<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Six Months Ended June 30, 2000
Commission File Number: 33-9640-LA
U S TRUCKING, INC.
(Exact Name of Issuer as Specified in its Charter)
COLORADO 68-0133692
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
Incorporation or Organization)
550 Long Point Road MT. Pleasant, S.C. 29462
------------------------------------------------------------------------------
(Address of Principal Executive (Offices)
(843) 972-2055
(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 [ ] No [X]
There were 19,727,783 shares of the Registrant's common stock outstanding as of
August 25, 2000
<PAGE> 2
U.S. TRUCKING, INC.
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) MARCH 31, 2000 AND DECEMBER
31, 1999
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 2000 AND 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE> 3
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
A S S E T S 2000 1999
----------- ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,171,224 1,057,719
Accounts receivable-net of allowance
for doubtful accounts of $1,978,665
in 2000 and $303,451 in 1999 17,450,668 8,140,132
Current portion of notes receivable-related parties 3,857,334 4,541,634
Parts and supply inventory 258,405 258,405
Current portion of deferred tax asset -- 400,000
Investment in marketable securities
at fair market value 133,572 188,136
Prepaid expenses and other assets 776,279 575,565
------------ ------------
Total Current Assets 23,647,482 15,161,591
------------ ------------
TRANSPORTATION AND OTHER EQUIPMENT
at cost, less accumulated depreciation and
amortization of $668,326 in 2000 and $420,541 in 1999 953,798 887,690
------------ ------------
OTHER ASSETS
Restricted cash 4,070,207 981,704
Notes receivable-related parties 3,169,069 5,407,346
Deferred tax asset - net of current portion 1,141,963 741,963
Due from related party -- 186,023
Due from captive insurer 1,040,943 705,321
Other assets 64,397 375,700
Intangible assets - net of accumulated amortization
of $1,178,235 in 2000 and $879,565 in 1999 7,706,067 5,501,756
------------ ------------
Total Other Assets 17,192,646 13,899,813
------------ ------------
TOTAL ASSETS $ 41,793,926 $ 29,949,094
============ ============
</TABLE>
1
<PAGE> 4
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------------------------------ ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable-trade $ 1,613,060 $ 2,027,819
Revolving loan payable 15,941,953 6,736,536
Accrued expenses and other 5,341,528 1,818,902
Current portion - long term debt 1,583,187 3,210,916
------------ ------------
Total Current Liabilities 24,479,728 13,794,173
------------ ------------
OTHER LIABILITIES
Owner operator escrow accounts 91,270 122,865
Long term debt - net of current portion 818,195 1,486,954
Convertible debentures 8,010,296 1,450,000
------------ ------------
Total Other Liabilities 8,919,761 3,059,819
------------ ------------
TOTAL LIABILITIES 33,399,489 16,853,992
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock (no par value
- 10,000,000 shares authorized)
Series A (99,000 shares outstanding) 76 762
Series B (2,000 shares outstanding 2,000,000 2,000,000
Series C (50,000 shares outstanding) 15,000 15,000
Series D (950 shares outstanding) 950,000 950,000
Series E (2,300 shares outstanding) 2,300,000 2,300,000
Common Stock (no par value-75,000,000 shares authorized,
18,229,461 shares issued and outstanding in 2000; 50,000,000 shares
authorized, 8,844,461 shares issued and outstanding in 1999) 7,649,010 6,445,199
Additional paid-in capital 3,605,580 3,605,580
Accumulated (deficit) (7,151,901) (1,302,675)
Accumulated other comprehensive (loss) (66,540) (11,976)
Subscriptions receivable (906,788) (906,788)
------------ ------------
Total Stockholders' Equity 8,394,437 13,095,102
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,793,926 $ 29,949,094
============ ============
</TABLE>
2
<PAGE> 5
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Net Revenues $ 40,366,390 $ 17,824,169
Operating expenses
Transportation and rentals 33,798,574 7,087,882
Operating supplies and maintenance 32,367 625,508
Other operating costs 415,527 300,831
Fuel -- 1,457,324
Insurance and claims 2,271,910 1,051,940
Depreciation and amortization 546,455 1,146,717
Taxes and licenses 94,506 235,013
Salaries, wages and benefits 1,939,611 4,137,873
Occupancy costs 175,884 172,032
Administrative expenses 1,674,351 1,069,171
------------ ------------
Total operating expenses 40,949,184 17,284,291
------------ ------------
Operating income (loss) (582,794) 539,878
------------ ------------
Other income and expenses
Interest income 22,247 2,425
Interest expense (829,300) (378,472)
Other income 391,818 25,899
Gain on disposition of assets -- 124,114
------------ ------------
Total other income and (expenses) (415,235) (226,034)
------------ ------------
Net income (loss) before income taxes (998,029) 313,834
Provision for income taxes -- --
------------ ------------
Net income from continuing operations (998,029) 313,834
------------ ------------
Loss from discontinued operations (4,851,197) --
------------ ------------
Net Income (loss) $ (5,849,226) $ 313,834
============ ============
Basic earnings (loss) per common share $ (.58) $ .03
============ ============
Weighted average number of common shares 10,101,544 8,925,676
============ ============
</TABLE>
3
<PAGE> 6
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Net Revenues $ 22,303,450 $ 10,162,797
Operating expenses
Transportation and rentals 19,460,755 4,417,867
Operating supplies and maintenance 10,469 303,321
Other operating costs 261,230 99,044
Fuel -- 742,225
Insurance and claims 774,457 557,376
Depreciation and amortization 342,299 596,082
Taxes and licenses -- 119,520
Salaries, wages and benefits 984,274 2,082,744
Occupancy costs 82,422 87,002
Administrative expenses 985,223 696,425
------------ ------------
Total operating expenses 22,901,127 9,701,606
------------ ------------
Operating income (loss) (597,677) 461,191
------------ ------------
Other income and expenses
Interest income 944 2,383
Interest expense (466,141) (269,676)
Other income 5,113 --
------------ ------------
Total other income and (expenses) (460,084) (267,293)
------------ ------------
Net income (loss) before income taxes (1,057,761) 193,898
Provision for income taxes -- --
------------ ------------
Net income from continuing operations (1,057,761) 193,898
------------ ------------
Loss from discontinued operations (4,851,197) --
------------ ------------
Net Income (loss) $ (5,908,957) $ 193,898
============ ============
Basic earnings (loss) per common share $ (.58) $ .02
============ ============
Weighted average number of common shares 10,101,544 6,988,351
============ ============
</TABLE>
4
