U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ended to
Commission File Number: 33-30123-A
GENERAL PARCEL SERVICE, INC.
(Exact name of small business issuer in its charter)
State of Florida 59-2576629
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8923 Western Way, Suite 22,
Jacksonville, FL 32256
(Address of principal executive offices)
(904) 363-0089
(Issuer's telephone number)
Check whether issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
There were 3,758,671 shares of the Company's common stock
outstanding as of November 8, 1996.
<PAGE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
-----
PART I. FINANCIAL INFORMATION Page Number
-----------
Item 1
- ------
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995. . . . . . 2
Consolidated Statements of Earnings for
the three months ended September 30, 1996
and 1995 and for the nine months ended
September 30, 1996 and 1995 . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for
the three months ended September 30, 1996
and 1995. . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . 5
Item 2
- ------
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 6
PART II. OTHER INFORMATION . . . . . . . . . . . . .13
Item 6
- ------
Exhibits and Reports on Form 8-K
(A) Reports on Form 8-K
(B) Exhibits:
Exhibit 10, Material Contracts
Exhibit 27, Financial Data Schedule
<PAGE>
<TABLE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 8,233 $ 6,739
Accounts receivable (net of allowance for doubtful
accounts of $7,543 and $7,846 at September 30, 1996
and December 31, 1995 respectively) 2,313,168 2,068,975
Other current assets 552,001 380,090
-------------- -------------
Total current assets 2,873,402 2,455,804
-------------- -------------
Long term assets:
Equipment, at net book value 6,904,558 7,593,626
Goodwill 962,774 1,015,784
Other assets 221,932 187,251
-------------- -------------
Total long term assets 8,089,264 8,796,661
-------------- -------------
Total assets $ 10,962,666 $ 11,252,465
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short term borrowings $ 1,679,689 $ 1,599,000
Current obligations under capital leases 930,818 860,309
Current maturities of long-term debt 311,984 518,842
Accounts payable 2,083,366 1,953,468
Accrued expenses and other current liabilities 1,248,741 738,404
-------------- -------------
Total current liabilities 6,254,598 5,670,023
-------------- -------------
Long term liabilities:
Long-term obligations under capital leases 1,035,250 1,605,802
Long-term debt 677,919 3,910,808
Convertible debentures 300,000 300,000
------------- -------------
Total long term liabilities 2,013,169 5,816,610
------------- -------------
Total liabilities 8,267,767 11,486,633
------------- -------------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 800,000 shares authorized,
340,000 issued and outstanding at September 30, 1996,
100,000 issued and outstanding at December 31, 1995,
liquidation preference $8,000,000. 3,400 1,000
Common stock, $.01 par value, 10,000,000 shares authorized,
3,758,671 shares issued and outstanding at September 30,
1996 and December 31, 1995. 37,586 37,586
Additional paid-in capital 19,387,255 13,389,655
Deficit (16,733,342) (13,662,409)
------------- -------------
Total stockholders' equity (deficit) 2,694,899 (234,168)
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 10,962,666 $ 11,252,465
============= =============
Read accompanying notes.
</TABLE>
2
<PAGE>
<TABLE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended September 30, Six months ended September 30,
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 5,777,825 $ 5,015,484 $ 17,161,818 $ 14,932,303
Operating expenses
Operations salaries & benefits 3,474,389 2,815,491 9,505,179 8,152,980
Fuel 420,591 272,725 1,184,479 863,044
Equipment rental 179,109 3,581 228,558 28,080
Insurance 378,795 478,302 1,091,641 1,452,282
Tires & maintenance 244,505 190,780 665,580 547,768
Depreciation & amortization 442,611 424,447 1,311,063 1,273,144
Facilities expense 443,747 319,540 1,170,520 957,703
Terminal expense 93,903 58,789 204,095 194,151
Purchased transportation 110,954 60,322 304,947 180,604
Other operating costs 86,655 30,196 221,228 125,961
Selling and administrative expense 1,202,323 1,007,007 3,548,927 2,659,313
------------- -------------- -------------- --------------
Total operating expense 7,077,582 5,661,180 19,436,217 16,435,030
------------- -------------- -------------- --------------
Operating income (loss) (1,299,757) (645,696) (2,274,399) (1,502,727)
Interest expense 211,299 205,809 553,234 561,063
------------- -------------- -------------- --------------
Net income (loss) (1,511,056) (851,505) (2,827,633) (2,063,790)
Preferred stock dividend requirement 122,500 43,750 281,529 131,250
------------- -------------- -------------- --------------
Earnings available to common
shareholders $ (1,633,556) $ (895,255) $ (3,109,162) $ (2,195,040)
============= ============== ============== ==============
Net Income (loss) per common
share (primary and fully diluted) $ (0.43) $ (0.24) $ (0.83) $ (0.58)
============= ============== ============== ==============
Weighted average number of common
shares outstanding 3,758,671 3,758,671 3,758,671 3,758,671
============= ============== ============== ==============
</TABLE>
Read accompanying notes.
