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 Nine Months Ended September 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 [X] No [ ]
There were 19,727,783 shares of the Registrant's common stock outstanding as of
August 25, 2000
<PAGE>
U.S. TRUCKING, INC.
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 2000 AND
DECEMBER 31, 1999
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 AND 1999
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED
DECEMBER 31, 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED
SEPTEMBER 30, 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>
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 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 -- 1,057,719
Accounts receivable-net of allowance
for doubtful accounts of $5,603,970
in 2000 and $303,451 in 1999 9,998,841 8,140,132
Current portion of notes receivable-related parties -- 4,541,634
Parts and supply inventory 143,405 258,405
Current portion of deferred tax asset -- 400,000
Investment in marketable securities
at fair market value 28,881 188,136
Prepaid expenses and other assets 682,869 575,565
------------ -----------
Total Current Assets 10,853,996 15,161,591
------------ -----------
TRANSPORTATION AND OTHER EQUIPMENT -
at cost, less accumulated depreciation and
amortization of $982,249 in 2000 and
$420,541 in 1999 4,114,264 887,690
------------ -----------
OTHER ASSETS
Restricted cash 4,085,864 981,704
Notes receivable-related parties-net of allowance
for doubtful accounts of $1,897,278 in 2000
and $ -0- in 1999 315,814 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 601,963 705,321
Other assets -- 375,700
Intangible assets - net of accumulated amortization
of $7,672,771 in 2000 and $879,565 in 1999 259,694 5,501,756
------------ ------------
Total Other Assets 6,405,298 13,899,813
------------ ------------
TOTAL ASSETS $21,373,558 $29,949,094
============ ============
</TABLE>
3
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------------------------------ --------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable-trade $ 3,187,952 $ 2,027,819
Revolving loan payable 15,224,072 6,736,536
Accrued expenses and other 3,598,230 1,818,902
Current portion - long term debt 400,000 3,210,916
------------ -----------
Total Current Liabilities 22,410,254 13,794,173
------------ -----------
OTHER LIABILITIES
Owner operator escrow accounts -- 122,865
Long term debt - net of current portion 1,994,932 1,486,954
Convertible debentures 8,885,000 1,450,000
------------ -----------
Total Other Liabilities 10,879,932 3,059,819
------------ -----------
TOTAL LIABILITIES 33,290,186 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) (28,265,063) (1,302,675)
Accumulated other comprehensive (loss) (171,231) (11,976)
Subscriptions receivable -- (906,788)
------------ -----------
Total Stockholders' Equity (11,916,628) 13,095,102
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,373,558 $29,949,094
============ ===========
</TABLE>
4
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------------- --------------
<S> <C> <C>
Net Revenues $56,816,019 $29,828,018
Operating expenses
Transportation and rentals 48,853,827 12,589,165
Operating supplies and maintenance 112,549 1,102,553
Bad debts 7,609,557 577,969
Other operating costs 415,527 --
Fuel 25,000 2,405,503
Insurance and claims 3,750,916 1,696,760
Depreciation and amortization 2,394,912 1,731,921
Taxes and licenses 225,487 416,033
Salaries, wages and benefits 2,960,708 6,400,761
Occupancy costs 251,104 262,117
Administrative expenses 2,736,069 1,810,006
------------ -----------
Total operating expenses 69,335,656 28,992,788
------------ -----------
Operating income (loss) (12,519,637) 835,230
------------ -----------
Other income and expenses
Interest income 155,435 13,691
Interest expense (1,482,382) (596,048)
Other income 13,592 25,899
Gain (loss) on disposition of equipment (449,998) 404,954
-------------- ------------
Total other income and (expenses) (1,763,353) (151,504)
------------- ------------
Net income (loss) before income taxes (14,282,990) 683,726
Provision for income taxes -- 266,653
Tax benefit of net operating loss carryforward -- (266,653)
------------ -----------
Net income from continuing operations (14,282,990) 683,726
------------ -----------
Loss from discontinued operations (12,679,398) --
------------ -----------
Net Income (loss) $(26,962,388) $ 683,726
============ ============
Basic earnings (loss) per common share $ (2.10) $ .09
============= ============
Weighted average number of common shares 12,810,850 7,876,381
============= ============
</TABLE>
5
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------------- ------------
<S> <C> <C>
Net Revenues $ 16,449,629 $ 12,000,849
Operating expenses
Transportation and rentals 15,055,253 5,501,283
Operating supplies and maintenance 80,182 477,045
Bad debts 7,194,033 --
Other operating costs 415,527 277,138
Fuel 25,376 948,179
Insurance and claims 1,479,006 644,820
Depreciation and amortization 1,848,457 585,204
