudited) -
June 30, 1999 and December 31, 1998 3-4
Consolidated Statement of Income (Unaudited) -
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statement of Income (Unaudited) -
Three Months Ended June 30, 1999 and 1998 6
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 1999 and 1998 7-8
Notes to Condensed Consolidated Financial Statements 9-10
Item 2. Management's Discussion and Analysis or
Plan of Operation 11-14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
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U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1999 December 31, 1998
(Unaudited) (Unaudited)
Assets
Current Assets
Cash In Bank $ 789,052 $ 22,976
Trade Accounts Receivable - net 5,854,779 3,447,570
Accounts Receivable - Other 204,794 141,673
Parts and Supply Inventory 287,141 257,030
Prepaid Expenses and Other 540,411 162,036
----------- -----------
Total Current Assets 7,676,177 4,031,285
----------- -----------
Transportation & Other Equipment
at cost - Less accumulated
depreciation and amortization 7,544,458 9,718,805
Other Assets
Restricted Cash - Factor 135,706 -
Restricted Cash - Owner Operators 2,320 2,320
Restricted Cash - Letters of Credit 86,354 10,000
Restricted Cash - Captive Insurance 233,376 -
Due from Related Party 100,000 100,000
Due from Captive Insurer 456,732 355,321
Security Deposits 14,007 12,575
Intangible Assets - net of accumulated
amortization 3,602,494 2,082,055
----------- -----------
Total Other Assets 4,630,989 2,562,271
----------- -----------
Total Assets $19,851,624 $16,312,361
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable - Trade 1,797,246 1,443,415
Revolving Credit Line 3,193,669 1,795,888
Accruals & Other Current Liabilities 1,144,276 669,957
Current Portion - Long Term Debt 2,229,247 2,034,756
----------- -----------
Total Current Liabilities 8,364,438 5,944,016
Other Liabilities
Owner Operator Escrow 121,588 55,874
Convertible Debentures 540,000 0
Long-Term Notes Payable - net of
current portion 3,548,708 5,224,092
----------- -----------
Total Other Liabilities 4,210,296 5,279,966
----------- -----------
Total Liabilities 12,574,734 11,223,982
3
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Stockholders' Equity
Preferred Stock (no par value -
20,000,000 shares authorized,
990,000 Series A issued and out-
standing; 900 Series B issued
and outstanding; and 50,000 Series C
issued and outstanding 900,762
Common Stock (no par value - 75,000,000
shares authorized, 6,901,258 issued
and outstanding on June 30, 1999, and
16,074,591 on December 31, 1998) 3,368,238 2,796,000
Additional paid-in Capital 4,223,480 3,821,812
Accumulated Deficit (1,095,590) (1,409,433)
Subscription Receivable (120,000) (120,000)
----------- -----------
Total Stockholders' Equity 7,276,890 5,088,379
----------- -----------
Total Liabilities & Stockholders'
Equity $19,851,624 $16,312,361
=========== ===========
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U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Six For the Six
Months Ending Months Ending
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
Net Revenues $17,824,169 $10,718,964
Operating Expenses
Purchased Transportation & Rentals 7,087,882 39.8% 3,667,666 34.2%
Salaries, Wages & Benefits 4,137,873 23.2% 2,666,923 24.9%
Fuel 1,457,324 8.2% 1,112,614 10.4%
Operating Supplies & Maintenance 625,508 3.5% 621,429 5.8%
Insurance & Claims 469,137 2.6% 340,933 3.2%
Misc. Operating Expenses 300,831 1.7% 293,687 2.7%
Taxes & Licenses 235,013 1.3% 203,562 1.9%
Insurance Captive Expense 582,803 3.3% 0 0.0%
Occupancy Costs 172,032 1.0% 125,308 1.2%
Depreciation and Amortization 1,146,717 6.4% 813,820 7.6%
----------- ----- ----------- -----
Total Operating Expenses 16,215,120 91.0% 9,845,942 91.9%
General Administrative Expenses 1,069,171 6.0% 411,565 3.8%
Operating Income 539,878 3.0% 461,457 4.3%
Interest Expense (378,472) -2.1% (315,076) -2.9%
Gain on Sale of Equipment 124,114 0.7% 0 0.0%
Interest Income 2,425 0.0% 1,200 0.0%
Other Income 25,899 0.1% 45,241 0.4%
----------- ----- ----------- -----
Net Income Before Taxes 313,844 1.8% 192,822 1.8%
Provision for Income Taxes 104,459 0.6% 83,500 0.8%
Tax Benefit of Net Operating
Loss Carryforward (104,459) -0.6% (83,500) -0.8%
----------- ----- ----------- -----
Net Income 313,844 1.8% 192,822 1.8%
=========== ===== =========== =====
Accumulated Deficit - beginning (1,409,434) (1,531,200)
Accumulated Deficit - ending $(1,095,590) $(1,338,378)
----------- -----------
Earnings per Common Share 0.04 0.01
Fully Diluted Earnings per Share 0.02 0.01