<PAGE> 7
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock
No Par Value
Shares Amount Shares Amount
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Opening balance - January 1, 2000 8,844,461 $6,445,199 1,054,250 $ 5,265,762
Issuance of Common Stock-
Checkmate Acquisition 385,000 1,203,125 -- --
Series A Preferred stock exchanged
for common stock 9,000,000 686 (900,000) (686)
Other Comprehensive Loss:
Net Loss for the six months
ended June 30, 2000 -- -- -- --
Change in unrealized loss on
available-for-sale investments -- -- -- --
---------- ---------- --------- -----------
Closing balance - June 30, 2000 18,229,461 $7,649,010 154,250 $ 5,265,076
========== ========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid in Accumulated Comprehensive Subscriptions
Capital Deficit (Loss) Receivable Total
---------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Opening balance - January 1, 2000 $3,605,580 $(1,302,675) $(11,976) $(906,788) $ 13,095,102
Issuance of Common Stock-
Checkmate Acquisition -- -- -- -- 1,203,125
Series A Preferred stock exchanged
for common stock -- -- -- -- --
Other Comprehensive Loss:
Net Loss for the six months
ended June 30, 2000 -- (5,849,226) -- -- (5,849,226)
Change in unrealized loss on
available-for-sale investments -- -- (54,564) -- (54,564)
---------- ----------- -------- --------- ------------
Closing balance - June 30, 2000 $3,605,580 $(7,151,901) $(66,540) $(906,788) $ 8,078,564
========== =========== ======== ========= ============
</TABLE>
5
<PAGE> 8
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Preferred Stock
No Par Value
Shares Amount Shares Amount
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Opening balance - January 1, 1999 16,074,591 $2,796,000 -- $ --
Issuance of Common Stock upon
Exercise of options 1,759,870 449,961 -- --
Capital contributed -- -- -- --
Issuance of Common Stock-
Excalibur Acquisition - Note 3 200,000 650,000 -- --
Issuance of Common Stock-Prostar
Acquisition - Note 3 200,000 500,000 -- --
Common Stock exchanged for Series
A Preferred Stock - Note 8 (9,990,000) (762) 999,000 762
Issuance of Series B Preferred
Stock Note 8 -- -- 2,000 2,000,000
Issuance of Series C Preferred
Stock Note 8 -- -- 50,000 15,000
Issuance of Series D Preferred
Stock Note 8 -- -- 950 950,000
Issuance of Series E Preferred
Stock Note 8 -- -- 2,300 2,300,000
Proceeds from sale of Common Stock 600,000 2,050,000 -- --
Other Comprehensive Income:
Net Income for the year ended
December 31, 1999 -- -- -- --
Change in unrealized loss on
available-for-sale investments -- -- -- --
December 31, 1999 -- -- -- --
---------- ---------- --------- -----------
Closing balance - December 31, 1999 8,844,461 $6,445,199 1,054,250 $ 5,265,762
========== ========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid in Accumulated Comprehensive Subscriptions
Capital Deficit (Loss) Receivable Total
---------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Opening balance - January 1, 1999 $3,821,812 $(1,409,433) -- $(120,000) $ 5,088,379
Issuance of Common Stock upon
Exercise of options -- -- -- (436,788) 13,173
Capital contributed 401,668 -- -- -- 401,668
Issuance of Common Stock-
Excalibur Acquisition - Note 3 -- -- -- -- 650,000
Issuance of Common Stock-Prostar
Acquisition - Note 3 -- -- -- -- 500,000
Common Stock exchanged for Series
A Preferred Stock - Note 8 -- -- -- -- --
Issuance of Series B Preferred
Stock Note 8 (185,000) -- -- -- 1,815,000
Issuance of Series C Preferred
Stock Note 8 -- -- -- -- 15,000
Issuance of Series D Preferred
Stock Note 8 (150,000) -- -- -- 800,000
Issuance of Series E Preferred
Stock Note 8 (282,900) -- -- -- 2,017,100
Proceeds from sale of Common Stock -- -- -- (350,000) 1,700,000
Other Comprehensive Income:
Net Income for the year ended
December 31, 1999 -- 106,758 -- -- 106,758
Change in unrealized loss on
available-for-sale investments -- (11,976) -- -- (11,976)
December 31, 1999 -- -- -- -- 106,758
---------- ----------- -------- --------- ------------
Closing balance - December 31, 1999 $3,605,580 $(1,302,675) $(11,976) $(906,788) $ 13,095,102
========== =========== ======== ========= ============
</TABLE>
6
<PAGE> 9
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) from continuing operations $ (998,029) $ 313,844
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
(USED) IN OPERATING ACTIVITIES
Depreciation & amortization 546,455 1,146,717
Provision for doubtful accounts 1,675,414 --
Deferred taxes -- --
Gain on disposal of equipment -- (124,114)
(Increase) Decrease-Assets
Restricted cash (3,088,503) (445,436)
Accounts receivable (7,674,807) (2,571,741)
Parts and Supplies inventory -- (30,111)
Prepaid expenses and other assets 110,589 (378,376)
Intangible assets 103,144 --
Due from captive insurer (335,622) --
Increase (Decrease)-Liabilities
Accounts payable - trade (414,759) --
Revolving loan 9,205,417 1,751,612
Accrued expenses and
other current liabilities (908,618) 540,034
----------- -----------
Total Adjustments (781,290) (111,415)
----------- -----------
Net cash provided (used) by continuing operations (1,779,019) 202,429
----------- -----------
Discontinued operations (4,851,197) --
----------- -----------
Subtotal (6,630,516) 202,429
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in security deposit -- (1,433)
Purchase of equipment and software development (93,689) (244,673)
Cash paid for businesses acquired (534,698) (340,000)
Proceeds from disposition of assets -- 1,104,114
----------- -----------
Net cash (used) by investing activities (628,387) 518,008
----------- -----------
Subtotal $(7,258,903) $ 720,437
----------- -----------
</TABLE>
7
<PAGE> 10
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Balance Forward $(7,258,903) $ 720,437
CASH FLOWS FROM
FINANCING ACTIVITIES
Due from related parties 186,023
Notes receivable 3,554,671 --
Repayments of notes receivable (632,094) --
Proceeds from sale of common stock
and additional paid in capital -- 1,883,732
Issuance of convertible debentures 6,560,296 --
Principal payments on long-term debt (2,296,488) (1,838,093)
----------- -----------
Net cash (used) provided by financing activities 7,372,408 45,639
----------- -----------
NET INCREASE (DECREASE) IN CASH 113,505 766,076
CASH AT BEGINNING OF PERIOD 1,057,719 22,976
----------- -----------
CASH AT END OF PERIOD $ 1,171,224 $ 789,052
=========== ===========
Supplemental Disclosure of Cash flow information:
Cash Paid during the year
Interest expense $ 749,101 $ 305,123
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
8
<PAGE> 11
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Non Cash Investing and Financing Activities
During the first quarter of year 2000, U.S. Trucking acquired the business
operations of Checkmate Truck Brokerage, Inc. and Maverick Truck Brokerage, Inc.