Taxes and licenses 130,981 181,020
Salaries, wages and benefits 1,021,097 2,262,888
Occupancy costs 75,220 90,085
Administrative expenses 1,061,716 740,835
------------ -----------
Total operating expenses 28,386,848 11,708,497
------------ -----------
Operating income (loss) (11,937,219) 295,352
------------ -----------
Other income and expenses
Interest income 133,188 11,266
Interest expense (653,082) (217,576)
Gain (Loss) on the sale of equipment (814,398) 280,840
Other income (13,826) --
------------ -----------
Total other income and (expenses) (1,348,118) 74,530
------------ -----------
Net income (loss) before income taxes (13,285,337) 369,882
Provision for income taxes -- 144,254
Tax benefit of net operation loss carryforward -- (144,254)
------------ -----------
Net income from continuing operations (13,285,337) 369,882
------------ -----------
Loss from discontinued operations (7,828,201) --
------------ -----------
Net Income (loss) $(21,113,162) $ 369,882
============ ===========
Basic earnings (loss) per common share $ (1.16) $ .05
============ ===========
Weighted average number of common shares 18,229,461 7,149,404
============ ===========
</TABLE>
6
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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)
Write off of Subscriptions
Receivable -- -- -- --
Other Comprehensive Loss:
Net Loss for the nine months ended
September 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
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 -- -- -- -- --
Write off of Subscriptions
Receivable -- -- -- 906,788 906,788
Other Comprehensive Loss:
Net Loss for the nine months ended
September 30, 2000 -- (26,962,388) -- -- (26,962,388)
Change in unrealized loss on
available-for-sale investments -- -- (159,255) -- (159,255)
---------- ------------ ---------- ----------- ------------
Closing balance - June 30, 2000 $3,605,580 $(28,265,063) $ (171,231) $ $(11,916,628)
========== ============ ========== =========== ============
</TABLE>
7
<PAGE>
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
========== ========== ========= ===========
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>
8
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) from continuing operations $(14,282,990) $ 683,726
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
(USED) IN OPERATING ACTIVITIES
Depreciation & amortization 3,355,912 1,731,921
Provision for doubtful accounts 3,978,410 --
(Loss) on disposition of equipment 449,998 --
Deferred taxes -- --
Gain on disposal of equipment -- (404,954)
(Increase) Decrease-Assets
Restricted cash (3,104,160) (485,108)
Accounts receivable (5,339,088) (4,375,651)
Parts and Supplies inventory 115,000 (39,870)
Investment in marketable securities 159,255 --
Prepaid expenses and other assets 268,396 (588,512)
Intangible assets 4,874,457 --
Due from captive insurer 103,358 --
Increase (Decrease)-Liabilities
Accounts payable - trade 1,160,133 ( 110,457)
Revolving loan 8,487,536 3,034,165
Owner operator escrow (122,865) --
Accrued expenses and
other current liabilities 1,779,328 727,107
------------ -----------
Total Adjustments 16,165,670 (511,359)
------------ -----------
Net cash provided (used) by operating activities 1,882,680 172.367
------------ -----------
Discontinued operations (12,679,398) --
Subtotal (10,796,718) --
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and software development (136,618) (1,251,766)
Cash paid for businesses acquired (534,698) (898,484)
Proceeds from disposition of assets -- 1,255,160
------------ -----------
Net cash (used) by investing activities (671,316) (895,090)
------------ -----------
Subtotal $(11,468,034) $ (722,723)
------------ -----------
</TABLE>
9
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Nine Months ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
<S> <C> <C>
Balance Forward $(11,468,034) $ 722,723
CASH FLOWS FROM
FINANCING ACTIVITIES
Due from related parties 186,023 --
Notes receivable 5,091,532 (1,124,805)
Repayments of notes receivable -- --
Proceeds from long-term debt financing 508,676 1,071,229
Issuance of preferred stock -- 2,665,462
Proceeds from sale of common stock
and additional paid in capital -- 701,688
Issuance of convertible debentures 7,435,000 1,040,000
Conversion of stock options- 71,238
Principal payments on long-term debt ( 2,810,916) (2,168,727)
------------ ------------
Net cash (used) provided by financing activities 10,410,315 2,256,085
------------ ------------
NET INCREASE (DECREASE) IN CASH (1,057,719) 1,533,362
CASH AT BEGINNING OF PERIOD 1,057,719 22,976
------------ ------------
CASH AT END OF PERIOD $ -- $ 1,556,338
============ ============
Supplemental Disclosure of Cash flow information:
Cash Paid during the year
Interest expense $ 1,382,382 $ 217,576
============ ============
Income taxes $ -- $ --
=============== =============
</TABLE>
10
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Nine Months ended September 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.
