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, 1997
[ ] 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
TRANSIT GROUP, 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.)
2859 Paces Ferry, Suite 1740, Atlanta, Georgia 30039
(Address of principal executive offices)
(770) 444-0240
(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 19,018,811 shares of the Company's common stock
outstanding as of November 13, 1997.
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1 - Financial Statements
Consolidated Balance Sheets
as of September 30, 1997 and
December 31, 1996 . . . . . . . . . . . . . . .2
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1997 and 1996 . . . . . . . . . .3
Consolidated Statements of Cash Flows
for the nine months ended September 30,
1997 and 1996 . . . . . . . . . . . . . . . . .4
Notes to Consolidated Financial Statements . . . .5
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . .8
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . 11
Item 6
Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
TRANSIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 834,361 $ 6,455
Accounts receivable, net of
allowance of $195,339 9,883,937 --
Current portion of deferred taxes 367,930 --
Other current assets 2,468,811 27,231
------------ ------------
Total current assets 13,555,039 33,686
Long-term assets:
Equipment, at net book value 24,416,747 4,828
Goodwill 35,319,884 --
Other assets 1,282,979 --
Net long-term assets from discontinued
operations 4,845,653 5,781,602
------------ ------------
Total long-term assets 65,865,263 5,786,430
------------ ------------
Total assets $ 79,420,302 $ 5,820,116
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 9,073,587 $ --
Current maturities of debt 1,846,790 --
Current portion of capitalized leases 6,106,930 --
Accounts payable 3,789,423 --
Accrued expense 4,988,178 --
Net current liabilities from
discontinued operations 11,723,341 3,807,445
Other current liabilities 35,983 --
------------ ------------
Total current liabilities 37,564,232 3,807,445
Long-term liabilities
Long-term debt 5,488,318 --
Long-term obligations under capital
leases 11,302,376 --
Long-term deferred taxes payable 922,523 --
------------ ------------
Total long-term liabilities 17,713,217 --
------------ ------------
Total liabilities 55,277,449 3,807,445
------------ ------------
Common stock issued subject to
put arrangements 8,100,000 --
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value,
800,000 shares authorized, none
issued and outstanding at
September 30, 1997, 420,000 issued
and outstanding at December 31, 1996, -- 4,200
Common stock, $.01 par value,
30,000,000 shares authorized,
11,494,780 shares issued and
outstanding at September 30, 1997,
and 3,758,671 at December 31, 1996. 190,184 37,586
Additional paid-in capital 49,479,521 21,386,455
Deficit (33,626,852) (19,415,570)
------------ ------------
Total stockholders' equity 16,042,853 2,012,671
------------ ------------
Total liabilities and
stockholders' equity $ 79,420,302 $ 5,820,116
============= =============
</TABLE>
Read accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
TRANSIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues
Freight and transportation revenue $ 10,859,233 $ -- $ 10,859,233 $ --
Other income -- -- -- --
------------- ------------ ------------- ------------
Total revenues 10,859,233 -- 10,859,233 --
------------- ------------ ------------- ------------
Expenses
Purchased transportation 4,142,025 -- 4,142,025 --
Salaries, wages and benefits 2,547,342 -- 2,547,342 --
Fuel 1,062,043 -- 1,062,043 --
Operating supplies and expenses 1,137,956 -- 1,137,956 --
Insurance 261,500 -- 261,500 --
Depreciation and amortization expense 816,188 -- 816,188 --
General and administrative expense 422,922 47,077 690,988 280,940
------------- ------------- ------------- ------------
Total operating expense 10,389,976 47,077 10,658,042 280,940
------------- ------------- ------------- ------------
Operating income 469,257 (47,077) 201,191 (280,940)
Interest expense 414,269 -- 414,269 --
------------- ------------- ------------- ------------
Earnings from continuing operations
before income taxes 54,988 (47,077) (213,078) (280,940)
Income taxes attributable to
continuing operations 42,830 -- 42,830 --
------------- ------------- ------------- ------------
Income from continuing operations 12,158 (47,077) (255,908) (280,940)
Discontinued operations:
Loss from discontinued operations -- (1,463,979) (6,114,408) (2,546,693)
Estimated loss on disposal including
provision for operating losses
through disposal date -- -- (7,455,966) --
------------- ------------- ------------- ------------
Net income (loss) 12,158 (1,511,056) (13,826,282) (2,827,633)
Preferred stock dividend requirement -- (122,500) (385,000) (281,529)
------------- ------------- ------------- ------------
Income (loss) to common shareholders $ 12,158 $ (1,633,556) $ (14,211,282) $ (3,109,162)
============= ============= ============= ============
Income (loss) per common share -- basic
and diluted
Continuing operations $ 0.00 $ (0.05) $ (0.08) $ (0.15)
Discontinued operations:
Loss from discontinued operations 0.00 (0.39) (0.73) (0.68)
Estimated loss on disposal 0.00 0.00 (0.89) 0.00
------------- ------------- ------------- ------------
Total $ 0.00 $ (0.44) $ (1.70) $ (0.83)
============= ============= ============= ============
Weighted average number of common
shares outstanding - basic 15,239,087 3,758,671 8,359,543 3,758,671
========== ========== ========== ==========
Weighted average number of common
shares outstanding - diluted 16,938,571 3,758,671 8,359.543 3,758,671
========== ========== ========== ==========
</TABLE>
Read accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
TRANSIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Nine months ended September 30,
1997 1996
<S> <C> <C>
Cash flows (used in) provided by operating
activities:
