<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to________
Commission File Number: 000-18601
---------
TRANSIT GROUP, INC.
------------------
(Exact name of registrant as specified 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 30339
----------------------------------------------------
(Address of principal executive offices) - (zip code)
(770) 444-0240
--------------
(Registrant's telephone number, including area code)
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 27,322,933 shares of the Company's common stock outstanding as of
August 4, 1999.
<PAGE>
TRANSIT GROUP, INC.
FORM 10-Q/A
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1
------
Financial Statements
Consolidated Balance Sheets
as of June 30, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Income (unaudited) for the three
and six month periods ended June 30, 1999 and 1998 4
Consolidated Statement of Changes in Total Non Redeemable
Preferred Stock, Common Stock and Other Shareholder's Equity (unaudited) 5
Consolidated Statements of Cash Flows (unaudited) for the six
months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2
------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3
------
Quantitative and Qualitative Disclosures About
Market Risk 18
PART II. OTHER INFORMATION
Item 4
------
Submission of Matters to a Vote of Security Holders 19
Item 6
------
Exhibits and Reports on Form 8-K 19
</TABLE>
This quarterly report on Form 10-Q/A is being filed as a result of the
restatement of our consolidated financial statements for the three and six month
periods ended June 30, 1999 to reflect the conclusion of the Emerging Issues
Task Force regarding decreases in deferred tax asset valuation allowances
established in a purchased business combination as a result of changes in tax
regulations. Our Form 10-Q filed on August 16, 1999 is hereby superseded and
restated as amended in its entirety.
2
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,020 $ 2,020
Accounts receivable (net of allowance of $756 and $706) 40,707 28,437
Other current assets 8,298 5,611
Deferred income taxes 1,103 1,103
-------- --------
Total current assets 51,128 37,171
-------- --------
Noncurrent assets:
Property, equipment, and capitalized leases 62,986 42,818
Goodwill 55,226 50,062
Other assets 206 476
-------- --------
Total noncurrent assets 118,418 93,356
-------- --------
Total assets $169,546 $130,527
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital leases $ 17,390 $ 12,273
Accounts payable 12,026 6,170
Bank overdrafts 542 1,319
Accrued expenses and other current liabilities 7,738 10,029
Net current liabilities of discontinued operations 29 273
-------- --------
Total current liabilities 37,725 30,064
-------- --------
Noncurrent liabilities:
Long-term debt and capital lease obligations 40,466 38,963
Note payable to affiliate of Chairman - 3,500
Other liabilities 385 4,291
Deferred income taxes 860 439
-------- --------
Total noncurrent liabilities 41,711 47,193
-------- --------
Total liabilities 79,436 77,257
-------- --------
Redeemable common stock 3,675 5,115
-------- --------
Redeemable preferred stock 24,912 -----
-------- --------
Non Redeemable preferred stock, common stock
and other stockholders' equity:
Preferred stock, no par value, 15,000,000 and 5,000,000 shares authorized ----- -----
Common Stock, $.01 par value, 100,000,000 shares
authorized, 26,058,376 and 23,610,190 shares issued and outstanding 250 222
Note receivable secured by stock (756) (729)
Additional paid-in capital 76,868 68,411
Accumulated deficit (14,839) (19,749)
-------- --------
Total non redeemable preferred stock, common stock
and other stockholders' equity 61,523 48,155
-------- --------
Total liabilities and stockholders' equity $169,546 $130,527
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1999 1998 1999 1998
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues $ 75,167 $ 35,402 $ 140,011 $ 61,747
----------- ----------- ----------- -----------
Operating expenses:
Purchased transportation 26,916 15,091 52,433 26,842
Salaries, wages and benefits 19,114 7,657 34,756 13,750
Fuel 6,336 2,511 11,194 4,534
Operating supplies and expenses 7,587 4,629 14,460 5,875
Lease expense - revenue equipment 4,475 377 8,611 1,102
Insurance 990 459 1,785 1,108
Depreciation and amortization expense 2,850 1,670 5,145 2,992
General and administrative expense 2,201 873 3,968 1,688
----------- ----------- ----------- -----------
Total operating expenses 70,469 33,267 132,352 57,891
----------- ----------- ----------- -----------
Operating income 4,698 2,135 7,659 3,856
Interest expense 1,517 862 2,519 1,641
----------- ----------- ----------- -----------