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
Effective June 1999, U.S. Trucking acquired the intermodal business of Excalibur
Express, Inc.
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
In April 1999 U.S. Trucking acquired the freight brokerage business of Prostar,
Inc.
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
11
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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. and Prostar, Inc. as of September 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 September 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.
12
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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. signed 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 signed a master agent agreement with One-Way
Logistics, Inc. to manage Gulf Northern's over the road operations. Effective
November 30, 2000 Gulf Northern's trustee filed a voluntary petition of
bankruptcy under Chapter 11 of the U.S. Code. 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.
13
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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 he 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.
14
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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 entered into 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 $500,000 payable to the principals. In addition, $500,000 has been placed in
escrow pending the outcome of an acquisition review of the assets and
liabilities. 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:
Checkmate/
Maverick
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
===========
15
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
NOTE 3 - Acquisition of Subsidiaries and Other Assets and Liabilities
(Conrtinued)
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>
16
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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 $9,338,000 as of September 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 September 30, 2000 of
$29,000,000. 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.
17
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 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 higher of $1.50 or the lower of 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 or $2.37 per share. In no event will the conversion price be
less than $1.50 per share. No debentures were converted as of June 30, 2000.
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.
18
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
NOTE 7 - Industry Segment Information
During 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.
U.S. Trucking currently has three major business segments: long-haul trucking,
interstate truck brokerage and liability insurance for the long haul trucking
industry. In 1999, a fourth segment, Agents' Program was included and separately
reported. However, that segment was deemed to be not reportable at December 31,
1999. 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.
Nine Months ended September 30, 2000
<TABLE>
<CAPTION>
Long-haul Truck Liability
Trucking Brokerage Insurance Inter-segment Total
---------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Sales $ 31,896,910 $ 23,321,554 $ 2,424,850 $ (827,295) $ 56,816,019
Operating income (loss) (14,971,885) (723,934) (306,592) -- (16,002,411)
Net interest (1,093,812) (233,135) -- -- (1,326,947)
Pretax income (loss) (16,502,103) (957,069) (306,592) -- (17,765,764)
Loss from discontinued
operations (5,242,489) (3,954,135) -- -- (9,196,624)
Net income (loss) (21,744,592) (4,911,204) (306,592) -- (26,962,388)
Assets 16,671,656 3,399,634 1,302,268 -- 21,373,558
Depreciation &
Amortization 5,405,885 4,094,812 -- -- 9,500,697
Additions to long-
lived assets 138,618 383,232 -- -- 521,850
</TABLE>
19
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
NOTE 7 - Industry Segment Information (continued)
<TABLE>
<CAPTION>
Three Months ended September 30, 2000
Long-haul Truck Liability
Trucking Brokerage Insurance Inter-segment Total
---------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Sales $ 10,585,971 $ 6,050,936 $ 139,821 $ (236,399) $ 16,539,629