Net loss from continuing operations $ (255,908) $ (280,940)
Adjustments to reconcile net loss to
cash (used in) provided by operating
activities:
Depreciation and amortization 816,188 1,665
Changes in assets and liabilities:
Decrease in accounts receivable 633,883 --
Decrease in other current assets (309,336) --
Increase in other assets (6,733) --
Decrease in accounts payable (602,275) --
Increase in deferred taxes 142,184 --
Increase in accrued expenses 338,946 --
------------- -------------
Total adjustments 1,012,857 1,665
------------- -------------
Net cash (used in) provided by
continuing operations 756,949 (279,275)
Net cash (used in) discontinued
operations (3,020,194) (287,080)
------------- -------------
Net cash (used in) operating
activities (2,263,245) (566,355)
------------- -------------
Cash flows for investing activities:
Business acquisition (3,897,691) --
Proceeds from disposal of equipment 220,043 4,500
Purchase of equipment (232,337) (506,759)
------------- -------------
Net cash used in investing
activities (3,909,982) (502,259)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of preferred
stock -- 6,000,000
Proceeds from issuance of common stock 6,075,014 --
Dividends paid on preferred stock (666,750) (243,300)
Repayment of long-term debt (842,108) (3,449,226)
Principal payments under capital lease
obligations (1,672,362) (558,597)
Repayment of short-term debt (212,631) (3,000,000)
Increase in short-term borrowings 4,999,356 3,080,689
Decrease in bank overdraft (679,383) (759,458)
------------- -------------
Net cash provided by financing
activities 7,001,136 1,070,108
------------- -------------
Increase in cash 806,540 1,494
Cash, beginning of period 6,455 6,739
------------- -------------
Cash, end of period $ 834,361 $ 8,233
============= =============
Supplemental cash flow data
Cash paid during the period for interest
in discontinued operations $ 446,914 $ 487,434
============= =============
Cash paid during the period for
interest in continued operations $ 414,269 $ --
============= =============
Supplemental schedule of noncash
investing and financing activities
in discontinued operations
Capital lease and notes payable
obligations incurred for
new vehicles and equipment $ 212,896 $ 68,033
============= ==============
</TABLE>
Read accompanying notes.
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The information presented herein as of September 30, 1997, and for
the three and nine months ended September 30, 1997 and 1996 is
unaudited. The December 31, 1996, balance sheet data was derived
from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
1. Basis of Presentation
- -------------------------
The Company's consolidated balance sheet as of September 30, 1997,
it's consolidated statements of operations for the three and nine
month periods ended September 30, 1997 and it's consolidated
statement of cash flows for the nine month period ended September
30, 1997 present the consolidated financial position, results of
operations and cash flows of the Company reflecting the disposal of
the parcel delivery and courier operations (see Note 4) and the
acquisition of four truckload carriers (see Note 5).
These September 30, 1997 financial statements include the consolidated
balance sheets of Transit Group, Inc. ("Transit Group" or the "Company")
and its four acquired subsidiaries, Carolina Pacific Distributors, Inc.
("Carolina Pacific"), Capitol Warehouse, Inc. ("Capitol Warehouse"),
Service Express, Inc. ("Service Express") and Carroll Fulmer Group, Inc.
("Carroll Fulmer") at September 30, 1997 and the results of operations
and cash flows for the following periods:
Company Periods Included
------- ----------------
Carolina Pacific July 12, through September 30, 1997
Capitol Warehouse August 16, through September 30, 1997
Service Express August 16, through September 30, 1997
Carroll Fulmer August 30, through September 30, 1997
The Company's consolidated balance sheet as of December 31, 1996, it's
consolidated statements of operations for the three and nine month periods
ended September 30, 1996 and it's consolidated statement of cash flows for
the nine month period ended September 30, 1996 have been restated to
reflect the disposal of such businesses.
2. Summary of Significant Accounting Policies
- ----------------------------------------------
Management's Representation
- ---------------------------
The accompanying interim consolidated financial statements have
been prepared by the Company in accordance and consistent with the
accounting policies stated in the Company's 1996 Annual Report on
Form 10-KSB and should be read in conjunction with the consolidated
financial statements appearing therein. 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 except for adjustments recorded pursuant to APB 30 (See Note
4). 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 Transit Group.
Corporate Name Change
- ---------------------
The Company formerly known as General Parcel Service, Inc. changed
it's name to Transit Group, Inc. effective June 30, 1997. This name
change reflects the new strategic direction of the Company as it
concentrates it's operations in the truckload motor carrier
industry.
3. Common Stock Sales
- ----------------------
On May 2, 1997, the Company's Chairman, the Company's President and
Chief Executive Officer, certain affiliates of the Company's
Chairman and another individual subscribed to purchase 3,387,187
shares of restricted common stock for cash, cancellation of debt
and assumption of debt in the amount of approximately $5.9 million.
In July 1997, warrants were exercised to purchase 25,000 shares of
common stock for $62,500.
3. Preferred Stock
- -------------------
The holders of the Company's outstanding preferred stock elected to
convert their preferred stock and accrued dividends to common stock
on June 30, 1997. The Company issued 4,323,922 shares of common
stock upon the conversion.