<TABLE>
<S> <C>
Fair Value of assets acquired $3,531,347
Fair Value of liabilities assumed 4,399,649
Goodwill recognized 2,606,125
Cash paid 534,698
Value of Common Stock issued 1,203,125
</TABLE>
Effective June 1999, U.S. Trucking acquired the intermodal business of Excalibur
Express, Inc.
<TABLE>
<S> <C>
Fair Value of assets acquired $ --
Fair Value of liabilities assumed 76,410
Goodwill recognized 1,026,410
Cash paid 300,000
Value of Common Stock issued 650,000
</TABLE>
In April 1999 U.S. Trucking acquired the freight brokerage business of Prostar,
Inc.
<TABLE>
<S> <C>
Fair Value of assets acquired $ --
Fair Value of liabilities assumed 229,312
Goodwill recognized 1,444,312
Cash paid 715,000
Value of Common Stock issued 500,000
</TABLE>
9
<PAGE> 12
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 1 - General and Summary of Significant Accounting Policies
(A) - Nature of Business
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They have been prepared in accordance with paragraph
228.310 of Regulation S-B and accordingly, do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. All adjustments considered necessary for a fair
presentation have been included.
U.S. Trucking is in the mid to long-haul trucking, brokerage-logistics services,
agent and auto liability insurance businesses. Corporate headquarters are
located in Mt. Pleasant, South Carolina with regional terminals located in
various states. Services are provided to customers throughout the 48 contiguous
states.
(B) - Basis of Presentation
The accompanying consolidated balance sheets and related statements of
operations, stockholders' equity and cash flows includes the accounts of U.S.
Trucking, Inc. and its wholly owned subsidiaries, Gulf Northern Transport, Inc.,
Mencor, Inc., Prostar, Inc. and UST Logistics, Inc. as of June 30, 2000 and Gulf
Northern Transport, Inc. and Mencor, Inc. as of June 30, 1999. Significant
intercompany transactions or balances as of and for the periods ended June 30,
2000 and 1999 have been eliminated.
(C) - Net Income per Common Share
Basic net income per share is computed on the basis of the weighted average
number of common shares outstanding during each period. Diluted net income per
share is calculated by combining weighted average number of common shares
outstanding and potentially dilutive common share equivalents
(D) - Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
maturities of six months or less to be cash equivalents for financial statement
purposes.
10
<PAGE> 13
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(E) - Parts and Supply Inventory
Inventory consists principally of parts and supplies used in maintaining its
motor carrier fleet, skids used in transporting goods, and small tools and are
stated at the lower-of-cost or market, determined on a first-in, first-out
basis.
(F) - Transportation and Other Equipment
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives. Accelerated
methods of depreciation are followed for tax purposes and the straight-line
method is used for financial reporting purposes.
Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years.
(G) - Intangible Assets
Intangible assets include goodwill which is amortized on a straight-line basis
over periods ranging from six to twenty years and deferred financing, debt
issuance costs and trade-in costs which are amortized on a straight-line basis
over periods ranging from three to five years.
(H) - Management
In January 2000, U.S. Trucking subsidiary Gulf Northern Transport, Inc. entered
into a master agent agreement with Carolina Global, Inc. to manage Gulf
Northern's container operations. Carolina Global is owned 90% by Logistics
Management, LLC and 10% by an officer of U.S. Trucking. Under the terms of the
agreement, Gulf Northern will pay 90% of revenues generated by its container
operations to Carolina Global in exchange for the operational services provided.
Also in January 2000, Gulf Northern entered into a master agent agreement with
One-Way Logistics, Inc. to manage Gulf Northern's over the road operations.
One-Way is owned 90% by Logistics Management, LLC and 10% by an officer of U.S.
Trucking. Under the terms of the agreement, Gulf Northern will pay 90% of
revenues generated by its over the road operations to One-Way in exchange for
the operational services provided.
11
<PAGE> 14
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(I) - Income Taxes
U.S. Trucking accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting or Income Taxes"
which requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assts are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
respective periods' taxable income for federal, state and local income tax
reporting purposes.
(J) - Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(K) - Revenue Recognition
During 1999, U.S. Trucking changed its revenue recognition policy to record
revenue at the time freight is picked up at the customer's site. Prior to 1999,
the Company recognized revenues at the time freight was delivered to recipients.
This change in accounting policy resulted in an insignificant difference in net
income for the periods reported. Accordingly, these financial statements were
not restated to reflect this change. Liability insurance revenue is recognized
on a written premium basis. All other revenue is recognized at the time services
are provided.
(L) - 1999 Reclassifications
Certain reclassifications have been made to the 1999 figures to conform them to
the current year's presentation.
12
<PAGE> 15
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 2 - Earnings (Loss) Per Common Share
Basic earnings (loss) per common share was calculated using the weighted average
number of shares outstanding for the periods presented, after giving effect to
the conversion of 9,990,000 shares of common stock into series A preferred stock
in February 1999 and the conversion of 900,000 shares Series A preferred stock
back to 9,000,000 shares of common stock as of June 30, 2000. The resulting
weighted average number of common shares outstanding was 10,010,544 in 2000 and
8,925,676 in 1999. With respect to 1999, diluted earnings per common share were
calculated assuming the issuance of potentially dilutive securities such as the
convertible preferred stock and convertible debentures and options and warrants.
NOTE 3 - Acquisition of Subsidiaries and Other Assets and Liabilities
On February 7, 2000, U.S. Trucking consummated a merger agreement to acquire
Checkmate Truck Brokerage, Inc. and Maverick Truck Brokerage, Inc., for a
purchase price of $2,606,125. Under the terms of the agreement, the purchase
price consists of 385,000 shares of common stock that were valued at $1,203,125
and $886,961 payable to the principals of which 500,000 has been paid as of June
30, 2000. Further, the contract includes a stock adjustment agreement whereby
the issuance of the common stock included in the agreement will be adjusted
pending the outcome of certain performance parameters. An allocation of the
purchase price follows:
<TABLE>
<CAPTION>
Checkmate/
Maverick
----------
<S> <C>
Assets
Accounts receivable $3,311,143
Transportation and
other equipment 220,204
Goodwill 2,606,125
----------
Total $6,137,472
==========
Liabilities Assumed and Equity
Liabilities assumed $3,962,688
Liability to sellers 971,659
Common stock 1,203,125
----------
Total $6,137,472
==========
</TABLE>
13
<PAGE> 16
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 3 - Acquisition of Subsidiaries and Other Assets and Liabilities
(Continued)
In April 1999, U.S. Trucking acquired the common stock of Pro Star, Inc. a truck
brokerage company based in Charleston, SC for $1,444,312 consisting of 200,000
shares of common stock, cash of $715,000 and the assumption of liabilities of
$229,312. In June 1999, the Company acquired the intermodal business of
Excalibur Express, Inc., also a Charleston, SC based company for $1,026,410
consisting of 200,000 shares of common stock and $300,000 in cash. An allocation
of the purchase prices follow:
<TABLE>
<CAPTION>
Excalibur
Prostar, Inc. Express Total
------------- ---------- ----------
<S> <C> <C> <C>
Assets
------
Goodwill $1,444,312 $1,026,410 $2,470,722
---------- ---------- ----------
Total $1,444,312 $1,026,410 $2,470,722
========== ========== ==========
Liabilities Assumed and Equity
------------------------------
Liabilities assumed and
debt to sellers $ 944,312 $ 376,410 $1,320,722
Common stock 500,000 650,000 1,150,000
---------- ---------- ----------
Total $1,444,312 $1,026,410 $2,470,722
========== ========== ==========
</TABLE>
14
<PAGE> 17
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 4 - Income Taxes
The deferred tax asset of $1,141,963 represents the tax benefit from net
operating losses generated in prior years reduced by a valuation allowance
amounting to $2,159,000 as of June 30, 2000. The valuation allowance provided is
based on management's valuation of the likelihood of realization of the benefit
of the net operating loss carryovers. Management believes it is more likely than
not that U.S. Trucking will realize the benefit of the recorded deferred tax
assets.