Average Number of Shares
Outstanding 8,925,676 13,000,000
5
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U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Three For the Three
Months Ending Months Ending
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
Net Revenues $10,162,797 $ 5,651,634
Operating Expenses
Purchased Transportation & Rentals 4,417,867 43.5% 2,110,710 37.3%
Salaries, Wages & Benefits 2,082,744 20.5% 1,385,005 24.5%
Fuel 742,225 7.3% 550,188 9.7%
Operating Supplies & Maintenance 303,321 3.0% 319,079 5.6%
Insurance & Claims 245,709 2.4% 169,971 3.0%
Misc. Operating Expenses 99,044 1.0% 152,565 2.7%
Taxes & Licenses 119,520 1.2% 102,122 1.8%
Insurance Captive Expense 311,667 3.1% 0 0.0%
Occupancy Costs 87,002 0.9% 55,405 1.0%
Depreciation and Amortization 596,082 5.9% 379,165 6.7%
----------- ----- ----------- -----
Total Operating Expenses 9,005,181 88.6% 5,224,210 92.4%
General Administrative Expenses 696,425 6.9% 235,018 4.2%
----------- ----- ----------- -----
Operating Income 461,191 4.5% 192,406 3.4%
Interest Expense (269,676) -2.7% (174,002) -3.1%
Gain on Sale of Equipment - 0.0% - 0.0%
Interest Income 2,383 0.0% 1,015 0.0%
Other Income - 0.0% 35,805 0.6%
----------- ----- ----------- -----
Net Income Before Taxes 193,898 1.9% 55,224 1.0%
Provision for Income Taxes 57,659 0.6% 21,537 0.4%
Tax Benefit of Net Operating
Loss Carryforward (57,659) -0.6% (21,537) -0.4%
----------- ----- ----------- -----
Net Income 193,898 1.9% 55,224 1.0%
Accumulated Deficit - beginning (1,289,488) (1,393,601)
----------- -----------
Accumulated Deficit - ending $(1,095,590) $(1,338,377)
=========== ===========
Earnings per Common Share $ 0.03 $ 0.01
Fully Diluted Earnings per Share $ 0.01 $ 0.01
Average Number of Shares
Outstanding 6,988,351 13,000,000
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U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six For the Six
Months Ending Months Ending
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
----------- -----------
Cash Flows from Operating Activities
Net Income $ 313,844 $ 192,822
Adjustments to Reconcile Net Income
to Net Cash Used in Operating
Activities:
Depreciation & Amortization 1,146,717 805,293
Expense related to stock-based
compensation plan - 15,000
Gain on Sale of Equipment (124,114) -
(Increase) Decrease - Assets - -
Restricted Cash (445,436) (220,600)
Accounts Receivable (2,571,741) 78,070
Parts & Supply Inventory (30,111) (9,740)
Prepaid Expenses & Other Current
Assets (378,376) (132,189)
Increase (Decrease) - Liabilities
Accounts Payable & Revolving Credit
Line 1,751,612 (78,983)
Accrued Expenses and Other
Liabilities 540,034 51,576
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Total Adjustments (111,415) 508,427
Net Cash Provided by Operating
Activities 202,429 701,249
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Cash Flows from Investing Activities
Reduction (Increase) in security
deposit (1,433) 50
Purchase of Equipment (244,673) (108,287)
Sale of Transportation and Other
Equipment 1,104,114 -
Payment for Refinancing of
Acquisition Debt - (55,274)
Proceeds from Sale of Common Stock
and Additional Paid In Capital 1,883,732 -
----------- -----------
Net Cash Provided (Used) by Investing
Activities 2,741,740 (163,511)
Subtotal
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Cash Flows from Financing Activities
Discount on note payable - 9,144
Cash paid for acquisitions (340,000) -
Principal Payments on Long-Term Debt (1,838,093) (427,734)
Principal Payments on Capital Lease
Obligations - (160,906)
----------- -----------
Net Cash Used by Financing Activities (2,178,093) (579,496)
Net Increase (Decrease) in Cash 766,076 (41,758)
Cash at Beginning of Year 22,976 60,099
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Cash at End of Period $ 789,052 $ 18,341
=========== ===========
Supplementary Disclosure of Cash
Flow Information
Cash Paid during the period
Interest Expense $ 378,472 $ 305,123
=========== ===========
Income Taxes $ - $ -
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8
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U.S. TRUCKING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - Basis of Presentation
The accompanying consolidated financial statements include the parent company,
US Trucking, Inc. and its wholly owned subsidiaries, Gulf Northern Transport,
Inc., ProStar, Inc., Mencor, Inc. and the US Trucking Captive Insurance
Program(hereinafter collectively called the "Company"). All material
inter-company items and transactions have been eliminated in consolidation.