4. Discontinued Operations
- ---------------------------
During the second quarter of 1997, the Company approved a plan to dispose
of it's parcel delivery and courier operations and has executed a contract
for the sale of the parcel delivery business to a company controlled by
Transit Group's Chairman. The sale contract is effective as of September
30, 1997 and administration and legal work is progressing to transfer all
the parcel delivery assets to the purchaser. Under the contract, the
buyer will assume the net liabilities related to the parcel delivery
operations as part of the transaction and will receive shares of the
Company's common stock.
Revenues attributable to the discontinued businesses were $14.7 million
and $17.2 million for the nine months ended September 30, 1997 and 1996,
respectively. The Company has recorded a provision for losses during
the phase-out period of approximately $800,000. A tax benefit has not
been provided on the losses from discontinued operations because it is
more likely than not that a portion or all of the losses may not produce
a tax benefit.
The loss from discontinued operations has been reflected as an APB No. 30
disposal of a segment. The December 31, 1996 consolidated balance sheet,
the consolidated statements of operations for the three and nine month
periods ended September 30, 1996 and the consolidated statement of cash
flows for the nine month period ended September 30, 1996 have been restated
to separately reflect the financial position, results of operations and cash
flows of the discontinued parcel delivery and courier businesses.
5. Business Combinations
- -------------------------
In May 1997, the Company executed letters of intent to acquire four
privately-held trucking companies in separate transactions. The four
companies have combined annual revenues of approximately $100 million
and were purchased by the Company during the third quarter of 1997 for
cash and stock.
On July 11, 1997, the Company consummated the first of its announced
acquisitions by acquiring Carolina Pacific, a privately-held North
Carolina corporation, and the business and related assets operated by
the owners of Carolina Pacific. Pursuant to the Stock Purchase
Agreement executed at closing, Transit Group purchased all of the
outstanding capital stock of Carolina Pacific and the business and
related assets operated and owned by the shareholders of Carolina
Pacific for a purchase price of approximately $10.8 million consisting
of $3.7 million in cash at closing, issuance of 1,733,000 shares of
common stock of the Company to the shareholders of Carolina Pacific
and assumption of approximately $0.6 million of debt.
Carolina Pacific, which has been in business for more than 20 years,
is a truckload carrier based in Highpoint, North Carolina.
On August 15, 1997, Transit Group consummated the acquisition of
Service Express, an Alabama corporation. Pursuant to the Agreement
and Plan of Reorganization executed at closing, a wholly-owned Alabama
subsidiary of Transit Group was merged with and into Service Express
in a reverse triangular merger, with Service Express remaining as the
surviving corporation of the merger. Upon consummation of the merger,
all of the outstanding common stock of Service Express was converted
into 903,226 shares of Transit Group common stock.
In addition, on August 15, 1997, Transit Group consummated the
acquisition of Capitol Warehouse, a Kentucky corporation. Pursuant
to the Agreement and Plan of Reorganization executed at closing, a
wholly-owned Kentucky subsidiary of Transit Group was merged with and
into Capitol Warehouse in a reverse triangular merger, with Capitol
Warehouse remaining as the surviving corporation of the merger. Upon
consummation of the merger, all of the outstanding common stock of
Capitol Warehouse was converted into 641,283 shares of Transit Group
common stock.
Service Express and Capitol Warehouse are truckload carriers based
in Tuscaloosa, Alabama and Louisville, Kentucky, respectively.
On August 29, 1997, Transit Group consummated the acquisition of Carroll
Fulmer, a Florida corporation. Pursuant to the Agreement and Plan of
Reorganization executed at closing, Carroll Fulmer merged with and
into Transit Group Sub., Inc., a wholly-owned Florida subsidiary of
Transit Group (the "Subsidiary"), in a forward triangular merger, with
the Subsidiary remaining as the surviving corporation of the merger.
Upon consummation of the merger, all of the outstanding common stock of
Carroll Fulmer was converted into 4,166,666 shares of Transit Group
common stock, and the Subsidiary's name was changed to Carroll Fulmer
Group, Inc.
Carroll Fulmer is a truckload carrier based in Groveland, Florida.
<PAGE>
The following unaudited pro forma combined results of operations of the
Company for the three and nine months ended September 30, 1997 and 1996
account for all four acquisitions as if they had occurred on January 1,
1997 and 1996, respectively. The pro forma results give effect to the
amortization of goodwill, the effects of additional interest expense
and certain other adjustments.
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Results of Operations
For the Three and Nine Months Ended September 30, 1997 and 1996
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $ 25,164,817 $ 19,006,572 $ 80,230,494 $ 64,428,492
Income (loss) from
continuing operations (61,159) (218,795) (255,908) (794,640)
Discontinued operations:
Loss from discontinued
operations -- (1,463,979) (6,114,408) (2,546,693)
Estimated loss on disposal
including provision for
operating losses through
disposal date -- -- (7,455,966) --
------------ ------------ ------------ ------------
Net loss (61,159) (1,682,774) (13,826,282) (3,341,333)
Preferred stock dividend
requirement -- (122,500) (385,000) (281,529)
------------ ------------ ----------- ------------
Loss to common shareholders $ (61,159) $ (1,805,274) $(14,211,282) $ (3,622,862)
Loss per common share -- basic
and diluted:
Continuing operations $ (0.00) $ (0.03) $ (0.04) $ (0.09)
Discontinued operations:
Loss from discontinued
operations (0.00) (0.16) (0.42) (0.23)
Estimated loss on disposal (0.00) (0.00) (0.51) --
------------ ------------ ------------ ------------
Total $ (0.00) $ (0.16) $ (0.97) $ (0.32)
============ ============ ============ ============
Weighted average number of
shares -- basic 19,018,145 11,202,180 14,651,275 11,202,180
========== ========== ========== ==========
Weighted average number of
shares -- diluted 20,717,629 11,202,180 14,651,275 11,202,180
========== ========== ========== ==========
</TABLE>
The above pro forma statements do not purport to be indicative of the results
of operations which would have occurred had the acquisitions been made on
January 1, 1997 or 1996.