Income before income taxes 3,181 1,273 5,140 2,215
Income tax (benefit) expense (1,092) 109 (66) 209
----------- ----------- ----------- -----------
Net income 4,273 1,164 5,206 2,006
Preferred stock dividends (296) ----- (296) -----
----------- ----------- ----------- -----------
Income available to common shareholders $ 3,977 $ 1,164 $ 4,910 $ 2,006
=========== =========== =========== ===========
Income per common share -- basic $ 0.15 $ 0.05 $ 0.19 $ 0.09
=========== =========== =========== ===========
Income per common share -- diluted $ 0.15 $ 0.05 $ 0.19 $ 0.09
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - basic 26,038,631 21,726,967 25,240,163 21,277,313
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - diluted 27,083,493 23,267,346 26,150,369 22,666,801
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL
NON REDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Additional Note receivable Accumulated shareholders'
stock paid-in capital secured by stock deficit equity
------ --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $222 $68,411 $(729) $(19,749) $48,155
Issuance of preferred stock ----- ----- ----- ----- -
Stock issued for acquisitions 28 8,377 ----- ----- 8,405
Stock purchased and retired (4) (1,544) ----- ----- (1,548)
Stock returned to settle
contingencies and retired (1) (118) ----- ----- (119)
Accrued interest ----- ----- (27) ----- (27)
Stock issued to affiliate of
Chairman 1 230 ----- ----- 231
Stock no longer subject to
redemption 4 1,436 ----- ----- 1,440
Preferred dividends ----- ----- ----- (296) (296)
Stock options exercised ----- 76 ----- ----- 76
Net income ----- ----- ----- 5,206 5,206
----- ------- ----- -------- -------
Balance June 30, 1999 $250 $76,868 $(756) $(14,839) $61,523
===== ======= ===== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 5,206 $ 2,006
-------- --------
Adjustments to reconcile income to cash
(used in) provided by continuing operations:
Depreciation and amortization 5,145 2,992
Deferred Taxes (2,671) -----
Gain on sale of equipment (213) (136)
Changes in assets and liabilities
Increase in accounts receivable (4,400) (671)
(Increase) decrease in other assets (531) 136
Decrease in accounts payable and accrued expenses (2,844) (1,061)
Other (458) 21
-------- --------
Total adjustments (5,972) 1,281
-------- --------
Net cash (used in) provided by continuing operations (766) 3,287
Net cash used in discontinued operations (13) (67)
-------- --------
Net cash (used in ) provided by operating activities (779) 3,220
-------- --------
Cash flows from investing activities:
Business combinations, net of cash acquired (2,813) (3,244)
Proceeds from disposal of equipment 4,164 2,367
Purchase of equipment (3,818) (2,498)
-------- --------
Net cash used in investing activities (2,467) (3,375)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 24,912 -----
Repayment of capital lease obligations and long-term debt (26,510) (8,496)
Increase in long-term debt 6,734 11,701
Decrease in bank overdraft (1,418) (971)
Stock redeemed and retired (1,548) -----
Stock options exercised 76 -----
-------- --------
Net cash provided by financing activities 2,246 2,234
-------- --------
(Decrease) increase in cash (1,000) 2,079
Cash, beginning of period 2,020 790
-------- --------
Cash, end of period $ 1,020 $ 2,869
======== ========
Supplemental cash flow data
Cash paid for interest $ 1,836 $ 1,683
======== ========
Business combinations
Fair value of assets acquired $ 42,139 $ 46,544
Fair value of liabilities assumed (30,707) (30,744)
Common stock issued (8,286) (11,197)
-------- --------
Net cash payments $ 3,146 $ 4,603
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
TRANSIT GROUP, INC.
Notes to Consolidated Financial Statements
The information presented herein as of June 30, 1999, and for the three and six
month periods ended June 30, 1999 and 1998 are unaudited. The December 31, 1998
balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
On June 25, 1999, new consolidated return regulations were issued that changed
the rules for using the Company's operating loss carryovers by eliminating the
requirement to apply the separate return limitation loss years limitation to
situations in which a change of ownership, as defined in Section 382 of the
Internal Revenue Code, occurred within six months of an acquired company
becoming a member of a consolidated group. Prior to this change in the
consolidated return regulations, the Company limited the income tax benefit
recognized in the financial statements for certain net operating losses of
acquired companies by establishing a valuation allowance for deferred tax
assets.