As required by SFAS 109, deferred taxes are provided based upon the tax rate at
which the items of income and expense are expected to be settled in the
Company's tax return. The expected tax rate used is 37.3% for each of the years.
U.S. Trucking has net operating losses through June 30, 2000 of $8,850,000.
These losses will be available to offset future taxable income and begin to
expire in 2010.
There is no tax effect related to the component of the other comprehensive loss
since no future capital gain can be anticipated.
15
<PAGE> 18
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 5 - Convertible Debentures
During the six months ended June 30, 2000, U.S. Trucking issued convertible
debentures in the amount of $7,100,000. Debt issuance costs amounted to $84,000
which are being amortized over the life of the debentures. The debentures
include a stated interest rate of 10% per annum and mature during 2003. The
Company also retired $539,704 of debentures during the six months ended June 30,
2000. Related debt issuance costs of $44,000 was expensed and is included in
amortization expenses in the accompanying financial statements.
During the six months ended June 30, 1999 the Company issued $2,250,000 of 10%
convertible debentures due May 31, 2002 with related debt issuance costs
amounting to $208,000. The Company subsequently retired $800,000 of those
debentures. Related debt issuance costs of $78,180 was expensed and is included
in amortization expenses in the accompanying financial statements.
The holders of the debentures are entitled, at their option, to convert at any
time, all or any part of the principal amount of the debentures into U.S.
Trucking's common stock plus accrued interest.
The price per share of common stock into which the debentures are convertible is
the lower of $1.50 or 80% of the average closing bid price of the Common Stock
quoted on the OTC Bulletin board for three trading days preceding the conversion
date.
NOTE 6 - Captive Insurance Program
The company recorded in the accompanying financial statements $1,040,943 of
amounts due from the captive insurer of which $ 2,252,990 and $ 937,214 is
reflected in revenues in the six months ended June 30, 2000 and 1999,
respectively. These amounts represent the estimated "program-to date profit" at
June 30, 2000 and 1999.
16
<PAGE> 19
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 7 - Industry Segment Information
U.S. Trucking has three major business segments: long-haul trucking, interstate
truck brokerage and liability insurance for the long haul 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 segment performance on an after-tax basis and separately
reports information on its truck brokerage operation. In addition, during 1998,
the company added the liability insurance business and reports that segment's
performance similarly. In determining the 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.
SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Long-haul Truck Liability
Trucking Brokerage Insurance Intersegment Total
------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 21,400,939 $ 17,270,618 $2,285,729 $(590,896) $ 40,366,390
Operating income (loss) (1,084,098) 192,395 308,909 -- (582,794)
Net interest (764,279) (42,774) -- -- (807,053)
Pretax income (loss) (1,456,579) 149,641 308,909 -- (998,029)
Loss from discontinued
operations (4,851,197) -- -- -- (4,851,197)
Net income (loss) (6,307,776) 149,641 308,909 -- (5,849,226)
Assets 31,474,181 8,242,069 2,077,676 -- 41,793,926
Depreciation &
Amortization 351,240 171,033 24,182 -- 546,455
Additions to long-
lived assets 226,799 383,232 -- -- 610,031
</TABLE>
17
<PAGE> 20
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 7 - Industry Segment Information (continued)
THREE MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Long-haul Truck Liability
Trucking Brokerage Insurance Intersegment Total
------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 10,739,848 $11,250,649 $ 661,189 $(242,660) $22,303,450
Operating income (loss) (970,849) 119,929 253,243 -- (597,677)
Net interest (461,989) (3,208) -- -- (465,197)
Pretax income (loss) (1,436,316) 125,312 253,243 -- (1,057,761)
Loss from discontinued
Operations (4,851,197) (4,851,197)
Net income (loss) (6,295,071) 134,386 274,007 -- (5,886,678)
Assets 31,474,181 8,242,069 2,077,676 -- 41,793,926
Depreciation &
Amortization 207,596 126,316 8,387 -- 342,299
Additions to long-
lived assets 98,104 178,934 -- -- 277,038
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Long-haul Truck Liability
Trucking Brokerage Insurance Intersegment Total
------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 14,712,520 $ 2,513,413 $ 937,214 $(338,978) $ 17,824,169
Operating income 484,353 27,375 28,150 -- 539,878
Net interest (371,222) (7,250) -- -- (378,472)
Pretax income (loss) 121,933 90,490 101,421 -- 313,844
Net income 121,933 90,490 101,421 -- 313,844
Assets 17,412,698 949,767 1,489,159 -- 19,851,624
Depreciation &
Amortization 1,133,808 12,909 -- -- 1,146,717
Additions to long-
lived assets 244,673 -- -- -- 244,673
</TABLE>
18
<PAGE> 21
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 7 - Industry Segment Information (continued)
THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Long-haul Truck Liability
Trucking Brokerage Insurance Intersegment Total
------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 7,691,441 $ 2,168,294 $ 458,215 $(155,153) $ 10,162,797
Operating Income (loss) 286,649 107,101 67,441 461,191
Net interest (262,382) (7,294) -- -- (269,676)
Pretax income (loss) 26,712 99,807 67,441 193,898
Net income (loss) 26,712 99,807 67,441 193,898
Assets 17,412,698 949,767 1,489,159 -- 19,851,624
Depreciation &
Amortization 583,473 12,609 -- -- 596,082
Additions to long-
lived assets 244,673 -- -- -- 244,673
</TABLE>
NOTE 8 - Commitments and Contingencies
During 1999, U.S. Trucking issued a total of 6,497,297 shares of common stock to
several companies and individuals as collateral in connection with contingent
transactions. Of these shares, 5,100,000 were issued with the understanding that
they could be recalled at any time, at the discretion of the Company, prior to
any transaction taking place. The remaining 1,397,297 shares are used as
collateral for the other contingent transactions. Accordingly, these shares were
not included in the total shares issued and outstanding as of December 31, 1999,
and therefore, were not considered in the calculation of earnings per share.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the Consolidated
Financial Statements, including the footnotes, and understand that this
discussion is qualified in its entirety by the foregoing and other more detailed
financial information appearing elsewhere herein. Historical results of
operations and the percentage relationships among any amounts included in the
Consolidated Statement of Operations, and any trends which may appear to be
inferable therefrom, should not be taken as being necessarily indicative of
trends of operations or results of operations for any future periods.