The consolidated financial statements included herein have been prepared in
accordance with generally accepted accounting principles ("GAAP"), pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures have been omitted or condensed pursuant
to such rules and regulations. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Results of operations in interim periods are
not necessarily indicative of results for a full year. These consolidated
financial statements and notes thereto should be read in conjunction with the
Company's consolidated financial statements and notes. The preparation of
financial statements in accordance with GAAP requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities as well as disclosure of contingent assets
and liabilities, at the date of the accompanying consolidated financial
statements, and the reported amounts of the revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
NOTE 2 - Earnings per Share
Earnings per common share amounts are based on the weighted average number of
common shares outstanding and diluted earnings per share amounts are based on
the weighted average number of common shares outstanding plus the incremental
shares that would have been outstanding upon the assumed exercise of all
diluted preferred shares.
NOTE 3 - Segment Information
Description of the types of services from which each reportable segment
derives its revenues. The Company has three major business segments:
long-haul trucking of refrigerated and nonrefrigerated products, interstate
freight brokerage and a captive insurance program for liability insurance for
the trucking industry. During the fourth quarter of 1998, the company adopted
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS 131).
The adoption of SFAS 131 requires the presentation of descriptive information
about reportable segments which is consistent with that made available to the
management of U S Trucking to assess performance. As a result of this change,
the company now reports information on its truck brokerage operation. In
addition, during 1998, the company added the captive liability insurance
program (business) and reports that segment's performance similarly. In
determining that net income of each segment of the company, 100% of the
interest expense is allocated to long-haul trucking and effective tax rates
are determined for each business segment.
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The Company evaluates performance and allocated resources based on net profit
and loss from operations.
The Company's reportable segments are business units that offer different
transportation services. The reportable segments are each managed separately
because of their distinct differences in the operations.
SIX MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Long Haul Truck Liability Intersegment Total
Trucking Brokerage Insurance
<S> <C> <C> <C> <C> <C>
Sales 14,712,520 2,513,413 937,214 (338,978) 17,824,169
Net Income 121,933 90,490 101,421 0 313,844
Assets 17,412,698 949,767 1,489,159 0 19,851,624
Depreciation &
Amortization 1,133,808 12,909 0 0 1,146,717
</TABLE>
THREE MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Long Haul Truck Liability Intersegment Total
Trucking Brokerage Insurance
<S> <C> <C> <C> <C> <C>
Sales 7,691,441 2,168,294 458,215 (155,153) 10,162,797
Net Income 26,650 99,807 67,441 0 193,898
Assets 17,412,698 949,767 1,489,159 0 19,851,624
Depreciation &
Amortization 583,473 12,609 0 0 596,082
</TABLE>
NOTE 4 - Acquisitions
(A) The Company acquired the stock of a S.Carolina brokerage company during
the quarter ended June 30, 1999. The Company expects to add approximately $7.5
million of annual operating revenue with the acquisition while expecting
significant bottom line enhancement. The Company has relocated the acquired
company to the Company's General Offices in Charleston, S.C. to ensure quick
synergies with the brokerage company (Mencor) already owned by the Company.