The Emerging Issues Task Force addressed the accounting for decreases in
deferred tax asset valuation allowances established in a purchased business
combination as a result of a change in tax regulations and reached a consesus
that the change in the valuation amount should be recognized through operating
income. Because the consensus of the Emerging Issues Tax Force was released
after our second quarter's operating results were released, we are restating the
second quarter of 1999, to include the benefit arising from the change in the
consolidated return regulations.
1. Basis of Presentation
---------------------
The consolidated balance sheet of Transit Group, Inc. ("Transit Group" or the
"Company") as of June 30, 1999, it's consolidated statements of income for the
three and six month periods ended June 30, 1999 and 1998, and its consolidated
statements of cash flows for the six month periods ended June 30, 1999 and 1998
include the consolidated balance sheets of the Company and it's fourteen
acquired subsidiaries, and the results of operations and cash flows for the
periods since acquisition. The Company has made the following acquisitions:
<TABLE>
<CAPTION>
Company Date Acquired
------- -------------
<S> <C>
Carolina Pacific Distributors, Inc. 07/11/97
Service Express, Inc. 08/16/97
Transit Leasing, Inc. 08/16/97
Carroll Fulmer Group, Inc. 08/30/97
Rainbow Trucking, Inc. 12/30/97
Transportation Resources and Management, Inc. 01/31/98
Certified Transport, Inc. 05/05/98
KJ Transportation, Inc. 06/17/98
Network Transportation, Inc. 07/13/98
Diversified Trucking, Inc. 08/05/98
Northstar Transportation, Inc. 08/11/98
Priority Transportation, Inc. 01/19/99
Massengill Trucking Service, Inc. 03/03/99
KAT, Inc. 03/22/99
</TABLE>
Certain prior year balances have been reclassified to conform to the current
year financial statement presentation.
7
<PAGE>
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 1998 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. Additionally, all adjustments are of a normal recurring nature.
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-Q and do not contain certain information included in the annual
consolidated financial statements and notes of Transit Group.
3. Business Combinations
---------------------
From July 1997 through December 1998 the Company acquired 11 truckload carriers.
In January 1999, the Company acquired Priority Transportation, Inc. an Olive
Branch, Mississippi based truckload carrier. Total consideration for all of the
outstanding shares of Priority was funded by the issuance of approximately
890,000 shares of Transit Group common stock, the payment of $1,000,000 cash,
and a $495,000 payment on a promissory note.
The Company acquired Massengill Trucking Service, Inc. in March 1999.
Massengill was a privately held truckload carrier based in Hickory Flat,
Mississippi. The acquisition was funded by the issuance of approximately
1,070,000 shares of Transit Group common stock, a cash payment of $1.3 million
at closing, and approximately $850,000 over a five year period.
Also in March 1999, the Company acquired Chesterton, Indiana based KAT, Inc. for
consideration comprised of approximately 812,000 shares of Transit Group common
stock and $725,000 in cash.
In the second quarter of 1999, the Company executed Letters of Intent regarding
the acquisition of 5 truckload carriers. The status of those transactions is as
follows:
On July 19, the Company completed the acquisition of R&M Transportation for
consideration of 1.2 million shares of common stock and the payment of $1.4
million in cash.
On July 30, the Company completed the acquisition of Bestway, Inc. a
Jeffersonville, Indiana based dry van carrier and MDR, Inc. headquartered in
Jonesboro, Arkansas. In connection with the acquisition of Bestway, the Company
issued 1.5 million of its common shares and paid $6.8 million in cash. MDR was
purchased for $1.8 million in cash and the issuance of 2.5 million of the
Company's common shares.
The acquisition of Fox Midwest and its affiliate SDS Distributors is anticipated
to close in the third quarter of 1999.
The fifth Letter of Intent dealt with the proposed acquisition of Little Rock,
Arkansas based Pro Transportation. On August 2, the Company announced that the
parties mutually agreed to terminate negotiations.