3
<PAGE>
<TABLE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows (used in) provided by operating activities:
Net loss $ (2,827,633) $ (2,063,790)
Adjustments to reconcile net loss to cash
(used in) provided by operating activities:
Loss on disposal of fixed assets 1,307 2,718
Depreciation and amortization 1,311,063 1,321,511
Changes in assets and liabilities:
Increase in accounts receivable (244,193) (177,484)
Decrease (increase) in other current assets (171,911) 193,989
Increase in other assets (34,681) (5,326)
Increase in accounts payable 889,356 101,428
Increase in accrued expenses 510,337 176,682
-------------- --------------
Total adjustments 2,261,278 1,613,518
-------------- --------------
Net cash (used in) provided by operating activities (566,355) (450,272)
-------------- --------------
Cash flows for investing activities:
Business combination -- (151,674)
Proceeds from disposal of equipment 4,500 --
Purchase of equipment (506,759) (626,055)
-------------- --------------
Net cash used in investing activities (502,259) (777,729)
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 6,000,000 --
Dividends paid on preferred stock (243,300) (175,000)
Repayment of long-term debt (3,439,747) (533,155)
Increase in long-term debt -- 3,000,000
Principal payments under capital lease obligations (568,076) (916,661)
Repayment of short-term debt (3,000,000) (2,500,000)
Increase in short-term borrowings 3,080,689 2,500,000
Increase (decrease) in bank overdraft (759,458) (141,587)
-------------- --------------
Net cash provided by financing activities 1,070,108 1,233,597
-------------- --------------
Increase in cash and cash equivalents 1,494 5,596
Cash and cash equivalents, beginning of period 6,739 5,575
-------------- --------------
Cash and cash equivalents, end of period $ 8,233 $ 11,171
============== ==============
Supplemental cash flow data
Cash paid during the period for interest $ 487,434 $ 489,708
============== ==============
Supplemental schedule of noncash investing and
financing activities
Capital lease and notes payable obligations
incurred for new vehicles and equipment $ 68,033 $ 461,874
============== ==============
Business combination
Fair value of assets acquired $ -- $ 1,408,670
Fair value of liabilities assumed -- (1,256,996)
============== ==============
Net cash payments $ -- $ 151,674
============== ==============
</TABLE>
Read accompanying notes
4
<PAGE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The information presented herein as of September 30, 1996, and
for the three months and nine months ended September 30, 1996
and 1995, is unaudited. The December 31, 1995, balance sheet
data was derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles.
Management's Representation
- ---------------------------
In the opinion of management, all adjustments necessary for a
fair presentation of such consolidated financial statements are
reflected in the interim periods presented. Such adjustments
consisted of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented as
permitted by Form 10-QSB and do not contain certain information
included in the annual consolidated financial statements and
notes of General Parcel Service, Inc. (the "Company").
Net Loss per Common Share
- -------------------------
Net loss applicable to common share is based on the weighted
average number of shares outstanding during the periods
reported. Any assumption of conversion of common stock
equivalents, such as options and warrants, is anti-dilutive and
has not been considered in determining net loss per share or the
weighted average number of shares outstanding.
Preferred Stock
- ---------------
On February 28, 1996, the Board of Directors amended the
Articles of Incorporation to provide for 300,000 shares of Class
A, Series 2 Cumulative Preferred Stock ("Series 2 Preferred").
On March 4, 1996, 120,000 shares were sold for a total price of
$3,000,000 to an Affiliate of the Company's Chairman. Proceeds
from the sale were used to retire $3,000,000 of bank debt. On
June 25, 1996, 60,000 shares were sold at a total price of
$1,500,000 to the same Affiliate of the Company's Chairman.
Proceeds from the June 25, 1996 sale were used to fund working
capital requirements. The Series 2 Preferred shares are
non-voting and generally provide for a conversion into common
stock at a rate of $2.50 per share, and provide for a cumulative
dividend of $1.75 per annum, paid quarterly.
On September 18, 1996, the Board of Directors amended the
Articles of Incorporation to provide for 300,000 shares of Class
A, Series 3 Cumulative Preferred Stock ("Series 3 Preferred").
On September 30, 1996, 60,000 shares were sold for a total price
of $1,500,000 to an Affiliate of the Company's Chairman.
Proceeds from the September 30, 1996 sale were used to fund
working capital requirements. The Series 3 Preferred shares are
non-voting and generally provide for a conversion into common
stock at a rate of $2.50 per share, and provide for a cumulative
dividend of $2.00 per annum, paid quarterly. At September 30,
1996, the Company had preferred stock dividends in arrears of
$210,000.
5
<PAGE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with the
Consolidated Financial Statements including the footnotes and 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
Statements of Earnings, and any trends which may appear to be
inferable therefrom, should not be taken as being necessarily
indicative of trends in operations or results of operations for
any future periods.
Liquidity and Capital Resources
- -------------------------------
Except for the year ending December 31, 1993, the Company has
experienced negative annual operating cash flows since its
inception. Expansion of operations and operating losses since
inception have been funded from six major sources: 1) private
placements of restricted shares of common and preferred stock to
its principal shareholders, 2) proceeds from its initial public
offering of common stock in November, 1989, 3) installment loans
and leases from third party lenders collateralized by equipment
acquired to support business growth, 4) a bank line of credit
collateralized by accounts receivable and stock owned by a major
shareholder and his affiliates, 5) short term borrowings from
banks and shareholders, 6) debt issued and liabilities assumed
in connection with the acquisition of the assets of Transit
Express of Charlotte, Inc. ("TE").
As of September 30, 1996, the Company had raised net equity
capital of $8,145,052 from private placements of restricted
common shares, $8,417,489 from private placements of preferred
stock, $2,715,700 from its initial public offering of November
2, 1989, and $150,000 from the sale of unrestricted common
shares. When combined with cumulative operating losses since
inception of $16,315,042 and $418,300 of dividends paid on
preferred stock, the Company's net stockholders' equity as of
September 30, 1996, was $2,694,899. The Company issued
$6,000,000 of preferred stock during 1996, but has issued no
restricted common stock in 1996.
As of September 30, 1996, the Company was contractually
obligated to repay $4,635,660 of indebtedness to equipment
lessors, banks and other secured lenders and $300,000 to holders
of its convertible debentures. In addition, the Company owed
$2,083,366 to suppliers of goods and services necessary for the
conduct of ongoing business including amounts represented by
issued and outstanding checks, and had accrued salaries and
other expenses of $1,248,741 which were unpaid at September 30,
1996.
Cash used in operations during the nine months ended September
30, 1996 was $566,355 as compared to cash used in operations for
the first nine months of 1995 of $450,272. The net cash used in
operations resulted primarily from the net loss and increases in
accounts receivable, other current assets and other assets.
These were partially offset by the non-cash expenses of
depreciation and amortization, and increases in accounts payable
and accrued expenses. The Company's cash balance increased by
$1,494 during the first nine months of 1996.