The purchase was recorded at the estimated fair value, at the acquisition
date, in accordance with AFB Opinion No. 16. In conjunction with the
acquisition, the Company issued 200,000 shares of common stock and paid
$340,000 in cash. Adjustments, if any, to the purchase price allocations are
not expected to have a material impact on the accompanying consolidated
financial statements.
(B) The Company completed the acquisition of the assets of a container company
located in S. Carolina during the quarter ended June 30, 1999. The Company
expects to add approximately $6.0 million of annual operating revenue with the
acquisition, while meeting on going demands from its customer base. With the
Company's General Offices' located in a city ranked in the Top Ten ports in
the Nation, entering the transportation of containerized freight was a natural
transition and much needed. The purchase was recorded at the estimated fair
value, at the acquisition date, in accordance with AFB Opinion 16. In
conjunction with the acquisition, the Company agreed to issue a total of
188,000 shares of common stock over the next three years based on a vesting
schedule and to pay a total of $300,000 in cash during the third quarter of
the current fiscal year. Adjustments, if any, to the purchase price
allocations are not expected to have a material impact on the accompanying
consolidated financial statements.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations for the Six months ended June 30, 1999, and 1998 should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto contained elsewhere in this report.
This Quarterly Report on Form 10-Q contains forward-looking statements. The
words "believe," "expect," "anticipate", and similar expressions identify
forward-looking statements, which speak only as of the date the statement was
made. Such forward-looking statements are within the meaning of that term in
Section 27A of the Securitites Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements may include, but
are not limited to, projections of revenues, income, or loss, capital
expenditures, plans for future operations, financing needs or plans, the
impact of inflation and plans relating to the foregoing. Statements in the
Company' Form 10-K, including Notes to the Consolidated Financial Results of
Operations, describe factors, among others, that could contribute to or cause
such differences.
GENERAL
The Company was established in January of 1997 by combining under U S
Trucking-Nevada the operations of Gulf Northern Transport, a mid-to-long-haul
truckload carrier and Mencor, Inc. a third party logististics (brokerage)
company.
The Company's operating results are driven by the results of the truckload
business of its operating subsidiary, Gulf Northern Transport, Inc., it's
brokerage operations, Mencor, Inc., ProStar Inc, and the Company's Captive
Auto-Liability Insurance Program. The Company reported profits in the six
months and three months periods ending June 30, 1999, by significantly
decreasing the operating expenses, increasing brokerage productivity,
improving utilization in its trucking division and by adding new profit flow
from its Captive Auto-Liability Insurance Program.
RESULTS OF OPERATIONS:
The Company's operating revenue for the six months ended June 30, 1999,
increased by 66.9% to $17.8 million as compared to $10.7 million over the same
period in 1998.For the three months ended June 30, 1999, operating revenue
increased by 78.1% to $10.1 million from $5.7 million over the same period in
1998. The increase in operating revenue resulted from increased brokerage
revenues, expansion of the Company's customer base, increased volume from
existing customers, and was facilitated by the continued expansion of the
Company's fleet, including approximately 40 leased owner operators which was
part of the expansion into the container business during the period ended June
30, 1999. The Company's fleet increased 18.5% to 294 tractors (including 118
owned by independent contractors) as of June 30, 1999, from 248 tractors
(including 78 owned by independent contractors) as of June 30, 1998.
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Purchased transportation increased as a percentage of operating revenue to
39.8% for the six months ended June 30, 1999, from 34.2% for the same period
in 1998. For the three months ended June 30, 1999, purchased transportation
as a percentage of operating revenue increased to 43.5% from 37.3% during the
same period in 1998. These increases were primarily due to the increase in the
ratio of independent contractors to company drivers, and the increase in
brokerage operating revenue which in turn creates a payable due to outside
carriers that the Company uses to haul its freight at a gross profit margin of
11% to 16%.
Salaries, wages and benefits decreased as a percentage of operating revenue to
23.2% for the six months ended June 30, 1999, from 24.9% for the same period
in 1998. For the three months ended June 30, 1999, salaries, wages and
benefits decreased as a percentage of operating revenue to 20.5% from 24.5%
for the same period in 1998. These decreases were primarily the result of the
Company's efforts to reduce management overhead when practical, increasing the
Company's percentage of brokerage operating revenues, increasing the Company's
independent contractor base and the continuation of consolidating facilities.