<PAGE>
TRANSIT GROUP, 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 Operations, 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.
Comments in this Management's Discussion and Analysis of Financial
Condition and Results of Operations regarding the Company's
business which are not historical facts are forward looking
statements that involve risks and uncertainties. Among these risks
are the Company is in a highly competitive business, has a history
of operating losses, and is pursuing a growth strategy that relies
in part on the completion of acquisitions of companies in the
trucking industry. There can be no assurance that in its highly
competitive business environment, the Company will successfully
improve its operating profitability or consummate such
acquisitions.
The following discussion and analysis reflect the Company's
financial position, results of operations and cash flows as
restated to reflect the disposal of the parcel delivery and courier
operations in accordance with APB No. 30.
Liquidity and Capital Resources
- -------------------------------
The Company has incurred substantial operating losses and cash flow
deficits since inception. From September 1985 through September 30,
1997, the Company had accumulated a deficit from operating losses
of $32,288,048. As of September 30, 1997, the Company had raised
$57,769,705 from (i) private placements of preferred stock, (ii)
its initial public offering of November 2, 1989, (iii) the sale of
restricted and unrestricted common shares and has paid dividends on
its preferred stock of approximately $1,338,804 and (iv) stock
issued in connection with the acquisition of the four truckload
carriers. As a result of equity placements, dividends on preferred
stock and cumulative losses, the stockholders' equity as of
September 30, 1997, was $16,042,853, and common stock issued subject
to put arrangements was $8,100,000.
Management believes, but can offer no assurances, that it can
improve operating performance and cash flows through the following
measures:
Eliminating Parcel Delivery and Courier Operations.
Management has entered into a contract to sell it's unprofitable
parcel delivery operations to a company controlled by its Chairman and
expects this sale to close in December 1997 with an effective date
of September 30, 1997. Management is currently negotiating for the
sale of it's courier operations and expects to complete this sale by
December 31, 1997.
Acquiring Profitable Trucking Operations.
The Company has reorganized into a "holding company" format based in
Atlanta, Georgia. This new corporate structure is intended to increase
the Company's flexibility to pursue the acquisition and operation of
profitable truckload motor carriers. The Company's intent is to
continue to identify and acquire additional mid-size trucking
companies, primarily with annual revenues between $10 million and
$100 million, that possess strong market positions, sound
management and a commitment to a high level of service and quality.
The Company has completed the acquisition of four companies at
September 30, 1997 and is pursuing additional accounts.
Relying on Equity Sales to or Loans from Major Shareholders.
In July 1997, an affiliate of the Company's Chairman loaned the
Company $4 million to consummate the acquisition of Carolina
Pacific Distributors, Inc. During August, September and October of
1997, the affiliate loaned the Company an additional $2,600,000 to
fund the continuing operations of the parcel delivery and courier
operations and fund certain expenses associated with the
acquisition of the truckload companies. The $2,600,000 is
expected to be assumed by the purchaser of the parcel delivery
operations.
Obtaining Bank Financing.
Management is negotiating new lines of bank financing to provide
working capital financing and financing for acquisition of additional
truckload motor carriers. Management has received a $20 million
commitment from a bank to make available to Capital Warehouse,
Carroll Fulmer, Service Express and Carolina Pacific an asset based
line of credit secured by accounts receivable and other intangible
assets. The Company expects this line of credit to be closed by
the end of 1997.
In connection with the acquisition of three of the truckload carriers
completed during the third quarter of 1997, the Company granted selling
shareholders the option to put a portion of the shares which they
received in exchange for selling their business to the Company. The
amount of the puts issued by the Company aggregates approximately $8.1
million. Of this $8.1 million, options in the amounts of $4.6 million
are exercisable before August 29, 1998 when an additional $3.5 million
become exercisable. The put options expire in the amounts of $2.1
million at August 15, 1998 and $6.0 million at August 29, 2003.
Holders of options to put $6.0 million of stock at $3.60 per share may
require either the Company to redeem the stock or a major shareholder of
the Company to acquire the stock. Holders of options to put $1.8
million of stock at $3.875 per share and $0.3 million at $6.75 per
share have the right to put the stock to the Company with a guarantee
from a major shareholder.
Through November 10, 1997, the Company has received notification that
puts in the amount of approximately $2,200,000 will be exercised within
the next 60 days for stock at amounts ranging from $3.60 to $6.75 per
share. The Company is seeking investors to purchase the stock from
the shareholders. To the extent that the Company is not successful
in obtaining investors to purchase the stock, the Company will be
required to fund the cash required to meet its obligations under the
put through borrowing such funds, drawing down on bank lines which
may be available to its subsidiaries or to call upon a major
shareholder to purchase the stock under such shareholder's
obligations and guarantees associated with the acquisition contracts.
The Company has arranged for the purchase by third parties of
approximately $450,000 of the $2,200,000.
Financial Condition
- -------------------
As of June 30, 1997, the Company treated it's parcel delivery
operations and courier operations as discontinued operations. The
Company's outstanding vehicle and equipment indebtedness, operating
leases, and most remaining liablities (other than $4.0 million in
debt to a related shareholder) will be assumed by the companies
purchasing the operations.