6
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Company reduced its borrowings under its bank lines of
credit by a net amount of $2,919,311 during the first nine
months of 1996. The Company repaid its $3,000,000 bank term
loan and increased amounts borrowed under its revolving line of
credit agreement by a net amount of $80,689.
The revolving line of credit agreement provides for interest
payable monthly for advances of $1,000,000 or greater at the
lower interest of the thirty day LIBOR rate plus .75% or the
Bank's prime interest rate less .75% and for all other advances
at the Bank's prime interest rate less .75%. The revolving
credit agreement is collateralized by the Company's accounts
receivable and certain stock certificates pledged by the
Company's Chairman. As of December 31, 1995, the Company had
borrowed $1,599,000 against the line of credit and had
$1,101,000 of credit available. As of September 30, 1996, the
Company has borrowed $1,679,689 against the $3,250,000 line of
credit.
Management's estimates of cash requirements to fund operating
losses and debt service are substantial. All of these factors
raise the question as to whether the Company will continue to
operate as a going concern. While revenues continue to increase
and expense containment measures have been instituted,
management is nonetheless pursuing several strategies for
raising additional resources through debt or equity transactions.
Management believes, but can offer no assurances, that it can
improve operating performance and cash flows through the
following measures:
A large portion of the Company's expenses since inception have
been related to efforts to develop its marketing, distribution
and service network. Prior to 1996, the Company had developed
extensive distribution networks in Florida, Atlanta, Georgia,
and Charlotte, North Carolina. In January, 1996, the Company
opened a terminal in Greensboro, North Carolina to service
existing customers in the Greensboro, Winston-Salem,
Durham and Raleigh areas.
In June, 1996, the Company began an aggressive expansion into
South Carolina and areas not previously served in North
Carolina to fill the void created when another carrier ceased
operations. This carrier had serviced in the Carolinas many
of the customers that the Company serves in Florida and Georgia.
Management believes that the revenues which will be generated by
extending the Company's service area for present customers and
those additional customers it will attract will exceed the cost
of providing such service and will contribute to the absorption
of overhead. To service these new areas the Company has opened
new terminals in the North Carolina cities of Asheville, Fayetteville,
Raleigh and Wilmington, relocated to a larger Charlotte, North
Carolina terminal and opened new terminals in the South Carolina
cities of Charleston, Columbia, Greenville and Florence.
Management has reassessed the operating practices at
each of its terminals and has instituted a number of changes
directed towards cost containment including elimination of
unprofitable delivery routes. Route planning computer hardware
and software is being used to analyze and redesign the routing
structure of each city. Management expects to be able to reduce
7
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
costs through eliminating routes. Strict accountability over
all costs is being implemented at all locations through budgetary
controls and improved reporting of actual operating results to
operations managers. The Board of Directors has engaged KPMG
BayMark Capital LLC ("BayMark") to render certain financial
advisory and investment banking services to the Company. Under the
terms of the engagement, BayMark will familiarize itself to the
extent it deems appropriate and feasible with the business,
operations, properties, financial condition and prospects
of the Company and will advise and assist the Company in
identifying and/or evaluating various strategic or financial
alternatives that may be available to the Company to
enhance shareholder value. Among the alternatives which may be
available to the Company are an acquisition of all or a significant
portion of the assets or equity securities of another corporation
or business entity; a sale of the Company or significant portion of
its equity securities, assets or businesses to one or more
third parties; a recapitalization or restructuring of the Company;
repurchases by the Company of its common stock or other securities;
a public or private sale of additional equity or debt securities of the
Company; or such other form of transaction that BayMark believes may
be of possible interest to the Company.
Should the Company not obtain additional funding through the efforts
of BayMark and not be able to provide cash for its operations to fund
operations losses or debt service, it will rely on the commitment of
one of its major shareholders to fund losses of the Company through
December 31, 1996.
Financial Condition
- -------------------
As of September 30, 1996, the Company's working capital deficit
(current liabilities less current assets) was $3,381,196, which
was an increase of $166,977 from the $3,214,219 working capital
deficit at December 31, 1995. Total current assets of
$2,873,402 included cash of $8,233, accounts receivable of
$2,313,168, prepaid insurance premiums and deposits of $46,810,
inventories of tires, parts, uniforms and supplies of $218,405,
other prepaid expenses of $66,833 and other assets of $219,953.
Current liabilities of $6,254,598 included current obligations
under leases and other lending agreements of $2,922,491, amounts
owed to trade creditors of $2,083,366, including amounts
represented by issued and outstanding checks, and other accrued
expenses of $1,248,741.
Total assets as of September 30, 1996, decreased by $289,799 (or
2.6%) during the nine months ended September 30, 1996 to
$10,962,666. Accounts receivable increased by $244,193 (or
11.8%)
8
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
during the nine months ended September 30, 1996 to $2,313,168.
The number of weeks sales in outstanding receivables was 5.2 at
both September 30, 1996, and December 31, 1995. Other current
assets of $552,001 increased by $171,911 (or 45.3 %).
The net book value of equipment decreased by $689,068 (or 9.1%)
to $6,904,558 during the nine months ended September 30, 1996 as
a result of depreciation of $1,258,053 and disposals of $5,805
exceeding additions of $574,790. The additions included $68,033
for four new delivery vans, $132,000 for capitalized sales and use tax,
$205,270 for life-extending equipment repairs, $106,198 for terminal
equipment and $63,289 for computers and other office equipment.
Total liabilities of $8,267,767 decreased by $3,218,866 (or
28.0%) during the nine months ended September 30, 1996. This
resulted primarily from a decrease in total bank and other debt
by $3,359,058 (or 55.7%) to $2,669,592, an increase in accounts
payable of $129,898 (or 6.7%) to $2,083,366, an increase in
accrued expenses of $510,337 (or 69.1%) to $1,248,741 and a
decrease in obligations under capital leases of $500,043 (or
20.3%).