Operating (loss) (13,887,787) (916,329) (615,501) -- (15,419,617)
Net interest (329,533) (190,361) -- -- (519,894)
Pretax income (loss) (15,045,524) (1,106,710) (615,501) -- (16,767,735)
Loss from discontinued
operations (3,912,292) (3,954,135) -- -- (4,345,427)
Net income (loss) (15,436,816) (5,060,845) (615,501) -- 21,113,162)
Assets 16,671,656 3,399,634 1,302,268 -- 21,373,558
Depreciation &
Amortization 5,054,645 3,923,779 -- -- 8,978,424
Additions to long-
lived assets 88,181 -- -- -- 88,181
Nine Months ended September 30, 1999
Long-haul Agents' Truck Liability
Trucking Program Brokerage Insurance Intersegment Total
----------------------------------------------------------------------- -------------
Sales $23,195,461 $ 1,459,227 $ 4,521,499 $ 1,485,780 $ (338,978) $ 29,828,018
Operating income 420,589 65,450 266,151 184,978 (101,938) 835,230
Net interest (562,252) (5,250) (4,382) -- (10,473) (582,357)
Pretax income (loss) 231,415 60,200 261,768 184,978 (54,635) 683,726
Net income 231,415 60,200 261,768 184,978 (54,635) 683,726
Assets 22,368,773 1,328,057 1,778,527 2,170,161 -- 27,645,518
Depreciation &
Amortization 1,687,537 9,593 34,791 -- -- 1,731,921
Additions to long-
lived assets 768,766 483,000 -- -- -- 1,251,766
</TABLE>
20
<PAGE>
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
NOTE 7 - Industry Segment Information (continued)
<TABLE>
<CAPTION>
Three Months ended September 30, 1999
Long-haul Agents' Truck Liability
Trucking Program Brokerage Insurance Intersegment Total
----------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 8,482,941 $1,459,227 $ 2,008,086 $ 548,566 $( 494,971) $ 12,003,849
Operating Income (loss) 72,622 64,450 175,661 83,557 (101,938) 295,352
Net interest expense (185,006) (5,250) (3,156) -- (12,898) (206,310)
Pretax income (loss) 109,482 60,200 171,278 83,557 (54,635) (369,882)
Net income (loss) 109,482 60,200 171,278 83,557 (54,635) (369,882)
Assets 22,368,773 1,328,057 1,778,527 2,170,161 -- 27,645,518
Depreciation &
Amortization 553,729 9,593 21,882 -- -- 585,204
Additions to long-
lived assets 524,093 483,000 -- -- -- 1,007,093
</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.
21
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,2000
U.S. TRUCKING, INC. AND SUBSIDIARIES
NOTE 9 - Bankruptcy
On November 29, 2000, four of the Registrant's operating subsidiaries, Gulf
Northern Transport, Inc., ProStar, Inc., UST Logistics, Inc. and Mencor, Inc.
(the "petitioning subsidiaries") filed a Voluntary Petition under Chapter 11 of
the Bankruptcy Code (the "Petition") with the United States Bankruptcy Court,
Middle District of Florida, Jacksonville Division. As of this date, no plan of
reorganization has been filed by the Registrant's subsidiaries, however, a
trustee has been appointed. On December 1, 2000 U.S. Trucking, Inc., issued a
press release in which it announced: (i) the filing of the Petition, and (ii)
the signing of an agreement with its primary lender for repayment of any
deficiencies, which may be left after liquidation of the collateral. The
agreement provides for payment of liquidation of the collateral. The agreement
provides for payment of the deficiency over three years, including payments
based upon a fixed percentage of the Company's ongoing revenue. The accompanying
financial statements contain adjustments resulting from the bankruptcies based
upon management's best estimates as to the recoverability of assets and
obligations for liabilities incurred.
NOTE 10 - Discontinuance of Operations
During the quarter ended June 30,2000, U.S. Trucking effected a plan to
discontinue the agency portion of its truckload segment excluding intermodal. As
a result of the decision, the Company recorded adjustments to the assets and
liabilities of the business as well as a provision to cover estimated operating
losses expected during the period it will take to wind down operations. During
the third quarter ended September 30,2000, the Company effected a plan to
discontinue the truck brokerage and long-haul trucking businesses. Consequently,
the Company adjusted the carrying value of the assets and liabilities of those
business operations and recorded a change to earning of $4,345,427.