Results of Operations - Three months ended
September 30, 1997 versus three months ended September 30, 1996
- ---------------------------------------------------------------
At June 30, 1997, the Company had no revenues from continuing
operations. Such revenues commenced on July 11, 1997 with the
purchase of Carolina Pacific Distributors, Inc. and continued to
increase with the acquisitions of the three additional companies
with which it had executed letters of intent.
The following table sets forth items in the Consolidated Statement
of Operations for the three months ended September 30, 1997 as a
percentage of operating revenue. Because the truckload operations
were acquired during the third quarter of 1997, the table is not
comparable to an earlier period.
Percentage of
Operating Revenues
------------------
Operating revenues 100.0%
Operating expenses
Purchased transportation 38.1%
Salaries, wages and benefits 23.5%
Fuel 9.8%
Operating Supplies and expenses 10.5%
Insurance 2.4%
Depreciation and amortization expense 7.5%
General and administrative expense 3.8%
------
Total operating expense 95.7%
------
Operating income 4.3%
Interest expense 3.8%
------
Earnings from continuing operations
before income taxes 0.5%
Income taxes attributable to continuing
Operations 0.4%
------
Income from continuing operations 0.1%
======
The Company incurred corporate administration expenses for the
three months ended September 30, 1997 of approximately $0.4 million
as compared to approximately $47 thousand for the three months
ended September 30, 1996. These increases are attributable the
reorganization to a holding company format, the opening of new corporate
office in Atlanta, Georgia and the acquisition of the four truckload
companies.
Revenues attributable to the discontinued businesses were $5.0
million and $5.8 million for the three months ended September 30,
1997 and 1996, respectively. The reduction in revenue resulted
primarily from closing terminals in North and South Carolina. The
Company has recorded a provision for losses during the phase-out
period of approximately $0.8 million. A tax benefit has not been
provided on the losses from discontinued operations because it is
more likely than not that a portion or all of the losses may not
produce a tax benefit.
Results of Operations - Nine months ended
September 30, 1997 versus nine months ended September 30, 1996
- --------------------------------------------------------------
The following table sets forth items in the Consolidated Statement
of Operations for the nine months ended September 30, 1997 as a
percentage of operating revenue. Because the truckload operations
were acquired during the third quarter of 1997, the table is not
comparable to an earlier period.
Percentage of
Operating Revenues
------------------
Operating revenues 100.0%
Operating expenses
Purchased transportation 38.1%
Salaries, wages and benefits 23.5%
Fuel 9.8%
Operating Supplies and expenses 10.5%
Insurance 2.4%
Depreciation and amortization expense 7.5%
General and administrative expense 6.4%
------
Total operating expense 98.2%
------
Operating income 1.8%
Interest expense 3.8%
------
Earnings from continuing operations
before income taxes (2.0%)
Income taxes attributable to continuing
Operations 0.4%
------
Income from continuing operations (2.4%)
======
The Company incurred general and administrative expenses for the nine
months ended September 30, 1997 of approximately $0.7 as compared to
approximately $0.3 million for the nine months ended September 30, 1996.
These increases are attributable the reorganization to a holding company
format, the opening of new corporate office in Atlanta, Georgia and
the acquisition of the four truckload companies.
During the second quarter of 1997, the Company approved a plan to
dispose of its parcel delivery and courier operations and has
executed a letter of intent for the sale of the parcel delivery
portion of such businesses. It is expected that substantially all
property and equipment and substantially all capital and
operating lease obligations will be assumed by the buyer. The
Company anticipates that the disposal will be completed in December
1997.
Revenues attributable to the discontinued businesses were
approximately $14.7 million and $17.2 million for the nine months
ended September 30, 1997 and 1996, respectively. The Company has
recorded a provision for losses during the phase-out period of
approximately $0.8 million. A tax benefit has not been provided on
the losses from discontinued operations because it is more likely
than not that a portion or all of the losses may not produce a tax
benefit.
TRANSIT GROUP, INC. AND SUBSIDIARY
Part II - Other Information
Item 1 - Legal Proceedings
Not applicable
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults on Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 - Other Information
Not applicable
(a) Exhibits:
Exhibit 4 - Instruments defining the Rights of Security holders
4.1 Specimen Stock Certificate (incorporated by reference from
Exhibit 4.1 to the Registrant's Form S-18, Registration No.
33-30123A).
4.2 Warrant granting stock purchase warrants to J. Ray Gatlin
(incorporated by reference from Exhibit 4.2 to the
Registrant's Form S-18, Registration No. 33-30123A).
4.3 Warrant granting stock purchase rights to T. Wayne Davis
(incorporated by reference from Exhibit 4.3 to Registrant's
Form S-18, Registration No. 33-30123A).
4.4 Warrant granting stock purchase rights to T. Wayne Davis
(incorporated by reference from Exhibit 4.4 to Registrant's
Form S-18, Registration No. 33-30123A).
4.5 Warrant granting stock purchase rights to Drue B. Linton
(incorporated by reference from Exhibit 4.5 to Registrant's
Form S-18, Registration No. 33-30123A).
4.6 Warrant granting stock purchase rights to Steven C. Koegler
(incorporated by reference from Exhibit 4.7 to Registrant's
Form S-18, Registration No. 33-30123A).
4.7 Warrant granting stock purchase rights to J. Ray Gatlin
(incorporated by reference from Exhibit 4.8 to Registrant's
Form S-18, Registration No. 33-30123A).