Capital lease obligations of $1,966,068 at September 30, 1996
decreased during the nine months ended September 30, 1996 as a
result of $568,076 of scheduled principal payments in excess of
$68,033 of new additions. The additions to capitalized leases
were for four new delivery vans. Long term debt of $989,903 at
September 30, 1996 decreased $3,439,747 (or 77.7%) as a result of
repayment of the $3,000,000 term loan and $439,747 of scheduled
principal payments. Short-term borrowings increased by a net of
$80,689 to $1,679,689 (or 5.1%) resulting from repaying $3,000,000
of short term borrowings with proceeds from the sale of preferred
stock and borrowing $3,080,689 to fund operations, service debt
and pay lease payments.
The Company's stockholders' equity increased during nine months
ended September 30, 1996 by $2,929,067 to $2,694,899 at
September 30, 1996, as a result of the sale of $6,000,000 of
preferred stock and was reduced by the net loss for the period
and the payment of $243,300 of dividends on the Company's
preferred stock.
Results of Operations
- ---------------------
The Company's net loss for the nine months ended September 30,
1996 was $2,827,633 compared to a net loss of $2,063,790 for the
same period of 1995. For the quarter ended September 30, 1996
the net loss was $1,511,056 compared to a net loss of $851,505 for
the same period of 1995. Revenue for the nine months ended
September 30, 1996, was $17,161,818, representing an increase of
$2,229,515 (or 14.9%) over revenue for the same period of 1995.
Revenue for the three months ended September 30, 1996, was
$5,777,825, representing an increase of $762,341 (or 15.2%) from
revenue for the same period of 1995.
9
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The net loss for the third quarter of 1996 increased by start-up
expenses attributable to the Company's expansion throughout
North and South Carolina and a provision for assessments
resulting from a Florida sales and use tax audit for the period
December 1990 through April 1996.
Incremental revenue for the 1996 third quarter over the 1995
third quarter attributable to the increased Carolinas operations
was $560,215. Incremental costs were $963,794 comprising
payroll of $417,217, equipment rental expense of $171,963
facilities expense of $97,134, fuel of $50,373, tires and
maintenance expense of $35,893 and other expenses of $191,214.
During the third quarter, a provision was established for the
expected results of a Florida sales and use tax audit. The
additional taxes resulted primarily from vehicles leased to the
Company under capital leases for which the lessor had not
charged the Company sales tax. Included in selling and
administrative expense is an expense for sales tax of $120,000.
Interest expense includes a charge of $70,000 attributable to interest
on the sales and use tax deficiency. The $132,000 balance of the
expected tax liability was capitalized as an additional cost of
the equipment to which it relates.
Total operating expenses (excluding interest expense) were
$19,436,217 for the first nine months of 1996 and $7,077,582 for
the third quarter of 1996. For the first nine months of 1996,
total operating expenses increased $3,001,187 (or 18.3%)
compared to those expenses for the first nine months of 1995.
For the third quarter of 1996, total operating expenses
increased $1,416,402 (or 25.0%) over the third quarter of 1995.
The operating ratio (total operating expenses as a percentage of
revenue), was 113.3% for the nine months ended September 30,
1996 versus 110.1% for the nine months ended September 30, 1995,
and 122.5% for the quarter ended September 30, 1996, compared to
112.9% for the quarter ended September 30, 1995.
Operating salaries and benefits at $9,505,179 increased by
$1,352,199 (or 16.6%) for the first nine months of 1996, and
were 55.4% of revenue compared to 54.6% for the first nine
months of 1995. For the third quarter of 1996, operating
salaries and benefits were $3,474,389, an increase of $658,898
(or 23.4%) over those for the third quarter of 1995. Operating
salaries and benefits were 60.1% of revenue for the third
quarter of 1996 compared to 56.2% for the third quarter of 1995.
Fuel costs at $1,184,479 increased by $321,435 from the first
nine months of 1995 level of $863,044 and were 6.9% of revenue
for the nine months ended September 30, 1996, compared to 5.8%
for the first nine months of 1995. For the third quarter of
1995, fuel costs were $272,725. They increased in the quarter
ended September 30, 1996 by $147,866 to $420,591 and from the 1995
level of 5.4% of revenue to 7.3% of revenue in 1996. These
increases resulted primarily from higher fuel prices
and the addition of new routes in the Carolinas.
10
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Equipment rental expense for the first nine months of 1996
increased to $228,558, up $200,478 from the same nine months
1995 level of $28,080. For the third quarter of 1996, equipment
rental expense was $179,109, representing an increase of
$175,528 over those of the third quarter of 1995. The increase
is attributed to the rental of delivery vehicles needed to
service the expanded customer base and service area in North and
South Carolina.
Insurance costs decreased by $360,641 to $1,091,641 or 6.4% of
revenue in first nine months of 1996 as compared to $1,452,282
or 9.7% of first nine months of 1995 revenue. Insurance costs
decreased by $99,507 to $378,795 or 6.6% of revenue in third
quarter of 1996 as compared to $478,302 or 9.5% of third quarter
1995 revenue. This decrease resulted from the continued success
of the safety program and competitive insurance markets.
Tires and maintenance expense at $665,580 for the first nine
months of 1996, increased by $117,812 from the first nine months
1995 level and represented 3.9% of revenue compared to 3.7% in
the first nine months of 1995. Tires and maintenance expense at
$244,505 increased by $53,725 from the third quarter 1995 level
and represented 4.2% of revenue in the third quarter of 1996, up
from 3.8% for the same 1995 quarter.
The fixed components of operating cost (depreciation and
amortization, facilities and terminal expense) increased in the
first nine months of 1996 over the first nine months of 1995.
Depreciation and amortization was $1,311,063, an increase of
$37,919 (or 3.0%) from the first nine months of 1995, and was
7.6% of revenue in the first nine months of 1996 as compared to
8.5% in the same period of 1995. Depreciation and amortization
was $442,611, an increase of $18,164 (or 4.3%) from the third
quarter of 1995, and was 7.7% of revenue in the third quarter of
1996 as compared to 8.5% in the same period of 1995.