22
<PAGE>
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 transportation, logistics and inter-modal and transportation
service industry.
Assumptions relating to forward-looking statements involve judgments 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.
23
<PAGE>
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 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 logistics (brokerage) company.
During 1999, we acquired Prostar, Inc. ( a brokerage company ) and merged
Mencor, Inc. into Prostar, Inc.
U.S. Trucking, Inc.'s operating results are driven by the truckload business of
its operating subsidiary, Gulf Northern Transport, Inc., our Captive auto
liability insurance program, it's brokerage operations (ProStar Inc.),
implementation of an agent program, and the purchase of a inter-modal line of
business. The Company reported a loss for the period ending September 30, 2000
and a profit for period ending September 30, 1999.
On December 31, 1999, the Company effected a plan to transfer the over the road
truckload operations to One Way Logistics, Inc. This plan was not consummated.
However, in January 2000, U.S. Trucking, Inc's., subsidiary Gulf Northern
Transport, Inc. signed a master agent agreement with One Way Logistics, Inc. to
manage Gulf Northern's over the road operations. 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 operation service provided.
24
<PAGE>
Also in January 2000, U.S. Trucking subsidiary Gulf Northern Transport, Inc.
signed a master agent agreement with Carolina Global, Inc. to manage Gulf
Northern's container operations. Under the terms of the agreement, Gulf Northern
will pay 90% of revenues generated by its over the road operations to Carolina
Global, Inc. in exchange for operation service provided.
During the 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 nine months ended
September 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 September 30, 2000 consolidated balance sheet and the
consolidated statements of operations and cash flows for the nine 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 nine and three months ending September 30, 2000 and 1999 as a
percentage of operating revenues.
9 mos. Ending 9 mos. Ending
30-Sept-00 30-Sept-99
OPERATING REVENUES 100.0% 100.0%
PURCHASED TRANSPORTATION & RENTALS 85.9% 42.2%
OPERATING SUPPLIES AND MAINTENANCE 0.2% 3.6%
BAD DEBTS 13.3% 1.9%
FUEL 0.1% 8.1%
OTHER OPERATING EXPENSES 0.7% 0.0%
INSURANCE AND CLAIMS 6.6% 5.6%
DEPRECIATION AND AMORTIZATION 4.2% 5.8%
TAXES AND LICENSES 0.4% 1.4%
OCCUPANCY COSTS 0.4% 0.8%
SALARIES, WAGES AND BENEFITS 5.2% 21.5%
ADMINISTRATIVE EXPENSES 4.8% 6.0%
---- ----
TOTAL EXPENSES 121.8% 96.9%
OPERATING INCOME -21.8% 3.1%
INTEREST EXPENSE -2.6% -1.9%
GAIN ON SALE OF EQUIPMENT -0.8% 1.3%
INTEREST INCOME 0.3% 0.0%
OTHER INCOME 0.0% 0.1%
INCOME ( LOSS ) BEFORE INCOME TAXES -25.1% 2.3%
PROVISION FOR INCOME TAXES 0.0% 0.0%
NET INCOME FROM CONTINUING OPERATIONS -25.1% 2.3%
LOSS FROM DISCONTINUED OPERATIONS -22.3% 0.0%
NET INCOME ( LOSS ) -47.4% 2.3%
25
<PAGE>
3 mos. Ending 3 mos. Ending
30-Sept-00 30-Sept-99
OPERATING REVENUES 100.0% 100.0%
PURCHASED TRANSPORTATION & RENTALS 91.5% 45.8%
OPERATING SUPPLIES AND MAINTENANCE 0.4% 3.9%
BAD DEBTS 46.2% 0.0%
FUEL 0.1% 7.9%
OTHER OPERATING EXPENSES 2.5% 2.3%
INSURANCE AND CLAIMS 8.9% 5.3%
DEPRECIATION AND AMORTIZATION 11.2% 4.8%
TAXES AND LICENSES 0.8% 1.5%
OCCUPANCY COSTS 0.4% 0.7%
SALARIES, WAGES AND BENEFITS 6.2% 18.9%
ADMINISTRATIVE EXPENSES 6.4% 6.1%
---- ----
TOTAL EXPENSES 172.5% 97.6%
OPERATING INCOME -72.5% 2.4%
INTEREST EXPENSE -3.9% -1.8%
GAIN ON SALE OF EQUIPMENT -4.9% 2.3%
INTEREST INCOME 0.1% 0.0%
OTHER INCOME 0.0% 0.0%
INCOME ( LOSS ) BEFORE INCOME TAXES -83.2% 3.0%
PROVISION FOR INCOME TAXES 0.0% 1.2%
NET INCOME FROM CONTINUING OPERATIONS -80.7% 3.0%
LOSS FROM DISCONTINUED OPERATIONS -4.7% -0.0%
NET INCOME ( LOSS ) -130.8% 3.0%
Three months ended September 30, 2000 compared to September 30, 1999
Operating revenues. Total operating revenue increased from $12.0 million for the
three months ended September 30, 1999 to $16.4 million, or 36.6 % for the three
months ended September 30, 2000. The reason for this increase is the overall
increase of business within all of the operating segments of the company,
including truckload, brokerage and inter-modal.