For Company drivers, the Company records accruals for worker's compensation as
a component of of its claims accrual and the related expense is reflected in
salaries, wages and benefits expense in its consolidated statements of income.
Fuel expense decreased as a percentage of operating revenue to 8.2% for the
six months ended June 30, 1999, from 10.4% for the same period in 1998. This
decrease was primarily the result of an increase in the purchase of bulk fuel,
along with the increase in the percentage of independent contractors to
Company drivers for the 1999 period. For the three months ended June 30, 1999,
fuel expense as a percentage of operating revenue decreased to 7.3% from 9.7%
for the same period in 1998. This decrease was primarily the result of an
increase in the purchase of bulk fuel, along with the increase in the
percentage of independent contractors to Company drivers.
Operations and maintenance expense decreased to 3.5% of operating revenue for
the six months ended June 30, 1999, from 5.8% for the same period in 1998.
This decrease was primarily the result of increasing the Company's brokerage
operating revenue and to a lesser extent limiting the use of older, high cost
equipment, trading out of older equipment for newer, increasing the
independent contractor base, and capitalizing engine rebuilds that were
necessary during the period. For the three months ended June 30, 1999,
operations and maintenance expense as a percentage of operating revenue
decreased to 3.0% from 5.6% for the same period in 1998. This decrease was
primarily the result of the increase of brokerage operating revenue, and to a
lesser extent the increase of the independent contractor base and the
Company's ongoing control of not using its older equipment just for revenue
sake, while it negotiates new equipment transactions that it expects to
complete in the very near future.
The Company's insurance programs for medical, physical damage and cargo are
covered by premium insurance providers with deductibles the Company has chosen
and feels are manageable while being in the best interest of the Company. In
addition the Company provides its auto-liability coverage through its own
Auto-Liability Insurance Program which has become a strong revenue and profit
producer. Management considers all of its coverages adequate. insurance and
claims expense decreased to 2.6% for the six months ended June 30, 1999, from
3.2% for the same period in 1998. For the three months ended June 30, 1999,
insurance and claims decreased to 2.4% from 3.0% for the same period in 1998.
These decreases in percentages were due to the following factors which are
12
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listed in order of impact with the factor having the most impact first: an
increase in the Company's brokerage revenue, the increase of independent
contractors, and the decreased values of the Company's owned fleet on an
insurance cost basis.
Operating taxes and licenses decreased as a percentage of operating revenue to
1.3% for the six months ended June 30, 1999, from 1.9% for the same period in
1998. For the three months ended June 30, 1999, operating taxes and licenses
as a percentage of operating revenue decreased to 1.2% compared to 1.8% for
the same period in 1998. This decrease was primarily due to the increase in
the Company's brokerage operating revenue, the increase in the Company's
Auto-Liability Insurance Program operating revenue and the increase in
independent contractors who are required to pay their own mileage taxes.
Depreciation and amortization expense as a percentage of operating revenue
decreased to 6.4% for the six months ended June 30, 1999, from 7.6% for the
same period in 1998. This decrease was primarily the result of increasing the
Company's operating revenue through its brokerage operations and increasing
the number of independent contractors leased to the Company. For the three
months ended June 30, 1999, depreciation and amortization expense decreased to
5.9% from 6.7% for the same period in 1998 for the reasons listed above.
For both the six months and three months ended June 30, 1999, net interest
expense decreased as a percentage of revenue compared to the same periods in
1998. These decreases were primarily the result of reducing long term debt and
the converting of some debt to track leases.
Income taxes have been provided at the statutory federal and state rates
adjusted for certain permanent differences between financial statement and
income tax reporting. The Company has net operating losses available to
offset future income for financial reporting expiring in the year 2012.