Facilities expense (rent plus utilities) at $1,170,520 increased
by $212,817 (or 22.2%) and was 6.8% of revenue in the first nine
months of 1996 compared to 6.4% in the same period of 1995.
Facilities expense (rent plus utilities) at $443,747 increased
by $124,207 (or 38.9%) and was 7.7% of third quarter 1996
revenue versus 6.4% in the third quarter of 1995. Terminal
expense increased by $9,944 and $35,114 to $204,095 and $93,903
for the nine months and quarter ended September 30, 1995. The
significant increase in facilities expense is due to the
addition of terminals in North and South Carolina.
Purchased transportation, which includes amounts paid to
trucking companies to bring packages from customers'
distribution points outside the Company's geographical operating
area to the Company's terminals for delivery has increased to
$304,947 and $110,954 for the nine months and quarter ended
September 30, 1996, from $180,604 for the nine months ended
September 30, 1995 and $60,322 for the quarter ended September
30, 1995. The increases of $124,343 (or 68.9%) and $56,459 (or
83.9%) resulted from increased shipping volume from those
customers for which the Company pays the cost to transport
packages to its terminals.
11
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Other operating costs increased by $95,267 (or 75.6%) from
$125,961 for the nine months ended September 30, 1995 to
$221,228 for the same 1996 period. For the three months ended
September 30, 1996, other operating costs increased by $56,459
(or 187.0%) to $86,655 from $30,196. These increases resulted
primarily from increased terminal security costs.
Selling and administrative expense at $3,548,927 was 33.5%
higher than the first nine months 1995 level and increased as a
percentage of revenue from 17.8% in the 1995 first nine months
to 20.7% in the 1996 first nine months. For the third quarter of
1996, selling and administrative expense was $1,202,323, an
increase of $195,316 (or 19.4%) over that for the third quarter
1995 and increased as a percentage of revenue from 20.1% in the
1995 third quarter to 20.8% in the 1996 third quarter. The
increases relate primarily to additional legal expenses
associated with the UPS litigation and additional taxes and
licenses.
The Company's operating loss for the nine months ended September
30, 1996 was $2,274,399 compared to an operating loss of
$1,502,727 for the nine months ended September 30, 1995. Its
operating loss for the quarter ended September 30, 1996 was
$1,299,757, compared to an operating loss of $645,696 for the
quarter ended September 30, 1995.
Interest expense for the first nine months of 1996 was $553,234,
which was a decrease of $7,829 from the interest expense for the
first nine months of 1995. Interest expense for the third
quarter of 1996 was $211,299. This amount was $5,490 above the
interest expense for the quarter ended September 30, 1995.
12
<PAGE>
GENERAL PARCEL SERVICE, INC. AND SUBSIDIARY
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-k:
The Company filed a Form 8-K dated September 5, 1996,
reporting that on August 30, 1996, the District Judge
hearing the civil complaint filed by the Company in the United
States District Court for the Northern District of Georgia against
United Parcel Service, Inc. signed an order granting United Parcel
Service's Second Motion for Summary Judgment.
On September 4, 1996, Judgment was entered, ordering and
adjudging "that the plaintiff, General Parcel Service, Inc.,
take nothing, that the action be dismissed, and that the
defendants recover from the plaintiff their costs of this
action."
The Company announced its intention to appeal from that Order
and Judgment to the United States Court of Appeals for the Eleventh Circuit.
The Company filed a Form 8-K dated September 30, 1996,
reporting that on September 30, 1996 an affiliate of the
Chairman of the Board of the Company purchased $1,500,000
of the Class A, Series 3 Cumulative Convertible Preferred
Stock of the corporation.
The Company filed a Form 8-K dated October 30, 1996, stating
that the Registrant's Directors unanimously adopted a resolution
to extend the Warrant Expiration Date until November 16, 1998,
for its 690,000 outstanding Common Stock Purchase Warrants.
Exhibits:
Exhibit 10.1 - Lease Agreement governing GPS's terminal in
Tampa, Florida dated November 30, 1994 and amended on January 26, 1996 and
February 19, 1996 between GPS and Scott Steel, Inc.
Exhibit 27 - Financial Data Schedule
13
Signatures
- ----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
General Parcel Service, Inc.
Date: October 13, 1996
By: /s/E. Hoke Smith, Jr.
----------------------
E. Hoke Smith, Jr.
President and
Chief Executive Officer
By: /s/Wayne N. Nellums
---------------------
Wayne N. Nellums
Vice President,
Chief Financial Officer
14
<PAGE>
L E A S E
This lease, made and entered into this 30th day of
November 1994, between SCOTT STEEL, INC., (referred to
hereinafter as "Lessor"), and GENERAL PARCEL SERVICE, INC., a
Florida Corporation (referred to hereinafter as "Lessee");
W I T N E S S E T H:
Whereas, Lessor owns certain real property located in
Hillsborough County, Florida; and,
Whereas, Lessor has agreed to lease the said property to the
Lessee subject to certain terms and conditions; and,
Whereas, the Lessee desires to lease the said property from the
Lessor, and to that end and in consideration of the premises,
the covenants, terms and conditions to be performed as set
forth hereinafter, the parties have agreed and do agree as
follows:
1. Leased Premises: Subject to the terms and conditions set
forth hereinafter, the Lessor leases to the Lessee and the
Lessee rents hereby from the Lessor a 26,650 square foot
building of the Lessor which is on a 4.2 acre piece of property
at the south side of Oak Fair Boulevard in the Interstate
Business Park in Hillsborough County, Florida (See Exhibit "A".)
2. Term of the Lease: The term of this lease shall be for
a period of fifteen (15) years to commence on the day a
Certificate of Occupancy is issued. Lessor hereby grants to
Lessee two options to renew at five years each.