4.8 Form of Warrant issued (incorporated by reference from
Exhibit 4.9 to Registrant's Form S-18, Registration No.
33-30123A).
4.9 Form of Warrant Agreement between the Company and American
Transtech, Inc., as Warrant Agent (incorporated by
reference from Exhibit 4.10 to Registrant's Form S-18,
Registration No. 33-30123A).
4.10 Preferred Stock Purchase Agreement and specimen stock
certificate between the Company and T. Wayne Davis
(incorporated by reference from Exhibit Z to Registrant's
1993 Form 8-K, Registration No. 33-30123A).
Exhibit 10 - Material Contracts
10.1 Incentive Stock Option Plan (incorporated by reference from
Exhibit 10.2 to Registrant's Form S-18, Registration No.
33-30123A).
10.2 Lease Agreement governing the Company's lease of its
terminal in Jacksonville, Florida dated November 12, 1986,
between the Company and Lakepoint Joint Venture,
(incorporated by reference from Exhibit 10.9 to
Registrant's Form S-18, Registration No. 33-30123A).
10.3 First Amendment to Lease Agreement governing the Company's
lease of its terminal in Jacksonville, Florida dated
December 8, 1988, between the Company and Lakepoint Joint
Venture, (incorporated by reference from Exhibit 10.10 to
Form S-18, Registration No. 33-30123A).
10.4 Lease Agreement governing the Company's terminal in
Gainesville, Florida, dated June 25, 1990, between the
Company and W. Marvin Gresham incorporated by reference
from Exhibit B to Registrant's 1990 Form 10-K, Registration
No. 33-30123A).
10.5 Lease Agreement governing the Company's terminal in Riviera
Beach, Florida, dated July 9, 1990, between the Company and
McClosky-Bills, Partnership (incorporated by reference from
Exhibit D to Registrant's 1990 Form 10-K, Registration No.
33-30123A).
10.6 Lease Agreement governing the Company's terminal in
Tallahassee, Florida, dated December 19, 1991, between the
Company and Barnett Tallahassee, (incorporated by reference
from Exhibit A to Registrant's 1991 Form 10-K,
Registration No. 33-30123A).
10.7 Lease Agreement governing the Company's terminal in
Rockledge, Florida, dated October 21, 1991, between the
Company and Robert Carl Cook and Sara E. Cook,
(incorporated by reference from Exhibit B to Registrant's
1991 Form 10-K, Registration No. 33-30123A).
10.8 Lease Agreement governing the Company's terminal in
Orlando, Florida, dated December 20, 1992, between the
Company and Michel Kurban (incorporated by reference from
33-30123A).
10.9 Lease Agreement governing the Company's terminal in Fort
Myers, Florida, dated February 25, 1993, between the
reference from Exhibit D to Registrant's 1992 10-KSB,
Registration No. 33-30123A).
10.10 Lease Agreement governing the Company's terminal in Medley,
Florida, dated March 16, 1993, between the Company and Gran
Central Corporation (incorporated by reference from Exhibit
E to Registrant's 1992 10-KSB, Registration No. 33-30123A).
10.11 Employment Agreement between the Company and Gayle Smith,
dated April 5, 1993, (incorporated by reference from
Exhibit A to Registrant's 1993 10-KSB, Registration No
33-30123A).
10.12 Lease Agreement governing the Company's terminal in College
Park, Georgia, dated August 23, 1993, between the Company
and General of Georgia, Inc. (incorporated by reference
from Exhibit E to the Registrant's 1993 Form 10-KSB,
Registration No. 33-30123A).
10.13 Lease Agreement governing the Company's terminal in
Tifton, Georgia, dated October 7, 1993, between the
Company and National Foods, Inc. (incorporated by
reference from Exhibit G to Registrant's 1993 10-
KSB, Registration No. 33-30123A).
10.14 Lease agreement governing the Company's terminal in
Milton, Florida, dated June 30, 1994, between the
and Scott Steel, Inc. (incorporated by reference
from Exhibit B to Registrant's 1994 10-KSB,
Registration No. 33-30123A)
10.15 Lease Agreement governing the Company's terminal in
Columbia, South Carolina dated May 31, 1996 between
the Company and Angoria Columbia Enterprises.
(incorporated by reference from Exhibit 10.1 to
Registrant's June 30, 1996 10-QSB, Registration No.
33-30123A).
10.16 Assignment of Lease Agreement governing the
Company's terminal in Greensboro, North Carolina
dated June 13, 1996 between the Company, ABF Freight
System, Inc., Bob G. Gibson and Defco Company
(incorporated by reference from Exhibit 10.2 to
Registrant's June 30, 1996 10-QSB, Registration No.
33-30123A).
10.17 Lease Agreement governing the Company's terminal in
Charlotte, North Carolina dated July 30, 1996
between the Company and Lincoln National Life
Insurance Company (incorporated by reference from
Exhibit 10.7 to Registrant's June 30, 1996 10-QSB,
Registration No. 33-30123A).
10.18 Lease Agreement governing the Company's terminal in
Charleston, South Carolina dated July 9, 1996
between the Company and J. P. Gaillard, ET AL.
(incorporated by reference from Exhibit 10.8 to
Registrant's June 30, 1996 10-QSB, Registration No.
33-30123A).
10.19 Lease Agreement governing the Company's terminal in
Tampa, Florida dated November 30, 1994 and amended
on January 26, 1996 and February 19, 1996 between
the Company and Scott Steel, Inc. (incorporated by
reference from Exhibit 10.1 to Registrant's
September 30, 1996 10-QSB, Registration No.