These and other statements, which are not historical facts, are based largely on
current expectations and assumptions of management and are subject to a number
of risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements. Assumptions and
risks related to forward-looking statements, include that we are pursuing a
growth strategy that relies in part on the completion of acquisitions of
companies in the trucking, logistics and intermodal segments of the
transportation industry.
Assumptions relating to forward-looking statements involve judgements with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many which are beyond our control. When
used in this Quarterly Report, the words "estimates", "projects", and "expect"
and similar expressions are intended to identify forward-looking statements.
Although we believe that assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in the forward-looking
information will be realized.
Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impacts of which may cause us to alter our business strategy,
which may in turn, affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as our representation that
statements contained in this Quarterly Report speak only as of the date of this
Quarterly Report, and we do not have any obligation to publicly update or revise
any of these forward-looking statements.
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's Form 10-QSB, including Notes to the Consolidated
Financial Results of Operations, describe factors, among others, that could
contribute to or cause such differences.
Tax Benefit. During 1999, because of acquisitions made by the company, it became
more likely than not that the net operating loss carryovers generated from 1995
to 1999
20
<PAGE> 23
would be fully used by the time the loss utilization periods expired.
Accordingly, the income tax benefit was included in income during 1999.
Prior to 1999, US Trucking incurred net operating losses for tax purposes.
Because it did not appear likely that the benefit of such losses would be used
before their expiration dates, we had limited the income tax benefit recognized
in the financial statements for those net operating losses by establishing a
valuation allowance for deferred tax assets.
The Emerging Issues Task Force addressed the accounting for decreases in
deferred tax asset valuation allowances established in a purchase business
combination as a result of a change in tax regulations and reached a consensus
that the change in the valuation amount should be recognized through the
statement of operations.
GENERAL
U.S. Trucking, Inc. 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. During 1999, we acquired Prostar, Inc. (a brokerage company) and
merged Mencor, Inc. into Prostar, Inc.
U.S. Trucking, Inc. operating results are driven by the results of Gulf Northern
Transport, Inc. the companies trucking operation including over the road and
intermodal, our Captive auto liability insurance program, it's brokerage
operations (ProStar Inc. and VST logistics Inc.). The Company reported a loss
for the period ending June 30, 2000 and a profit for period ending June 30,
1999.
On December 31, 1999, we effected a plan to transfer the over the road truckload
operations to One-Way Logistics, Inc. a company owned 90% by Logistics
Management, LLC which owns a significant portion of stock in our company and is
controlled by our Chairman of the Board and the President-CEO). The
container/intermodal operations were transferred to Carolina Global, Inc. also a
company owned 90% by Logistics Management, LLC. Both agency programs work
similar in that U.S. Trucking, Inc. will pay out 90% agent settlements to
One-Way Logistics, Inc. and Carolina Global, Inc. and they will be responsible
for paying all costs related to the operations of their respective operations.
For U.S. Trucking. Inc., the 10% margin created from these transactions will be
used to provide Auto-Liability & Cargo insurance coverage, paying for receivable
financing interest and any overhead expense involved with managing the billing
and collecting of accounts receivables and the processing of the agents
settlements. After implementation of these procedures, our comparatives from one
period to another occurring in 1999 and 2000 will change dramatically, in that
our purchased transportation
21
<PAGE> 24
costs will increase significantly while other operating expenses and
administrative costs will be reduced materially.
During second quarter of 2000, we effected a plan to discontinue the agency
portion of our truckload segment excluding inter-modal. The decision resulted in
us having to record certain adjustments to the related assets and liabilities of
that business segment as well as provision to cover the estimated operating
losses expected during the period we estimate it will take to totally
discontinue the operation. In addition, we accrued our expected losses on the
disposal of assets. Such adjustments total $4,851,197 for the six months ended
June 30, 2000. The loss from discontinued operations has been reflected in
accordance with Accounting Principles Board No. 30 "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions" as a
disposal of a segment. The June 30, 2000 consolidated balance sheet and the
consolidated statements of operations and cash flows for the six months then
ended have been restated to separately reflect the financial position, results
of operations, and cash flows of the discontinued operations.
RESULTS OF OPERATIONS
The following tables sets forth items in the Consolidated Statement of
Operations for the six and three months ending June 30, 2000 and 1999 as a
percentage of operating revenues.