3. Improvements to the Premises: The Lessor acknowledges
hereby that the Lessee is leasing the building. and property
described herein for the purpose of operating and maintaining a
parcel delivery operation and that certain modifications and/or
improvements to the property may be required. The parties agree
hereby that any modifications and/or improvements to the leased
property, above and beyond those shown on the approved set of
plans hereto attached and called Exhibit "B", will be at
Lessee's sole cost and expense and that said modifications
and/or improvements will comply with all applicable rules, laws,
regulations, and requirements pertaining thereto, including,,
but not limited to, the building codes and zoning ordinances of
the state and local governments. Any such modification and/or
improvement shall-require the consent of the Lessor.
4. Rental: The Lessee hereby agrees to pay to the Lessor
as rental for the leased premises during the first year of the
lease term the sum of $16,312.92 per month, in advance,
together with applicable Florida sales tax and any other tax
which may be levied by any other governmental body on rental
payments, commencing when a Certificate of Occupancy is issued.
The rent shall increase each year according to the Consumer
Price Index for Urban Wage Earners and Clerical Workers - the
U.S. City Average, Bureau at Labor Statistics, U.S. Department
of Labor. At no time will the increase be less than 3% nor
more than 6% of the previous year's rental.
Rent is due on the first of each month and in default on the
10th day of the same month with a 10% late charge due.
The rent set forth herein shall be net to the Lessor. All
costs, expenses, and obligations of any kind and nature relating
to the leased property or any improvements on it shall be paid
by Lessee. The obligation of Lessee shall include, without
limiting the generality of the foregoing, any and all real
property and other taxes which may be assessed on the premises,
insurance premiums and charges for utilities, and such other
expenses, costs, and obligations that may be the subject of
other provisions in this lease.
5. Use of Leased Premises: The Lessee agrees that the
business to be operated by it on the leased premises will not be
operated in such a manner as to constitute a nuisance or a
hazard and that in connection with the operation of the business
the Lessee will observe and comply with all applicable laws,
ordinances, orders and regulations prescribed by lawful
authority having jurisdiction over the business operated in the
leased premises.
The building may be used for the purpose of a parcel delivery
operation and any legal operation incidental thereto. Any other
purpose shall require the consent of the Lessor.
2
6. Repair and Alterations: The Lessor shall
not be obligated to maintain the leased premises or any
improvements located thereon.
The Lessee agrees, at its sole cost and expense, to maintain all
of the improvements including the parking lot pavement and
service areas located on the leased premises. Without limiting
the obligations of the Lessee hereunder, Lessee specifically
agrees that it shall maintain and keep said premises in a good
state of repair and shall promptly repair any damaged portion of
the premises including wiring, plumbing, glass, roof, flooring,
asphalt pavement, and heating and air conditioning systems.
The Lessee, upon completion of the original improvements by
Lessor, may erect such additional improvements on the leased
premises as it deems appropriate and may make such alterations
or major renovations to the existing improvements as it deems
appropriate provided such alterations or renovations do not
disturb the structural integrity of such existing improvements
and further provided that it first obtain the written consent of
the Lessor, as well as any and all governing agencies.
7. Utilities: The Lessee shall be responsible for
electricity, lights, water, heat, telephone, gas, or any other
utility or service consumed in connection with the occupancy of
the leased premises by the Lessee.
8. Signs: The Lessee shall have the right to erect and
maintain such sign or signs on the premises as may be permitted
by applicable law.
9. Taxes: The Lessee shall pay, during the lease term, all
ad valorem taxes and any other assessments levied or assessed
against the leased premises by appropriate governmental
authorities, together with all taxes levied against any stock or
merchandise, raw material. furniture, furnishings, equipment,
inventory, and other property located in, on, or upon the leased
.premises. All taxes shall be paid each year before any fine,
penalty, interest, or cost may be added thereto for non-payment
or late payment, and Lessee agrees to provide Lessor with copies
of paid tax receipts.
3
Lessee shall have the right to contest or review by legal
proceedings any such tax assessment, at its own cost and
expense, and if necessary in the name of and with the
cooperation of the Lessor.
10. Liability Insurance; Indemnification: Lessee agrees to
indemnify and save harmless the Lessor from any claim or loss by
reason of an accident or damage to any person or property
happening in or on the demised premises. Lessee shall carry, at
its expense, public liability insurance coverage on all of the
demised premises, naming Lessor as additional insured, in a
company qualified to transact business in the State of Florida,
stipulating limits of liability of not less than $500,000.00 for
an accident affecting any one person; and not less than
$1,000,000.00 for an accident affecting more than one person;
and $100,000.00 property damage. A certificate of such coverage
from the insurer providing 30 days notice to Lessor prior to
cancellation or termination shall be furnished to Lessor.
11. Casualty Insurance: Lessee shall keep all buildings and
improvements on the leased property and all demised personal
property fully insured with insurance companies approved by
Lessor and authorized to do business in the State of Florida,
for protection against all loss or damage to that property by
fire and extended coverage; for all risk coverage. "Extended
Coverage" means the broadest coverage that from time to time is
contained and included in the then prevailing definition that
the insurer applies to the concept of extended coverage. In the
event of loss, all policies shall be payable jointly to "Lessor
and Lessee as its interests may appear. Casualty insurance
shall be for the full replacement value of buildings and/or
improvements and coverage amount shall require the written
approval of the Lessor.
Lessee shall also cause, immediately upon request of the Lessor,
the inclusion as an insured in any such insurance policy the
name of any mortgagee lending money to Lessor for any
4
improvements on the property.
12. Fire : In the event the premises shall be totally
destroyed or damaged to any extent by fire or other casualty,
Lessor agrees to proceed promptly and without expense to Lessee
to repair the damage or restore the improvements to the extent
of any insurance payments made to Lessor on account of said.
fire or other casualty. The said restoration of improvements
will be made by Lessor with reasonable promptness.