The business combinations described above will be accounted for under the
purchase method of accounting. Accordingly, the operating results of the
acquired companies have been included in the Company's consolidated financial
statements since their respective dates of acquisition. Assets acquired and
liabilities assumed were recorded at fair market value.
The unaudited pro forma financial information reflects the operations of the 5
companies acquired in 1997, the 6 companies acquired in 1998 and the 6 companies
acquired in 1999 as if they all had been acquired on January 1, 1998. The
following adjustments were made to the historical financial statements of
acquired companies prior to their acquisition by the Company:
8
<PAGE>
. Reduced depreciation expense due to changes in depreciation policies
and estimated lives;
. Amortization of goodwill recorded in connection with the acquisitions;
. Additional interest costs for the cash portion of the acquisition costs;
. Interest costs of the acquired companies have been adjusted to reflect the
Company's financing costs;
. Provision for income taxes at the Company's estimated annual tax rate; and
. Excluded the impact of the change in the valuation allowance for deferred tax
assets.
No projected provision for cost reductions (such as insurance, overhead,
purchasing, and fuel) have been reflected in the historical financial statements
of the subsidiaries from January 1, 1998 through the date of acquisition.
Unaudited Pro Forma Combined Results of Operations
(In thousands except share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
---------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 101,690 $ 92,867 $ 196,674 $ 186,277
=========== =========== =========== ===========
Net income $ 2,174 $ 1,093 $ 4,102 $ 2,822
=========== =========== =========== ===========
Income per basic common share $ .07 $ .03 $ .13 $ .09
=========== =========== =========== ===========
Income per diluted common share $ .07 $ .03 $ .13 $ .09
=========== =========== =========== ===========
Weighted average number of
basic common shares outstanding 31,246,132 31,568,681 31,242,118 31,578,812
=========== =========== =========== ===========
Weighted average number of
diluted common shares
outstanding 32,290,994 33,109,060 32,152,324 32,968,300
=========== =========== =========== ===========
</TABLE>
4. Income Taxes
------------
At December 31, 1998, the Company had $27.4 million of federal net operating
loss carryforwards potentially available to offset taxable income which expire
during the years 2007 to 2012. The Company recognized $7.5 million in benefits
for these net operating losses in the December 31, 1998 financial statements
because management believed it is more likely than not that the benefits will be
realized. The Company will be limited in the amount of net operating loss which
can be offset against taxable income in any given year because of significant
changes in ownership. Certain pre-acquisition losses of acquired companies will
be unusable because of the change of ownership provisions and a valuation
allowance remains for those losses. To the extent these losses are utilized,
any benefit will be used to reduce goodwill as the losses were incurred by
acquired subsidiaries. At June 30, 1999 the net operating loss carryforwards
are approximately $25.0 million.
The company determines its provisions for income taxes using its best estimate
of the effective tax rate expected to be applicable for the full fiscal year.
The difference between the provision for income taxes and the amount that would
be expected using the Federal statutory income tax rate of 34% is related to
nondeductible goodwill, changes in valuation allowances for deferred taxes,
amortization expense, and the meal component of per diem expenses paid to
drivers and certain other nondeductible expenses.
9
<PAGE>
On June 25, 1999, new consolidated return regulations were issued that changed
the rules for using the Company's operating loss carryovers by eliminating the
requirement to apply the separate return limitation loss years limitation to
situations in which a change of ownership, as defined in Section 382 of the
Internal Revenue Code, occurred within six months of an acquired company
becoming a member of a consolidated group. Prior to this change in the
consolidated return regulations, the Company limited the income tax benefit
recognized in the financial statements for a certain net operating losses of
acquired companies by establishing a valuation allowance for deferred tax
assets.
5. Redeemable and Non Redeemable Preferred Stock
---------------------------------------------
On May 13, 1999 the Company's shareholders retired the existing 5 million shares
of authorized preferred stock and authorized 20 million new shares of preferred
stock. The rights and privileges of the new preferred shares will be determined
upon issuance. The Company issued 5 million shares of preferred stock in the
transaction described in the following paragraph.