The Company's net income as a percentage of operating revenue was 1.8% for the
six month period ending June 30, 1999, as compared to 1.7% for the same period
in 1998. Net income as a percentage of operating revenue was 1.9% for the
three month period ending June 30, 1999, as compared to 0.9% for the same
period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had a working capital deficit of $688,261 as
compared to a deficit of $1,912,731 at December 31, 1998. The Company's
working capital deficit improved primarily as a result of operations,
$1,104,114 received from the sale of transportation equipment in February
1999, $900,000 received from the issuance of Series B Preferred Stock and
$540,000 of proceeds from a sale of an convertible debenture to a foreign
investor. Net cash provided by operating activities was approximately $202,429
for the first six months of 1999 compared to $701,249 for the corresponding
period in 1998. The company has historically funded its working capital
requirements through a combination of funds provided from operations, the
Company's working capital facility with GE Capital and invested capital. In
order to continue with its growth plans, the Company intends to raise
additional funds through private placement of equity and/or debt securities
which will depend upon prevailing market conditions, the market price of
common stock and other factors over which the company has no control.
Since June 30, 1999, the Company has raised approximately $1,100,000 in gross
proceeds from the sale of Series B Convertible Preferred Stock.
13
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INFLATION
Many of the Company's operating expenses, including fuel costs and fuel taxes,
are sensitive to the effects of inflation, which could result in higher
operating costs. The effects of inflation on the Company's business during
the six months ended June 30, 1999, were negligible.
SEASONALITY
In the transportation industry, results of operations frequently show a
seasonal pattern. Seasonal variations may result from weather or from
customer's reduced shipments after the busy winter holiday season. To date,
the Company's revenues have not shown any significant seasonal pattern. The
current expansion of the Company's operations into the West Coast could expose
the Company to greater operating variances due to seasonal weather.
YEAR 2000 ISSUE
The "Year 2000 Issue" arose because many existing computer programs use only
the last two digits to refer to a year. Therefore, these computer programs do
not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results.
The Company is in the process of reviewing, testing, and implementing various
modifications to ensure that its computer equipment and software will function
properly in the Year 2000 and beyond. The Company has completed the purchase
of a new hardware system consisting of a Compaq Proliant P2 300 MHz processor;
320 MB RAM, 2/9.1 GB mirror hard drive, a Server Tower and new Software that
enables the Company to generate all functions of the Company's operating
systems, including, but not limited to, the initiation of loads, dispatch,
billing, accounts payable and receivable, general ledger functions and
preparation of financial statements. All maintenance records for all of the
trucks, inventory records for all parts and supplies, claim records and
accident records as well as fuel and mileage for taxing bodies will be
supplied. Information from the Company's fuel provider, Comdata, will be
downloaded into the system as well. The Company is also working on on-line
banking services.
All internal and external costs associated with the Company's Year 2000
compliance activities are expensed as incurred. The Company believes that
the costs of addressing the Year 2000 issue will be approximately $120,000.
The Company has reviewed the Year 2000 issue with its major suppliers, vendors
and customers and believes that the Year 2000 issue will not pose significant
problems for the Company. The Company has discussed the issue with Comdata,
the primary fuel provider, GE Capital and the other major financial
institutions which provide financing to the Company, and the major customers,
and each of these companies has advised the Company that they expect to be
Year 2000 compliant.
Since all major computerized systems and applications will have been reviewed
and tested as part of the Year 2000 project, the Company feels that it has
reasonably addressed all material risks that may effect its operations. The
Company presently believes that the Year 2000 issue will not pose significant
operational problems for the Company. However, if all Year 2000 issues are not
properly identified and corrected, there can be no assurance that the Year
2000 issues will not materially effect the Company's relationships with
14
<PAGE>
vendors, customers, and others. Also, there can be no assurance that the Year
2000 issues of other entities with whom the Company deals will not have a
material adverse impact on the Company's operations.
The Company is in the process of evaluating and developing a contingency plan
to provide for the most reasonably likely worst cast scenarios regarding Year
2000 compliance. This contingency plan will be completed in the second half of
1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to ordinary, routine litigation and administrative
proceedings incidental to its business. These proceedings primarily involving
personnel matters, including Equal Employment Opportunity Commission claims
and claims for personal injury or property damage incurred in the
transportation of freight. It is the Company's policy to comply with
applicable equal employment opportunity laws and the Company periodically
reviews it policies and practices for equal employment opportunity compliance.