No damage or destruction to or of any building or improvement by
fire or any other casualty shall entitle Lessee to surrender
possession of the premiums or to terminate this lease, or to
violate any of its provisions or to cause any abatement or
rebate in the rent then due or thereafter becoming due under its
terms. If this lease is canceled for Lessee's default at any
time while there remains outstanding any obligation from any
insurance company to pay for the damage or any part of the
damage, the claim against the insurance company shall become the
absolute and unconditional property of Lessor upon cancellation
of the lease.
13. Mortgage Payments: As long as Lessee is not in default
under this lease, Lessor shall pay all installments of principal
and interest owing on any mortgage encumbering the property as
those payments come due. If Lessor does not make any payment
required by any mortgage encumbering the property as that
payment comes due and within the grace period required of the
mortgage, if any, Lessee may cure Lessor's default by making
such payment and crediting the same against the next installment
at rental due hereunder.
14. Eminent Domain: If all or any part at the leased premises,
including the building or other improvements, shall be taken
under a power of eminent domain, the entire compensation or
proceeds awarded for the taking of the land and all severance
damage shall belong to Lessor and the entire compensation or
proceeds awarded for the taking of the buildings and
improvements shall belong to Lessor. If the taking is to such
5
an extent that it is impracticable for Lessee to continue the
operation of its business on the leased premises, the lease, at
the option of the Lessee, shall terminate. If Lessee elects not
to exercise its right and option to terminate, the lease shall
continue in full force and effect except that the rental due
hereunder shall be reduced in a manner which is fair and
reasonable.
Nothing herein shall prevent the Lessor or the
Lessee from seeking any and all damages sustained from the
condemning authority by reason of the exercise of the power of
eminent domain.
In the event the condemnation or taking is to such an extent
that it is impracticable for Lessee to continue the operation of
its business on the leased premises and Lessee elects to
terminate the lease, Lessee shall notify Lessor of its election
to terminate within ten (10) days after the official notice of
condemnation is given to Lessee.
15. Default: It is agreed that in the event at any time
default should be made by the Lessee in the payment of any rent
due upon the day when the same shall become due and payable and
such default shall continue for thirty (30) days, or in case
default shall be made by the Lessee in the performance of any of
the other terms, conditions or covenants of said lease by said
Lessee to be performed, and said default shall continue for a
period of thirty (30) days, the Lessor may enter into and upon
the demised premises or any part thereof and repossess the same
with or without terminating this lease, and without prejudice to
any of its remedies for rents or breach of covenant, and in any
such event, may, at its option, terminate said lease by giving
written notice of its election so to do, or may, at its option,
let the premises or any part thereof as the agent of the Lessee,
or otherwise (giving Lessee credit on all amounts due hereunder
for rents collected for the account of Lessee). The foregoing
rights and remedies given to the Lessor are and shall be deemed
to be cumulative, and the exercise of one shall not be deemed to
be an electron, excluding the exercise by the Lessor at any
6
other time of a different or inconsistent remedy, and shall be
deemed to be given to the Lessor in addition to any other and
further rights granted to the Lessor by the terms of any
paragraph herein, or by law, and the failure upon the part of
the Lessor at any time to exercise any rights or remedy hereby
given to them shall not be deemed to operate as a waiver by them
of its right to exercise such right or remedy at any other or
future time. The Lessee, or its successors or assigns, shall
pay all costs, expenses, or charges including a reasonable
attorney's fee in any proceeding begun or had to enforce the
provisions of this lease or in collecting the sums secured
hereby, and the same shall become a part of the said sum so
secured.
It is further understood that should Lessee default under the
terms of this lease, that Lessor will exercise its right of
assignment at the property and take ownership at the same.
16. Bankruptcy: The Lessee covenants and agrees that if, at
any time Lessee or any guarantor of this lease is adjudged a
bankrupt or insolvent under the laws of the United States or of
any state, or makes a general assignment for the benefit of
creditors, or if a receiver of the property of the Lessee is
appointed and shall not be discharged; within 30 days after such
appointment, then the Lessor may, at its option, declare the
term of this lease at an end and shall forthwith be entitled to
immediate possession of the premises.
17. Subordinate: The Lessee agrees that this lease shall,
at all times, be subject and subordinate to the lien of any
first mortgage (which term shall include all security
instruments) that may be placed on the demised premises by the
Lessor; and Lessee agrees, upon demand, to execute any
instrument as may be required to effectuate such subordination.
Notwithstanding anything to the contrary set forth in this
lease, neither Lessor nor Lessee shall terminate this lease nor
shall Lessee abate, withhold, reduce or offset payment of the
.rental for default or violation of this lease during its term
while a first mortgage, its successors or
7
assigns, has title to the premises acquired by foreclosure of
such mortgage or by deed in lieu of foreclosure.
18. Title to Premises: Lessor covenants that it owns the
property leased hereunder and has authority to enter into this
lease agreement with Lessee.
19. Identity of Interest: The execution of this lease or the
performance of any act pursuant to the provisions hereof shall
not be deemed or construed to have the effect of creating
between Lessor and Lessee the relationship of principal and
agent or of a partnership or of a joint venture and the
relationship between them shall be and remain only that at
Lessor and Lessee.
20. Notices and Reports: Any notice, report, statement,
approval., consent, designation, demand or request to be given
and any option or election to be exercised by a party under the
provisions of this lease shall be effective only when made in
writing and delivered (or mailed by registered or certified mail
with postage prepaid) to the other party at the address given
below:
Lessor:
Scott Steel, Inc.
99 Racetrack Road, NW, Suite 300
Fort Walton Beach, FL 32547
Lessee:
General Parcel Service.. Inc.
8923 Western Way
Jacksonville, FL 32256
Provided, however, that either party may designate a different
address from time to time by giving to the other party notice in
writing of the change. Rental payments to the Lessor shall be
made by the Lessee to the Lessor at the above address.
21. Memoranda of Lease: Lessor and Lessee agree to execute
a memoranda of this lease suitable for recording in the public
records.
22. Entry of Lessor: Lessor may enter the leased premises
during business hours:
(a) to inspect or protect the said premises.