<TABLE>
<CAPTION>
6 MOS. ENDING 6 MOS. ENDING
30-JUN-00 30-JUN-99
------------------------------
<S> <C> <C>
OPERATING REVENUES 100.0% 100.0%
PURCHASED TRANSPORTATION & RENTALS 83.7% 39.8%
OPERATING SUPPLIES AND MAINTENANCE 0.1% 3.5%
FUEL 0.0% 8.2%
MISCELLANEOUS OPERATING EXPENSES 1.0% 1.7%
INSURANCE AND CLAIMS 5.6% 5.9%
DEPRECIATION AND AMORTIZATION 1.4% 6.4%
TAXES AND LICENSES 0.2% 1.3%
OCCUPANCY COSTS 0.4% 1.0%
SALARIES, WAGES AND BENEFITS 4.8% 23.2%
ADMINISTRATIVE EXPENSES 4.2% 6.0%
TOTAL EXPENSES 101.4% 97.0%
OPERATING INCOME (1.4)% 3.0%
INTEREST EXPENSE (2.1)% (2.1)%
GAIN ON SALE OF EQUIPMENT 0.9% 0.7%
INTEREST INCOME 0.1% 0.0%
OTHER INCOME 0.1% 0.1%
INCOME (LOSS) BEFORE INCOME TAXES (2.4)% 1.7%
PROVISION FOR INCOME TAXES (0.1)% 0.0%
NET INCOME FROM CONTINUING OPERATIONS (2.5)% 1.7%
LOSS FROM DISCONTINUED OPERATIONS (12.0)% 0.0%
NET INCOME (LOSS) (14.5)% 1.7%
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
3 MOS. ENDING 3 MOS. ENDING
30-JUN-00 30-JUN-99
------------------------------
<S> <C> <C>
OPERATING REVENUES 100.0% 100.0%
PURCHASED TRANSPORTATION & RENTALS 87.3% 43.5%
OPERATING SUPPLIES AND MAINTENANCE 0.0% 3.0%
FUEL 0.0% 7.3%
MISCELLANEOUS OPERATING EXPENSES 1.2% 1.0%
INSURANCE AND CLAIMS 3.5% 5.5%
DEPRECIATION AND AMORTIZATION 1.5% 5.9%
TAXES AND LICENSES (0.1)% 1.2%
OCCUPANCY COSTS 0.4% 0.9%
SALARIES, WAGES AND BENEFITS 4.4% 20.5%
ADMINISTRATIVE EXPENSES 4.5% 6.9%
TOTAL EXPENSES 102.7% 95.7%
OPERATING INCOME (2.7)% 4.3%
INTEREST EXPENSE (2.1)% (2.7)%
GAIN ON SALE OF EQUIPMENT 0.0% 0.0%
INTEREST INCOME 0.0% 0.0%
OTHER INCOME 0.0% 0.0%
INCOME (LOSS) BEFORE INCOME TAXES (4.8)% 1.6%
PROVISION FOR INCOME TAXES 0.0% 0.0%
NET INCOME FROM CONTINUING OPERATIONS (4.8)% 1.6%
LOSS FROM DISCONTINUED OPERATIONS (21.8)% 0.0%
NET INCOME (LOSS) (26.6)% 1.6%
</TABLE>
Three months ended June 30, 2000 compared to June 30, 1999
Operating revenues. Total operating revenue increased from $10.2 million for the
three months ended June 30, 1999 to $22.3 million, or 118.6% for the three
months ended June 30, 2000. The reasons for this increase are the acquisitions
of Excalibur Express, Inc., and Fulmer Transport, Inc. in the second and third
quarters of 1999, and the acquisition of Checkmate/Maverick truck brokerage
completed in February 2000 as well as the opening of a new container division in
March 2000. Operating revenues as a result from the Excalibur acquisition and
the opening of a new container division increased
23
<PAGE> 26
$3.96 million. Operating revenues as a result from the Fulmer acquisition
increased $2.83 million. Operating revenues as a result from the
Checkmate/Maverick acquisition increased $8.70 million. In addition, revenues
from the Captive Insurance Program increased from $460 thousand for the three
months ended June 30, 1999 to $628 thousand for the three months ended June 30,
2000.
Purchased transportation and rentals. Purchased transportation and rentals
increased from $4.42 million for the three months ended June 30, 1999 to $19.46
million or 340.5% for the three months ended June 30, 2000. As a percentage of
operating revenue, purchased transportation and rentals increased from 43.5% for
the three months ended June 30, 1999 to 87.3% for the three months ended June
30, 2000. Changes from converting the truckload and intermodal operations to
agency programs and the acquisition of Prostar, Inc.(a brokerage company) and
Checkmate/Maverick Truck Brokerage resulted in the increase in purchase
transportation as a percentage of sales. Freight settlements from brokerage
operations increased from $3.27 million for the three months ended June 30, 1999
to $10.48 million for the three months ended June 30, 2000. Agent settlements
from truckload and container operations increased from $73 thousand for the
three months ended June 30, 1999 to $9.67 million for the three months ended
June 30, 2000.
Salaries, wages and benefits. Salaries, wages and benefits decreased from $2.08
million for the three months ended June 30, 1999 to $984 thousand or 52.7% for
the three months ended June 30, 2000. Salaries, wages and benefits as a
percentage of total operating revenue decreased from 20.5% for the three months
ended June 30, 1999 to 4.4% for the three months ended June 30, 2000. The
decrease as a percentage of operating revenue is attributed to the change in
revenue mix discussed in the preceding paragraph which caused company driver
payroll to decrease from $1.24 million for the three months ended June 30, 1999
to zero for the three months ended June 30, 2000.
Fuel. Fuel expense decreased from $742 thousand for the three months ended June
30, 1999 to zero for the three months ended June 30, 2000. The decrease is
attributed to the conversion of truckload operations to a agency program in
which most operating costs other than agents settlements are eliminated. Fuel
expense from company owned tractors decreased from $729 thousand for the three
months ended June 30, 1999 to zero for the three months ended June 30, 2000.
Operating supplies and maintenance. Operating supplies and maintenance decreased
from $303 thousand for the three months ended June 30, 1999 to $10 thousand for
the three months ended June 30, 2000. The decrease is attributed to the change
in mix of revenues mentioned in previous paragraphs. By converting the truckload
operations to a agency program maintenance on all company equipment was
eliminated.
Insurance and claims. Insurance and claims increased from $557 thousand for the
three months ended June 30, 1999 to $774 thousand or 38.9% for the three months
ended June 30, 2000. Insurance and claims as a percentage of total operating
revenue decreased from 5.48% for the three months ended June 30, 1999 to 3.47%
for the three months ended June 30, 2000. The decrease as a percentage of
operating revenue can be attributed to
24
<PAGE> 27
increased revenues from our brokerage divisions, which have much lower insurance
costs as percentage of revenue associated with them.
Taxes and licenses. Taxes and licenses decreased from $119 thousand for the
three months ended June 30, 1999 to zero for the three months ended June 30,
2000. The decrease is attributed to the conversion of truckload and intermodal
operations to a agency program.
Depreciation and amortization. Depreciation and amortization decreased from $596
thousand for the three months ended June 30, 1999 to $343 thousand or 42.5% for
the three months ended June 30, 2000. Depreciation and amortization as a
percentage of total operating revenue decreased from 5.87% for the three months
ended June 30, 1999 to 1.53% for the three months ended June 30, 2000. The
decrease as a percentage of total operating revenue is attributed to the change
of truckload and intermodal operations to a agency program and the fact that
Gulf Northern Transport, Inc. sold all depreciable assets that was revenue
equipment to One-Way Logistics, Inc. in December 1999. Depreciation expense
decreased from $490 thousand for the three months ended June 30, 1999 to $58
thousand for the three months ended June 30, 2000. Amortization expense
increased from $106 thousand for the three months ended June 30, 1999 to $284
thousand for the three months ended June 30, 2000. The reason for the increase
is from the goodwill created from the Mid-Cal, Prostar, Excalibur Express,
Fulmer Transport and Checkmate/Maverick acquisitions.
General and administrative. General and administrative expenses increased from
$696 thousand for the three months ended June 30, 1999 to $1.01 million or 45.1%
for the three months ended June 30, 2000. General and administrative as a
percentage of total operating revenue decreased from 6.85% for the three months
ended June 30, 1999 to 4.53% for the three months ended June 30, 2000. The
decrease as a percentage of operating revenue can be attributed to the economies
of scale as revenues have increased through acquisitions some fixed costs have
remained constant therefore have decreased as a percentage of operating revenue.