ITEM 2. CHANGES IN SECURITIES
During the three months ended June 30, 1999, the Company issued 200,000 shares
of its Common Stock to two persons in connection with the acquisition of
ProStar, Inc. With respect to these transactions, the Company relied on
Section 4(2) of the Act. Each person was provided with information on the
Company and each person executed a Subscription Agreement in which he
represented that he was purchasing the shares for investment only and not
for the purpose of resale or distribution. The appropriate restrictive legend
was placed on the certificate and stop transfer orders were issued to the
transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
The Company is in the process of adding additional Company operated and Agent
operated container offices in strategic cities. The Company is also in the
process of establishing a lease-purchase program as a means of growing its
independent contractor base.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION LOCATION
3.6 Articles of Amendment dated May 5 Filed herewith
1999 regarding Series C Preferred electronically
Stock
27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K. None.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused
this Report to be signed on it's behalf by the undersigned, thereunto duly
authorized.
US TRUCKING, INC.
By:/s/ Dan L. Pixler
Dan L. Pixler, Chief Exectutive Officer
By:/s/ John Ragland
John Ragland, Chief Financial Officer
Dated: August 13, 1999
16
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
U. S. TRUCKING, INC.
(SERIES C PREFERRED STOCK)
Pursuant to the requirements of Section 7-106-102 of the Colorado
Business Corporation Act, the undersigned Corporation submits the following
Articles of Amendment to Articles of Incorporation.
FIRST: The name of the Corporation is U. S. Trucking, Inc.
SECOND: The Articles of Incorporation of the Corporation are hereby
amended as follows:
"There is hereby established a series of Preferred Stock of the
Corporation designated "Series C Preferred Stock." The number of shares of
this series of Preferred Stock shall be 50,000 shares. The powers,
designations, preferences and relative, participating, optional or other
special rights of the shares of this series of Preferred Stock and the
qualifications, limitations and restrictions of such preferences and rights
shall be as follows:
Section 1. Voting Rights. Except as otherwise expressly provided herein
or by law, the holders of shares of Series C Preferred Stock shall be entitled
to vote on all matters and shall be entitled to one hundred votes for each
share of Series C Preferred Stock held by such holder, such number of votes to
be appropriately adjusted in the event of any split, reverse split or dividend
of the common stock. Except as otherwise expressly provided herein or as
expressly required by law, the holders of shares of Series C Preferred Stock
and common stock shall vote together as a single class on all matters.
Section 2. Liquidation. The holders of shares of the Series C
Preferred Stock are not entitled to any liquidation rights.
Section 3. Dividend Provisions. The holders of shares of the Series C
Preferred Stock are not entitled to receive any dividends.
Section 4. Notices. Any notice required to be given to holders of
shares of Series C Preferred Stock shall be deemed given upon deposit in the
United States mail, postage prepaid, addressed to such holder of record at his
address appearing on the books of the Corporation, or upon personal delivery
at the aforementioned address."
Section 5. Amendment. The terms of the Series C Preferred Stock shall
not be amended without the consent of the holders of not less than a majority
of the outstanding Series C Preferred Stock.
THIRD: Such Amendment was duly adopted by the Board of Directors of the
Corporation on the 5th day of May 1999.
<PAGE>
IN TESTIMONY WHEREOF, the undersigned Corporation has caused these
Articles of Amendment to the Articles of Incorporation to be signed by a duly
authorized officer and duly attested by another such officer, to be hereunto
affixed this 5th day of May 1999.
U. S. TRUCKING, INC.
By:/s/ Danny Pixler, President
Danny Pixler, President
ATTEST:
/s/ Marion Huff
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3, 4 and 5 of the Company's Form 10-Q for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 789,052
<SECURITIES> 0
<RECEIVABLES> 6,059,573
<ALLOWANCES> 0
<INVENTORY> 287,141
<CURRENT-ASSETS> 7,676,177
<PP&E> 7,544,458
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,851,624
<CURRENT-LIABILITIES> 8,364,438
<BONDS> 0
<COMMON> 3,368,238
0
0
<OTHER-SE> 3,127,890
<TOTAL-LIABILITY-AND-EQUITY> 19,851,624
<SALES> 17,824,169
<TOTAL-REVENUES> 17,824,169
<CGS> 0
<TOTAL-COSTS> 16,215,120
<OTHER-EXPENSES> 1,069,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,472
<INCOME-PRETAX> 313,844
<INCOME-TAX> 0
<INCOME-CONTINUING> 313,844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313,844
<EPS-BASIC> .04
<EPS-DILUTED> .02
</TABLE>