(b) to determine whether the Lessee is complying with the
applicable laws, orders, regulations of any lawful authority
having jurisdiction over the premises or any business conducted
therein.
8
(c) to exhibit the said premises to any prospective
purchaser.
No authorized entry by Lessor shall constitute an eviction of
Lessee or a deprivation of its right or alter the obligation of
the Lessor or create any right in the Lessor adverse to the
interest of the Lessee hereunder.
23. Removal of Property at End of Lease: Lessee shall be
entitled to remove the equipment and other items placed on the
premises by it so long as such removal shall not damage the
premises. As to any other property, Lessor shall be entitled to
all property regarded as real property under Florida law and
Lessee shall be entitled to all property regarded as personal
property under Florida law.
24. Ownership of Improvements at Lease Expiration: At the
expiration of the lease, the improvements on the leased premises
shall become the sole property at the Lessor. Any and all trade
fixtures, signs, and personal property used by the Lessee in the
operation of its business on the leased premises shall remain
Lessee's sole property and Lessee shall have the right to remove
the same provided any damage in removal in repaired by Lessee.
25. Entire Agreement: This lease contains all of the
understandings between the parties hereto relative to the
leasing of the premises herein described, and all prior or
contemporaneous agreements relative thereto have been merged
herein or are voided by this instrument, which may be amended,
modified, altered, changed, revoked or rescinded in whole or in
part only by an instrument in writing signed by each of the
parties hereto.
26. Assignment and Subletting: The Lessee shall not assign this
lease or sublet the leased premises or any portion thereof, or
otherwise transfer any right or interest hereunder without the prior
written consent of the Lessor. 1f the Lessor consents to
9
the assignment, subletting or other transfer of any right of
interest hereunder by the Lessee, such approval shall be limited
to the particular instance specified in the consent and the
Lessee shall not be relieved of any duty, obligation or
liability under the provisions of the lease.
27. Binding Effect: The terms and provisions of this lease
shall be binding on the parties hereto and its respective heirs,
successors, assigns, and personal representatives.
IN WITNESS WHEREOF, the parties have set their hands and seals
the date and year first above written.
Signed sealed and delivered in the presence of:
Scott Steel, Inc.
(signed)
- --------------------------
Mark R. Barrett, President
(signed)
- --------------------------
John L. Scott, Jr.,
Secretary / Treasurer
Chairman of the Board
IN WITNESS WHEREOF, the parties have set their hands and seals
the date and year first above written.
Signed, sealed and delivered in the presence of:
GENERAL PARCEL SERVICE, INC.
(signed)
- --------------------------
E. Hoke Smith, Jr., President
<PAGE>
GUARANTY
The undersigned, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to
induce the Lessor to enter into the foregoing Lease Agreement,
does hereby unconditionally guarantee the performance of all
obligations imposed upon General Parcel Service, Inc.
Dated this 30th day of November, 1994
(signed)
- ----------------------
E. Hoke Smith
(signed)
- ----------------------
T. Wayne Davis
<PAGE>
AMENDMENT TO LEASE
This amendment to lease, made and entered into this 26th day of
January, 1996, between SCOTT STEEL, INC., (referred to
hereinafter as "Lessor"), and GENERAL PARCEL SERVICE, INC., a
Florida Corporation, (referred to hereinafter as "Lessee");
WHEREAS, the above parties entered into a Lease Agreement dated
November 30, 1994, for property and a building in Tampa, Florida;
It is agreed to amend the description of the property listed on
page one (1) to read as follows:
"Lessee rents hereby from the Lessor a 27,850 square foot
building of the Lessor which is on a 5.92 acre piece of property
being Lots 2 and 2, Block 3, U.S. 301, Industrial Park Addition
(See Exhibit "All)."
It is also agreed that the attached Exhibit "All replaces the
one attached to the original lease agreement.
IN WITNESS WHEREOF, the parties have set their hands and seals
the date and year first above written.
Signed, sealed and delivered in the presence of:
SCOTT STEEL, INC.
(Signed)
- --------------------------
Mark R. Barrett, President
IN WITNESS WHEREOF, the parties have set their hands and seals
the date and year first above written.
(Signed)
- --------------------------
John L. Scott, Jr.
Secretary/Treasurer
Chairman of the Board
GENERAL PARCEL SERVICE, INC.
(Signed)
- -------------------------
E. Hoke Smith, Jr., President
GUARANTY REAFFIRMATION
The undersigned, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, do hereby reaffirm
that guaranty of all obligations imposed upon GENERAL PARCEL
SERVICE, INC. under that Lease Agreement dated the 30th day of
November, 1994, and that Amendment to Lease executed by GENERAL
PARCEL SERVICE, INC. on the 29th day of January, 1996, between
GENERAL PARCEL SERVICE, INC., and SCOTT STEEL, INC.
Dated this 19th day of February, 1996.
(Signed)
- -----------------------
E. Hoke Smith, Jr.
(Signed)
- ------------------------
T. Wayne Davis
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the consolidated Statements of Operations and Balance
Sheet and is qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<PERIOD-START> JAN-1-1996
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,233
<SECURITIES> 0
<RECEIVABLES> 2,320,711
<ALLOWANCES> 7,543
<INVENTORY> 0
<CURRENT-ASSETS> 2,873,402
<PP&E> 14,569,575
<DEPRECIATION> 7,665,017
<TOTAL-ASSETS> 10,962,666
<CURRENT-LIABILITIES> 6,254,598
<BONDS> 0
<COMMON> 37,586
0
3,400
<OTHER-SE> 2,653,913
<TOTAL-LIABILITY-AND-EQUITY> 10,962,666
<SALES> 0
<TOTAL-REVENUES> 17,161,818
<CGS> 0
<TOTAL-COSTS> 19,436,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 553,234
<INCOME-PRETAX> (2,827,633)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,827,633)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,827,633)
<EPS-PRIMARY> (0.83)
<EPS-DILUTED> (0.83)
</TABLE>