Operating income (loss). Operating income decreased from $461 thousand or 4.54%
of total operating revenues for the three months ended June 30, 1999 to a
operating loss of $598 thousand or (2.68)% of total operating revenue for the
three months ended June 30, 2000. This decrease as a percentage of total
operating revenue can be attributed to the various factors discussed above.
Management anticipates as revenues increase, the margin created from purchased
transportation will justify enough margin to create profitability going forward
but there can no assurance that this will happen.
Interest. Interest expense increased from $269 thousand for the three months
ended June 30, 1999 to $466 thousand or 72.8% for the three months ended June
30, 2000. Interest expense as a percentage of total operating revenue decreased
from 2.65% for the three
25
<PAGE> 28
months ended June 30, 1999 to 2.09% for the three months ended June 30, 2000.
The primary reason for the increase in total is interest paid in relation to our
revolving credit line facility, which has increased from a loan balance of $3.19
million on June 30, 1999 to $15.94 million on June 30, 2000.
Discontinued Operations.
We recognized losses from discontinuing our agency truckload segment:
The loss is discussed earlier and totaled 4,851,197.
Net income decreased from $194 thousand for the three months ended June 30, 1999
to a net loss of $5.91 million for the three months June 30, 2000. The primary
factors that caused the loss is the discontinued operations and reduction in
operating income discussed previously.
Six months ended June 30, 2000 compared to June 30, 1999
Operating revenues. Total operating revenue increased from $17.82 million for
the six months ended June 30, 1999 to $40.37 million, or 126.5% for the six
months ended June 30, 2000. The reasons for this increase are the acquisitions
of Prostar, Inc., a line of intermodal business from Excalibur Express, Inc. and
Fulmer Transport, Inc. in the second and third quarters of 1999, and the
acquisition of Checkmate/Maverick truck brokerage completed in February 2000 as
well as the opening of a new container division in March 2000. Operating
revenues as a result of the Prostar acquisition increased $409 thousand.
Operating revenues as a result from the Excalibur acquisition and the opening of
a new container division increased $6.3 million. Operating revenues as result
from the Fulmer acquisition increased $6.89 million. Operating revenues as
result from the Checkmate/Maverick acquisition increased $13.24 million. In
addition, revenues from the Captive Insurance Program increased from $934
thousand for the six months ended June 30, 1999 to $2.25 million for the six
months ended June 30, 2000.
Purchased transportation and rentals. Purchased transportation and rentals
increased from $7.09 million for the six months ended June 30, 1999 to $33.80
million or 376.9% for the six months ended June 30, 2000. As a percentage of
operating revenue, purchased transportation and rentals increased from 39.8% for
the six months ended June 30, 1999 to 83.7% for the six months ended June 30,
2000. Changes from converting the truckload and intermodal operations to agency
programs and the acquisition of Prostar, Inc. (a brokerage company) and
Checkmate/Maverick Truck Brokerage resulted in the increase in purchase
transportation as a percentage of sales. Freight settlements from brokerage
operations increased from $3.58 million for the six months ended June 30, 1999
to $15.30 million for the six months ended June 30, 2000. Agent settlements from
truckload and container operations increased from $125 thousand for the six
months ended June 30, 1999 to $18.81 million for the six months ended June 30,
2000.
Salaries, wages and benefits. Salaries, wages and benefits decreased from $4.14
million for the six months ended June 30, 1999 to $1.94 million or 53.1% for the
six months
26
<PAGE> 29
ended June 30, 2000. Salaries, wages and benefits as a percentage of total
operating revenue decreased from 23.2% for the six months ended June 30, 1999 to
4.8% for the six months ended June 30, 2000. The decrease as a percentage of
operating revenue is attributed to the change in revenue mix discussed in the
preceding paragraph which caused company driver payroll to decrease from $2.40
million for the six months ended June 30, 1999 to zero for the six months ended
June 30, 2000.
Fuel. Fuel expense decreased from $1.46 million for the six months ended June
30, 1999 to zero for the six months ended June 30, 2000. The decrease is
attributed to the conversion of truckload operations to a agency program in
which most operating costs other than agents settlements are eliminated. Fuel
expense from company owned tractors decreased from $1.43 million for the six
months ended June 30, 1999 to zero for the six months ended June 30, 2000.
Operating supplies and maintenance. Operating supplies and maintenance decreased
from $626 thousand for the six months ended June 30, 1999 to $32 thousand for
the six months ended June 30, 2000. The decrease is attributed to the change in
mix of revenues mentioned in previous paragraphs. By converting the truckload
operations to a agency program maintenance on all company equipment was
eliminated.
Insurance and claims. Insurance and claims increased from $1.05 million for the
six months ended June 30, 1999 to $2.27 million or 116.0% for the six months
ended June 30, 2000. Insurance and claims as a percentage of total operating
revenue decreased from 5.9% for the six months ended June 30, 1999 to 5.6% for
the six months ended June 30, 2000. The decrease as a percentage of operating
revenue can be attributed to increased revenues from our brokerage divisions,
which have much lower insurance costs as percentage of revenue associated with
them.
Miscellaneous operating expenses. Miscellaneous operating expenses increased
from $301 thousand for the six months ended June 30, 1999 to $416 thousand or
38.1% for the six months ended June 30, 2000. Miscellaneous operating expenses
as a percentage of revenue decreased from 1.7% for six months ended June 30,
1999 to 1.0% for the six months ended June 30, 2000. The decrease as a
percentage of revenue is attributed to the conversion of truckload and
intermodal operations to agency programs discussed in preceding paragraphs.
Taxes and licenses. Taxes and licenses decreased from $235 thousand for the six
months ended June 30, 1999 to $94 thousand or 59.8% for the six months ended
June 30, 2000. Taxes and licenses as a percentage of total operating revenue
decreased from 1.32% for the six months ended June 30, 1999 to 0.2% for the six
months ended June 30, 2000. The decrease as a percentage of total operating
revenue is attributed to the conversion of truckload and intermodal operations
to a agency program.
Depreciation and amortization. Depreciation and amortization decreased from
$1.15 million for the six months ended June 30, 1999 to $546 thousand or 52.3%
for the six months ended June 30, 2000. Depreciation and amortization as a
percentage of total
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operating revenue decreased from 6.4% for the six months ended June 30, 1999 to
1.4% for the six months ended June 30, 2000. The decrease as a percentage of
total operating revenue is attributed to the change of truckload and intermodal
operations to a agency program and the fact that Gulf Northern Transport, Inc.
sold all depreciable assets that was revenue equipment to One-Way Logistics,
Inc. in December 1999. Depreciation expense decreased from $971 thousand for the
six months ended June 30, 1999 to $116 thousand for the six months ended June
30, 2000. Amortization expense increased from $170 thousand for the six months
ended June 30, 1999 to $430 thousand for the six months ended June 30, 2000. The
reason for the increase is from the goodwill created from the Mid-Cal, Prostar,
Excalibur Express, Fulmer Transport and Checkmate/Maverick acquisitions.