33-30123A).
10.20 Purchase Agreement governing purchase by GPS
Acquisition Corp. from Transit Express of Charlotte,
Inc. of certain assets, dated February 6, 1995
(incorporated by reference from Exhibit 10.5 to
Registrant's 1995 10-KSB, Registration No.
33-30123A).
10.24 Resignation agreement dated December 20, 1996
between the Company, E. Hoke Smith, Jr., and T.
Wayne Davis as guarantor (incorporated by reference
from Exhibit 10.31 to Registrant's 1996 10-KSB,
Registration No. 33-30123A).
10.25 Purchase Agreement governing purchase by Transit of
the stock of Carolina Pacific (incorporated by
reference from Exhibit 2.1 to Registrant's Form 8-K
dated July 11, 1997.
10.26 Purchase Agreement governing purchase by Transit of
the stock of Service Express (incorporated by
reference from Exhibit 2.1 to Registrant's Form 8-K
dated August 15, 1997.
10.27 Purchase Agreement governing purchase by Transit of
the stock of Capitol Warehouse (incorporated by
reference from Exhibit 2.2 to Registrant's Form 8-K
dated August 15, 1997.
10.28 Agreement and Plan of Reorganization under which
Carroll Fulmer was merged with and into Transit
Group Sub., Inc., a wholly-owned Florida subsidiary
of Transit Group incorporated by reference from
Exhibit 2.1 to Registrant's Form 8-K dated August
29, 1997.
(b) Reports on Form 8-K
The Company amended it's Form 8-K dated July 11, 1997 on September
24, 1997 to include audited financial statements and pro forma
financial information related to the acquisition of Carolina
Pacific.
The Company filed a Form 8-K dated August 15, 1997 to report
Transit Group had consumated the acquisitions of Capital Warehouse
and Service Express. Pursuant to the Agreement and Plan of
Reorganization excuted at closing, a wholly-owned Alabama
subsidiary of Transit Group was merged with and into Service
Express in a reverse triangular merger, with Service Express
remaining as the surviving corporation of the merger. Upon
consummation of the merger, all of the outstanding common stock
of Service Express was converted into 903,226 shares of Transit
Group common stock. In addition, on August 15, 1997, pursuant
to the Agreement and Plan of Reorganization executed at closing,
a wholly-owned Kentucky subsidiary of Transit Group was merged
with and into Capital Warehouse in a reverse triangular merger,
with Capital Warehouse remaining as the surviving corporation
of the merger. Upon consummation of the merger, all of the
outstanding common stock of Capital Warehouse was converted
into 641,283 shares of Transit Group common stock. The company
amended this filing on November 4, 1997, to include audited
financial statements on both Service Express and Capital
Warehouse and pro forma financial information.
The Company filed a Form 8-K dated August 29, 1997 to report
Transit Group had consummated the acquisition of Carroll Fulmer,
a Florida corporation. Pursuant to the Agreement and Plan of
Reorganization executed at closing, Carroll Fulmer was merged
with and into Transit Group Sub., Inc., a wholly-owned Florida
subsidiary of Transit Group (the "Subsidiary") in a forward
triangular merger, with the Subsidiary remaining as the
surviving corporation of the merger. Upon consumation of the
merger, all of the outstanding common stock of Carroll Fulmer
was converted into 4,166,666 shares of Transit Group common
stock, and the Subsidiary's name was changed to Carroll Fulmer
Group, Inc. The Company amended this filing on November 12,
1997 to include audited financial statements and pro forma
financial information.
Signature
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.
Transit Group, Inc.
Date: November 14, 1997
By: /s/Wayne N. Nellums
Wayne N. Nellums
Vice President,
Chief Financial Officer
and Secretary
<PAGE>
Exhibit 11.1 Statement regarding computation of earnings per share.
The Company computes earnings per share in accordance with FAS No.
128, Earnings Per Share. For the three and nine month periods ended
September 30, 1996 and for the nine month period ended September
30, 1997, the Company was required to pay dividends on its
outstanding convertible stock. Such preferred stock was converted
into common stock on June 30, 1997. The preferred dividend
requirements for the periods in which the preferred stock was
outstanding have been added to the loss from continuing operations
for each period to arrive at net income available to common
stockholders in calculating basic earnings per share.
The Company has stock options and warrants outstanding which were
not included in the computation of diluted earnings per share
for the three and nine months ended September 30, 1996 and for the
nine months ended September 30, 1997 because to do so would have
been anti-dilutive for periods presented. Such options and
warrants were included in the computation of diluted earnings per
share for the three month period ended September 30, 1997.
Computations of basic and diluted earnings per share are set forth
below.