On May 14, 1999 the Company consummated an equity financing transaction with
General Electric Capital Corporation ("GECC"). GECC invested $25 million in
exchange for 5 million shares of 9% cumulative, redeemable preferred stock,
which are convertible to common shares at any time. The proceeds will be used
primarily to finance future acquisitions although initially the Company paid
down certain borrowings under its revolving credit facility and other
borrowings.
On the third anniversary of the issue date, GECC has the right to require the
Company to redeem up to one third of the outstanding preferred shares at a price
equal to $5.00 per share plus all accrued and unpaid dividends. On the fourth
anniversary GE may require the Company to redeem up to two thirds (on a
cumulative basis) of the outstanding preferred shares plus all accrued and
unpaid dividends. GECC can require the Company to redeem all remaining
outstanding preferred shares plus accrued and unpaid dividends on the fifth
anniversary of the issue date. After the fifth anniversary of the issue date of
the preferred shares, GECC shall have no further rights to cause the Company to
redeem any shares, which may be then outstanding.
6. Common Stock
------------
On May 13, 1999 the Company's shareholders voted to increase the number of
authorized common shares from 30 million to 100 million.
7. Stock Options
-------------
The Company has granted options and warrants to acquire its common stock at
various times under various plans, contracts, and employment agreements that
approximated or exceeded fair market at the date of issue. Options and warrants
which vest over various periods may be exercised over periods ranging up to ten
years and generally expire in five to ten years.
A summary of outstanding options and warrants is as follows:
<TABLE>
<CAPTION>
Six Months ended June 30,
------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Outstanding beginning of period 3,413,058 2,754,158
Granted during period 738,700 509,000
Exercised/redeemed (657,933) -----
Forfeited or expired (5,500) (21,200)
--------- ---------
Outstanding at end of period 3,488,325 3,241,958
========= =========
</TABLE>
10
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This Quarterly Report contains certain forward-looking statements, as defined in
the Private Securities Litigation Reform act of 1995, including or related to
the Company's future results including certain projections and business trends.
These and other statements, which are not historical facts, are based largely on
current expectations and assumptions of management and are subject to a number
of risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements. Assumptions and
risks related to forward-looking statements include that the Company 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;
that it will continue to price and market its services competitively; that
competitive conditions within the Company's markets will not change materially
or adversely; that the demand for the Company's services will remain strong; and
that the Company will retain key managers, drivers and other personnel.
Assumptions relating to forward-looking statements involve judgements with
respect to , among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many which are beyond the Company's
control. When used in this Quarterly Report, the words "estimate", "project",
"intend", and "expect" and similar expressions are intended to identify forward-
looking statements. Although the Company believes that assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could
prove inaccurate and, therefore, there can be no assurance that the results
contemplated in the forward-looking information will be realized.
Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its business
strategy, which may in turn, affect the Company's results of operations. In
light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as our representation that any strategy, objectives or other plans will
be achieved. The forward-looking statements contained in this Quarterly Report
speak only as of the date of this Quarterly Report, and the Company does not
have any obligation to publicly update or revise any of these forward-looking
statements.
Liquidity and Capital Resources
- -------------------------------
In November 1998, the Company increased the capacity of its revolving line of
credit with AmSouth Bank from $20 million to $30 million. At June 30, 1999,
approximately $18 million was available under the credit facility. Concurrent
with expanding its credit facility, the Company converted $5 million of debt,
which was due in 1999, to a term facility which amortizes over seven years and
has a final maturity in January 2002.
Also in November 1998, the Company entered into a $50 million equipment
operating lease facility with a commercial lender. The facility is available to
restructure the financing of certain existing equipment and the remainder to
support future equipment leases. At June 30, 1999 approximately $12 million was
available under this facility.
The Company's acquisition strategy and requirements for replacing its revenue
equipment require significant capital resources. For the six months ended June
30, 1999, cash flow from operating activities was negative $0.8 million and
capital expenditures were $3.8 million for new trucks and trailers. The deficit
in cash flow from operations is related primarily to the increase in accounts
receivable related to the higher sales levels achieved in the last half of the
second quarter of 1999. There can be no assurance that the Company can continue
to finance its fleet through operations, leases or commercial lenders.