Purchased transportation and rentals. Purchased transportation and rentals
increased from $5.50 million for the three months ended September 30, 1999 to
$15.05 million or 173.6% for the three months ended September 30, 2000. As a
percentage of operating revenue, purchased transportation and rentals increased
from 45.8% for the three months ended September 30, 1999 to 91.5% for the three
months ended September 30, 2000. Changes from converting the truckload and
inter-modal operations to a 90% agency program 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.
26
<PAGE>
Salaries, wages and benefits. Salaries, wages and benefits decreased from $2.26
million for the three months ended September 30, 1999 to $1.02 million or 54.8%
for the three months ended September 30, 2000. Salaries, wages and benefits as a
percentage of total operating revenue decreased from 18.8% for the three months
ended September 30, 1999 to 6.2% for the three months ended September 30, 2000.
The decrease as a percentage of operating revenue is attributed to the change in
revenue mix discussed in the preceding paragraph.
Fuel. Fuel expense decreased from $948 thousand for the three months ended
September 30, 1999 to $25 thousand for the three months ended September 30,
2000.The decrease is attributed to the conversion of truckload operations to a
90% agency program in which most operating costs other than agents settlements
are eliminated.
Operating supplies and maintenance. Operating supplies and maintenance decreased
from $477 thousand for the three months ended September 30, 1999 to $80 thousand
for the three months ended September 30, 2000. The decrease is attributed to the
change in mix of revenues mentioned in previous paragraphs. By converting the
truckload operations to a 90% agency program maintenance on all company
equipment was shifted to the master agent
Insurance and claims. Insurance and claims increased from $644 thousand for the
three months ended September 30, 1999 to $1.47 million or 99.6 % for the three
months ended September 30, 2000. Insurance and claims as a percentage of total
operating revenue increased from 5.37% for the three months ended September 30,
1999 to 12.32% for the three months ended September 30, 2000. The increase as a
percentage of operating revenue can be attributed to the increase in cost of the
captive insurance program as well as increase in cargo claims in the inter-modal
operations.
Taxes and licenses. Taxes and licenses decreased from $181 thousand for the
three months ended September 30, 1999 to $131 thousand for the three months
ended September 30, 2000. The decrease is attributed to the conversion of
truckload and inter-modal operations to a agency program.
Depreciation and amortization. Depreciation and amortization increased from $585
thousand for the three months ended September 30, 1999 to $1.84 million or 42.5%
for the three months ended September 30, 2000. Depreciation and amortization as
a percentage of total operating revenue increased from 4.87% for the three
months ended September 30, 1999 to 11.23% for the three months ended September
30, 2000.
General and administrative. General and administrative expenses increased from
$740 thousand for the three months ended September 30, 1999 to $1.06 million or
43.2 % for the three months ended September 30, 2000. General and administrative
as a percentage of total operating revenue increased from 6.17% for the three
months ended September 30, 1999 to 6.45% for the three months ended September
30, 2000.