<TABLE>
<CAPTION>
Basic EPS Computation
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations $ 12,158 $ (47,077) $ (255,908) $ (280,940)
Preferred stock dividend requirement -- (122,500) (385,000) (281,529)
------------ ------------ ------------ ------------
Income available to common
shareholders 12,158 (169,577) (640,908) (562,469)
Discontinued operations:
Loss from operations -- (1,463,979) (6,114,408) (2,546,693)
Estimated loss on disposal including
provision for operating losses
through disposal date -- -- (7,455,966) --
----------- ------------ ------------ ------------
Net income (loss) available
to common shareholders $ 12,158 $ (1,633,556) $(14,211,282) $ (3,109,162)
=========== ============ ============ ============
</TABLE>
Weighted-average shares for the nine months ended September 30,
1997 is calculated as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------------- ----------- --------- --------------
<C> <S> <S> <S>
January 1-May 2, 1997 3,758,671 122/273 1,679,699
Issuance of common
stock on May 2 3,387,187
-----------
May 3-June 10 7,145,858 39/273 1,020,837
Exercise of stock
warrant on June 10 25,000
-----------
June 11-June 30 7,170,858 20/273 525,338
Conversion of preferred
stock on June 30 4,323,922
-----------
July 1-July 11 11,494,780 11/273 463,160
Issuance of common
stock on July 11 1,733,000
-----------
July 12-August 15 13,227,780 36/273 1,744,323
Issuance of common
stock on August 15 1,544,509
-----------
August 16-August 29 14,772,289 13/273 703,442
Issuance of common
stock on August 29 4,166,666
-----------
August 30-September 11 18,938,955 13/273 901,855
Issuance of common
stock on September 11 79,856
-----------
September 12-September 30 19,018,811 19/273 1,323,654
-----------
Weighted average shares 8,362,307
===========
</TABLE>
Weighted-average shares for the three months ended September 30,
1997 is calculated as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Shares
----------------- ----------- --------- --------------
<C> <S> <S> <S>
July 1-July 11 11,494,780 11/92 1,374,376
Issuance of common 1,733,000
stock on July 11
----------
July 12-August 15 13,227,780 36/92 5,176,088
Issuance of common 1,544,509
stock on August 15
----------
August 16-August 29 14,772,289 13/92 2,087,389
Issuance of common 4,166,666
stock on August 29
----------
August 30-September 11 18,938,955 13/92 2,676,157
Issuance of common 79,856
stock on September 11
---------
September 12-September 30 19,018,811 19/92 3,927,798
-------------
Weighted average shares 15,241,807
=============
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income (loss) per common
share - basic:
Continuing operations $ 0.00 $ (0.05) $ (0.08) $ (0.15)
Discontinued operations:
Loss from operations 0.00 (0.39) (0.73) (0.68)
Estimated loss on
disposal 0.00 -- (0.89) --
-------- --------- --------- --------
Total $ 0.00 $ (0.44) $ (1.70) $ (0.83)
======== ========= ========= ========
Weighted average number
common shares outstanding-
diluted 15,241,807 3,758,671 8,362,307 3,758,671
</TABLE>
<TABLE>
<CAPTION>
The diluted EPS computation is as follows:
Diluted EPS Computation
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations $ 12,158 $ (47,077) $ (255,908) $ (280.940)
Preferred stock dividend requirement -- (122,500) (385,000) (281,529)
------------ ----------- ------------- --------------
Income available to common
shareholders 12,158 (169,577) (640,908) (562,469)
Discontinued operations:
Loss from operations -- (1,463,979) (6,114,408) (2,546,693)
Estimated loss on disposal
including provision for
operating losses through
disposal date -- -- (7,455,966) --
------------ ------------ ------------- ------------
Net income (loss) available
to common shareholders $ 12,158 $ (1,633,556) $ (14,211,282) $ (3,109,162)
============ ============ ============= ============
Weighted-average shares 15,241,807 3,758,671 8,362,307 3,758,671
Plus: Incremental shares from
assumed conversions
Warrants and Options 1,699,484 -- -- --
----------- ---------- ---------- ----------
Adjusted weighted average
shares 16,941,291 3,758,671 8,362,307 3,758,671
=========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income (loss) per common
share - diluted:
Continuing operations $ 0.00 $ (0.05) $ (0.08) $ (0.15)
Discontinued operations:
Loss from operations 0.00 (0.39) (0.73) (0.68)
Estimated loss on
disposal 0.00 -- (0.89) --
---------- --------- -------- --------
Total $ 0.00 $ (0.44) $ (1.70) $ (0.83)
========== ========= ======== ========
Weighted average number
of common shares
outstanding-diluted 16,941,291 3,758,671 8,362,307 3,758,671
</TABLE>
The equation for computing (basic and diluted) EPS is:
Income available to common stockholders
------------------------------------------------
Weighted-average shares
The incremental shares from assumed exercise of options and
warrants are not included in computing the diluted per-share
amounts for the three months ended September 30, 1997 and the nine
months ended September 30, 1997 and 1996 because the net income
available to shareholders from continuing operations was a loss,
not income.
TRANSIT GROUP, INC. AND SUBSIDIARY
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the consolidated
Statements of Operations and Balance Sheets
and is qualified in its entirety by reference
to such financial statements.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<PERIOD-START> JAN-1-1997
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 834,361
<SECURITIES> 0
<RECEIVABLES> 9,883,937
<ALLOWANCES> 195,339
<INVENTORY> 0
<CURRENT-ASSETS> 13,555,039
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,420,302
<CURRENT-LIABILITIES> 37,564,232
<BONDS> 0
<COMMON> 190,184
0
0
<OTHER-SE> 15,852,669
<TOTAL-LIABILITY-AND-EQUITY> 79,420,302
<SALES> 10,859,233
<TOTAL-REVENUES> 10,859,233
<CGS> 0
<TOTAL-COSTS> 10,658,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 414,269
<INCOME-PRETAX> (213,078)
<INCOME-TAX> 42,830
<INCOME-CONTINUING> (255,908)
<DISCONTINUED> (13,520,374)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,826,282)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> (1.70)
</TABLE>