On May 14, 1999 the Company consummated an equity financing transaction with
General Electric Capital Corporation ("GECC"). GECC invested $25 million in
exchange for 5 million shares of 9% cumulative preferred stock, which are
convertible to common shares at any time. The proceeds will be used primarily
to finance future
11
<PAGE>
acquisitions although initially the Company paid down certain borrowings under
its revolving credit facility, and other borrowings.
The Company believes that the amounts available from operating cash flows, funds
available under its current facilities and its equipment lease facility will be
sufficient to meet the Company's expected operating needs and planned capital
expenditures for the foreseeable future.
Redemption Rights for Selling Shareholders in Acquisitions
- ----------------------------------------------------------
In connection with the acquisitions of Capitol Warehouse, Service Express, and
Carroll Fulmer, the Company granted the selling shareholders the right to
require the Company to redeem a portion of the shares which they received in
exchange for selling their businesses to the Company. The dollar amount of
stock subject to mandatory redemption by the Company aggregated approximately
$8.1 million upon acquisition of those companies.
At June 30, 1999, holders of redemption rights with respect to $3.7 million of
stock may require either the Company to redeem the stock or a major shareholder
of the Company to acquire the stock at a price of $3.60 per share. To the
extent such redemption rights are exercised, the Company will be required to
fund the cash required to meet its obligations under the redemption rights by
drawing 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.
Results of Operations - Three and six month periods ended June 30, 1999 compared
- --------------------------------------------------------------------------------
with the three and six month periods ended June 30, 1998
- --------------------------------------------------------
The following table sets forth items in the Consolidated Statement of Income for
the three and six month periods ended June 30, 1999 and 1998 as a percentage of
operating revenues.
<TABLE>
<CAPTION>
Percentage of Operating Revenue
----------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------- -------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Purchased transportation 35.8 42.6 37.4 43.5
Salaries, wages and benefits 25.4 21.6 24.8 22.3
Fuel 8.5 7.1 8.0 7.3
Operating supplies and expenses 10.1 13.1 10.3 9.5
Lease expense - revenue equipment 6.0 1.1 6.2 1.8
Insurance 1.3 1.3 1.3 1.8
Depreciation and amortization expense 3.8 4.7 3.7 4.8
General and administrative expense 2.9 2.5 2.8 2.7
------ ------ ------ ------
Total expenses 93.8 94.0 94.5 93.7
------ ------ ------ ------
Operating income 6.2 6.0 5.5 6.3
Interest expense 2.0 2.4 1.8 2.7
------ ------ ------ ------
Income before income taxes 4.2 3.6 3.7 3.6
Income tax (benefit) expense (1.5) 0.3 0.0 0.3
------ ------ ------ ------
Net income 5.7% 3.3% 3.7% 3.3%
====== ====== ====== ======
</TABLE>
12
<PAGE>
Results of Operations - Three months ended June 30, 1999 vs. three months ended
- -------------------------------------------------------------------------------
June 30, 1998
- -------------
Operating revenues increased from $35.4 million in 1998 to $75.2 million, or
112.3%, for 1999. The increase is due primarily to the acquisition of eight
companies from April 1998 through June 1999.
Purchased transportation increased from $15.1 million in 1998 to $26.9 million,
or 78.4%. Purchased transportation as a percentage of operating revenues
decreased from 42.6% in 1998 to 35.8% in 1999. Changes in the fleet mix from
brokerage and owner-operators to company owned trucks as a result of the
acquisitions resulted in the decline in purchase transportation as a percentage
of sales.
Salaries, wages and benefits increased from $7.7 million in 1998 to $19.1
million, or 149.6%, in 1999. Salaries, wages and benefits as a percentage of
operating revenues increased from 21.6% in 1998 to 25.4% in 1999. The increase
as a percentage of operating revenues is attributed to the change in revenue mix
discussed in the preceding paragraph as well as continued pressure on driver
wages. Should driver wages continue to increase as a result of the industry-
wide driver shortage, there can be no assurance that these costs can be passed
along through increased freight rates.
Fuel increased from $2.5 million in 1998 to $6.3 million, or 152.3%, in 1998.
Fuel as a percentage of operating revenues increased from 7.1% in 1998 to 8.5%
in 1999. Fuel costs as a percentage of operating revenues increased as a result
of changes in the Company's revenue mix. In the first half quarter of 1999,
fuel costs began to increase over the amount paid in the fourth quarter of 1998.