27
<PAGE>
Operating income(loss). Operating income decreased from $295 thousand or 2.46 %
of total operating revenues for the three months ended September 30, 1999 to a
operating loss of $12.35 million or (75.09) % of total operating revenue for the
three months ended September 30, 2000. This decrease as a percentage of total
operating revenue can be attributed to the provisions of bad debt and the write
down of goodwill and assets of discontinued operations.
Interest. Interest expense increased from $217 thousand for the three months
ended September 30, 1999 to $653 thousand or 200.9% for the three months ended
September 30, 2000. Interest expense as a percentage of total operating revenue
increased from 1.81% for the three months ended September 30, 1999 to 3.97% for
the three months ended September 30, 2000. The primary reason for the increase
in total is interest and fees paid in relation to our revolving credit line
facility with GE Capital Business Credit.
Discontinued Operations.
Net income decreased from zero for the three months ended September 30, 1999 to
a net loss of $7.82 million for the three months September 30, 2000. The primary
factors that caused the loss is the discontinued operations and reduction in
operating income discussed previously.
Nine months ended September 30, 2000 compared to September 30, 1999
Operating revenues. Total operating revenue increased from $29.82 million for
the nine months ended September 30, 1999 to $56.81 million, or 90.50% for the
nine months ended September 30, 2000. The reasons for this increase are the
overall increases in revenues within all of the operating subsidiaries.
Purchased transportation and rentals. Purchased transportation and rentals
increased from $12.58 million for the nine months ended September 30, 1999 to
$48.85 million or 288.3% for the nine months ended September 30, 2000. As a
percentage of operating revenue, purchased transportation and rentals increased
from 42.2% for the nine months ended September 30, 1999 to 85.9% for the nine
months ended September 30, 2000. Changes from converting the truckload and
inter-modal 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.
Salaries, wages and benefits. Salaries, wages and benefits decreased from $6.40
million for the nine months ended September 30, 1999 to $2.96 million or 53.7%
for the nine months ended September 30, 2000. Salaries, wages and benefits as a
percentage of total operating revenue decreased from 21.4% for the nine months
ended September 30, 1999 to 5.21% for the nine months ended September 30, 2000.
The decrease as a percentage of operating revenue is attributed to the change in
revenue mix within the inter-modal brokerage and truckload segments.
28
<PAGE>
Fuel. Fuel expense decreased from $2.40 million for the nine months ended
September 30, 1999 to 25 thousand for the nine months ended September 30,
2000.The decrease is attributed to the conversion of truckload operations to a
90% agency program in which most operating costs other than agents settlements
are eliminated or shifted to the master agent.
Operating supplies and maintenance. Operating supplies and maintenance decreased
from $1.10 million for the nine months ended September 30, 1999 to $112 thousand
for the nine months ended September 30, 2000. The decrease is attributed to the
change in mix of revenues mentioned in previous paragraphs. By converting the
truckload operations to a 90% agency program maintenance on all company
equipment became a cost to the master agent and eliminated.
Insurance and claims. Insurance and claims increased from $1.69 million for the
nine months ended September 30, 1999 to $3.75 million or 121.8% for the nine
months ended September 30, 2000. Insurance and claims as a percentage of total
operating revenue increased from 5.6% for the nine months ended September 30,
1999 to 6.6% for the nine months ended September 30, 2000. The increase as a
percentage of operating revenue can be attributed to an increase in the captive
insurance program cost, and an increase in claims and lower brokerage revenues
than anticipated.
Miscellaneous operating expenses. Miscellaneous operating expenses increased
from zero for the nine months ended September 30, 1999 to $415 thousand or 0.8%
for the nine months ended September 30, 2000. Miscellaneous operating expenses
as a percentage of revenue decreased from zero for nine months ended September
30, 1999 to 0.8% for the nine months ended September 30, 2000.
Taxes and licenses. Taxes and licenses decreased from $416 thousand for the nine
months ended September 30, 1999 to $215 thousand or 48.3% for the nine months
ended September 30, 2000 . Taxes and licenses as a percentage of total operating
revenue decreased from 1.39% for the nine months ended September 30, 1999 to
0.3% for the nine months ended September 30, 2000. The decrease as a percentage
of total operating revenue is attributed to the conversion of truckload and
inter-modal operations to a 90% agency program.