General and administrative. General and administrative expenses increased from
$1.07 million for the six months ended June 30, 1999 to $1.70 million or 74.9%
for the six months ended June 30, 2000. General and administrative as a
percentage of total operating revenue decreased from 6.0% for the six months
ended June 30, 1999 to 4.2% for the six months ended June 30, 2000. The decrease
as a percentage of operating revenue can be attributed to the economies of scale
as revenues have increased through acquisitions some fixed costs have remained
constant therefore have decreased as a percentage of operating revenue.
Operating income (loss). Operating income (loss) decreased from $540 thousand
or 3.0% of total operating revenues for the six months ended June 30, 1999 to
$(583) thousand or (1.4)% of total operating revenue for the six months ended
June 30, 2000. This decrease as a percentage of total operating revenue can be
attributed to the various factors discussed above. Again, management anticipates
as revenues increase, the margin created from purchased transportation will
justify enough to create profitability going forward. There can be no assurance
that will happen.
Interest. Interest expense increased from $378 thousand for the six months ended
June 30, 1999 to $829 thousand or 119.1% for the six months ended June 30, 2000.
Interest expense as a percentage of total operating revenue decreased from 2.1%
for the six months ended June 30, 1999 to 2.0% for the six months ended June 30,
2000. The primary reason for the increase in total is the interest paid in
relation to our revolving credit line facility which has increased from a loan
balance of $3.19 million on June 30, 1999 to $15.94 million on June 30, 2000.
Discontinued Operations -- We recognized losses from discontinuing our agency
truckload segment. The loss is discussed earlier and totaled 4,851,197.
Net income decreased from $314 thousand for the six months ended June 30, 1999
to a net loss of $5.85 million for the six months June 30, 2000. The primary
factors that produced our profit for the six months ended June 30, 2000, was the
loss from discontinued operations and the reduction in operating income
mentioned the preceding paragraphs.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, we had a working capital deficit of $832,246 as compared to a
working capital surplus of $1,367,418 at December 31, 1999 or a net change of
$2,200,000. Working capital declined due to a number of factors as follows:
Working capital declined because our accounts payable, accrued expenses and
current portion of long term debt increased approximately $1,500,000 on a net
basis and notes receivable-related parties and current deferred taxes declined
approximately $1,100,000. These working capital declinations were offset by an
increase of $105,000 in accounts receivable over and above our revolving loan
payable, and an increase of $314,000 in cash and prepaid expenses and other
current assets. In order to provide for working capital and to support our
continuing acquisition program, we increased our revolving working capital line
of credit with our major lender from $8,000,000 to $16,000,000.
Continuing with our acquisition program, we acquired Checkmate Truck Brokerage,
Inc. and Maverick Truck Brokerage, Inc. through a merger effective February 7,
2000. The acquisition required a cash payment of $500,000 to the sellers.
During the second quarter of fiscal 2000, we raised an additional $6,000,000
through the issuance of 11.5% three-year convertible debentures. A portion of
the net raised was used to fund our increase in restricted cash at ended June
30, 2000 and the balance was used to bolster our working capital.
Net cash used by continuing operations amounted to $1,779,019 for the six months
ended June 30, 2000 as compared to net cash of $202,429 provided by continuing
operating activities for the six months ended June 30, 1999. The loss for the
six months (5,849,226) was mostly attributed to our decision to discontinue the
agency truck-load segment of our transportation business excluding intermodal.
This decision resulted in us having to record certain adjustments to the related
assets and liabilities of that business segment and we recorded a provision to
cover the estimated operating losses expected during the period we estimate it
will take to totally discontinue the operation. Further, to the extent we could
estimate, we accrued our expected losses on the disposal of assets. Such
adjustments amounted to $4,851,197 for the six months ended June 30, 2000.
Net cash used by investing activities amounted to $628,387 for the six months
ended June 30, 2000 as compared to net cash provided of $518,008 for the six
months ended June 30, 1999. The net use of cash from investing activities was
mainly attributable to our acquisition during the first quarter of 2000
amounting to approximately $534,000.
Net cash flows provided by financing activities amounted to $7,372,408 for the
six months ended June 30, 2000 as compared to net cash provided of $45,639 for
the six months ended June 30, 1999. The net increase in cash flows from
financing activities was mainly attributable to the fact that we issued
$6,560,296 in convertible debentures, received $3,554,671 from notes receivable
and was offset by payments made on long-term debt of $2,296,488.
We expect to continue to acquire transportation companies that meet our cash
flow and profitability criteria. We expect to fund any potential acquisitions by
sale of common stock, preferred stock or the issuance of additional convertible
debentures. There is no assurance that we will find additional suitable
acquisitions candidates or that we can raise the required funds to complete such
acquisitions.
Management believes that it will be able to finance its needs for working
capital, facilities improvements, and software development with cash flows from
operations, borrowings under the line of credit, and the sale of debt or equity
securities. Over the long term, we expect it will be required to make capital
improvements that may require us to seek additional debt financing or equity
capital. The availability of debt financing or equity capital will depend upon
our financial condition and the results of operations as well as the prevailing
market conditions, the market price of our common stock and other factors over
which we have little control.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
In June, 2000, we issued 9,000,000 shares of common stock to Logistics
Management, LLC in connection with the exchange of 900,000 shares of Series A
Preferred Stock.
The exchange described above was made in reliance on the exemption from
registration offered by Section 4(2) of the Securities Act of 1933. We had
reasonable grounds to believe that these persons (1) were acquiring the shares
for investment and not with a view to distribution, and (2) had such knowledge
and experience in financial and business matters that they were capable of
evaluating the merits and risks of their investment and were able to bear those
risks. Such persons had access to pertinent information enabling them to ask
informed questions. An appropriate restrictive legend is noted on the
certificates representing such shares, and stop-transfer instructions have been
noted in our transfer records.
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) The following exhibits have been filed with this report:
10.1 Securities Purchase Agreement with Augusta/L.O.F., LLC
10.2 $6.0 million Subordinated Convertible Debenture
10.3 Warrant to purchase 580,000 shares
10.4 Agreement relating to conversion of Series A shares
10.5 $1.7 million Promissory Note
21 Subsidiaries of the Registrant
Exhibit 27 - Financial Data Schedule
(b) None.
<PAGE> 33
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. TRUCKING
---------------------------------------------
Registrant
August 28, 2000 By \s\ Danny L. Pixler
------------------------------------------
Danny L. Pixler
Chief Executive Officer
By \s\ John Ragland
------------------------------------------
John Ragland
Chief Financial Officer