Depreciation and amortization. Depreciation and amortization increased from
$1.73 million for the nine months ended September 30, 1999 to $2.39 million or
38.1% for the nine months ended September 30, 2000. Depreciation and
amortization as a percentage of total operating revenue increased from 5.6% for
the nine months ended September 30, 1999 to 6.6% for the nine months ended
September 30, 2000.
General and administrative. General and administrative expenses increased from
$1.81 million for the nine months ended September 30, 1999 to $2.73 million or
50.8% for the nine months ended September 30, 2000. General and administrative
as a percentage of total operating revenue decreased from 6.0% for the nine
months ended September 30, 1999 to 4.8% for the nine months ended September 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.
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Operating income(loss). Operating income(loss) increased from $835 thousand or
2.8% of total operating revenues for the nine months ended September 30, 1999 to
$(12.51) million or (22.0)% of total operating revenue for the nine months ended
September 30, 2000. This increase as a percentage of total operating revenue can
be attributed to the chare for bad debts, the write down of good will off
discontinued operations, the chare for loss on sale of equipment and increases
in interest and fees.
Interest. Interest expense increased from $596 thousand for the nine months
ended September 30, 1999 to $1.48 million or 99.6% for the nine months ended
September 30, 2000. Interest expense as a percentage of total operating revenue
increased from 1.9% for the nine months ended September 30, 1999 to 2.6% for the
nine months ended September 30, 2000. The primary reason for the increase in
total is the interest paid in relation to our revolving credit line facility.
Discontinued Operations.
Net income decreased from $683 thousand for the nine months ended September 30,
1999 to a net loss of $26.96 million for the nine months September 30, 2000. The
primary factors that caused our loss for the nine months ended September 30,
2000, was the loss from discontinued operations, the write down of bad debts,
the loss on sale of equipment, increases in our interest and fee cost and the
overall reduction in operating income.
Acquisition of Prostar, Inc. and Fulmer Transportation
Submission of Audited Financial Statements
In May 1999, U.S. Trucking acquired 100% of the common stock of Prostar, Inc.
and in September 1999, U.S. Trucking acquired certain assets and liabilities of
Fulmer Transportation, Inc.
In both instances, the acquisitions were contingent upon the accuracy and
validity of certain representations. In the case of Prostar, Inc., the
assertions were completed and validated and the acquisition was successful. In
the case of Fulmer Transportation, however, these contingent factors were
ultimately determined to be not valid and the acquisition was reversed. For
financial reporting purposes, however, Fulmer was determined to be part of U.S.
Trucking's consolidated group for part of the fiscal 1999 and 2000 years and
accordingly, audited financial statements of both Prostar and Fulmer for periods
prior to U.S. Trucking's acquisition are required to be presented.
Management determined that it was not practical to commence these audits
immediately upon the contractual signing of the acquisition agreements and it
was management's intention to commence the audit procedures during the 2000
year. We engaged our auditors to perform the required audits during the summer
of 2000.
Unfortunately, because of the deteriorated relationship with the principals of
Fulmer, the auditors were prohibited from completing their assignment and the
principals have refused any discussion in this regard. Accordingly, it is not
possible to complete the required audit for Fulmer at this time and present the
proper financial statements.
U.S. Trucking's management believes it has the information necessary to complete
the audit of Prostar, but its current financial condition has prevented it from
currently completing this requirement.
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LIQUIDITY & CAPITAL RESOURCES
On November 30, 2000, U.S. Trucking's four operating subsidiaries filed
voluntary petitions for protection under Chapter 11 of the US Bankruptcy code.
These subsidiaries comprised all of the Company's operations so the Company has
had no working capital requirements. While the Company is planning to recommence
a transportation business, which business will require operating capital, it has
not developed a plan for raising such capital, and will not do so until it
determines the nature and scope of its future business activities.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
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) Exhibit 27 - Financial Data Schedule
(b) None.
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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
December 22, 2000 By \s\ Danny L. Pixler
------------------------------------------
Danny L. Pixler
Chief Executive Officer
By \s\ John Ragland
------------------------------------------
John Ragland
Chief Financial Officer
33