Should fuel costs continue to increase, there can be no assurance that these
costs can be passed along to our customers.
Operating supplies and expenses increased from $4.6 million in 1998 to $7.6
million, or 63.9%, in 1999. Operating supplies and expenses as a percentage of
operating revenues decreased from 13.1% in 1998 to 10.1% in 1999. The decrease
as a percentage of operating revenues is attributed to the change in the fleet
and revenue mix discussed above.
Lease expense - revenue equipment increased from $.4 million in 1998 to $4.5
million, or 1087.0% in 1999. Expressed as a percent of operating revenues,
lease expense - revenue equipment increased from 1.1% in 1998 to 6.0% in 1999.
This increase is related to the utilization of the Company's $50 million
equipment operating lease facility.
Insurance expense increased from $.5 million in 1998 to $1.0 million, or 115.7%,
in 1999. Insurance expense as a percentage of operating revenues was 1.3% for
both periods.
Depreciation and amortization expense increased from $1.7 million in 1998 to
$2.8 million, or 70.6%, in 1999. Depreciation and amortization expense as a
percentage of operating revenues decreased from 4.7% in 1998 to 3.8% in 1999.
The decrease as a percentage of operating revenues is due to the increased use
of leased equipment.
General and administrative expense increased from $.9 million in 1998 to $2.2
million, or 152.1%, in 1999. General and administrative expense as a percentage
of operating revenues increased from 2.5% in 1998 to 2.9% in 1999.
Operating income increased from $2.1 million in 1998 to $4.7 million, or 120.0%,
in 1999. Operating income as a percentage of operating revenues increased from
6.0% in 1998 to 6.2% in 1999 as a result of the factors discussed above.
Interest expense increased from $.9 million in 1998 to $1.5 million, or 76.0%,
in 1999 as a result of increased borrowings to fund acquisitions offset by more
favorable interest rates and the increased use of leased equipment.
In 1999, as a result of changes in Federal tax laws, the Company reduced the
valuation allowance for net operating loss carryforwards and recognized a
benefit of $2.7 million. The difference between the provision for income taxes
that would be expected using the Federal statutory rate and the Company's actual
rate is attributed to non-deductible
13
<PAGE>
goodwill and the limitations imposed on the deductibility of the meal component
of per diem payments paid to the Company's drivers.
Results of Operations - Six months ended June 30, 1999 vs. six months ended June
- --------------------------------------------------------------------------------
30, 1998
- --------
Operating revenues increased from $61.7 million in 1998 to $140.0 million, or
126.7%, for 1999. The increase is due primarily to the acquisition of nine
companies from January 1998 through June 1999.
Purchased transportation increased from $26.8 million in 1998 to $52.4 million,
or 95.3%. Purchased transportation as a percentage of operating revenues
decreased from 43.5% in 1998 to 37.4% in 1999. Changes in the fleet mix from
brokerage and owner-operators to company owned trucks as a result of the
acquisitions resulted in the decline in purchased transportation as a percentage
of sales.
Salaries, wages and benefits increased from $13.8 million in 1998 to $34.8
million, or 152.8%, in 1999. Salaries, wages and benefits as a percentage of
operating revenues increased from 22.3% in 1998 to 24.8% in 1999. The increase
as a percentage of operating revenues is attributed to the change in revenue mix
discussed in the preceding paragraph as well as continued pressure on driver
wages. Should driver wages continue to increase as a result of the industry-
wide driver shortage, there can be no assurance that these costs can be passed
along through increased freight rates.
Fuel increased from $4.5 million in 1998 to $11.1 million, or 146.9%, in 1998.
Fuel as a percentage of operating revenues increased from 7.3% in 1998 to 8.0%
in 1999. Fuel costs as a percentage of operating revenues increased as a result
of fuel costs and the change in revenue mix. Should fuel costs continue to
increase, there can be no assurance that these costs can be passed along to our
customers.
Operating supplies and expenses increased from $5.9 million in 1998 to $14.5
million, or 146.1%, in 1999. Operating supplies and expenses as a percentage of
operating revenues increased from 9.5% in 1998 to 10.3% in 1999. The increase
as a percentage of operating revenues is attributed to the change in the fleet
and revenue mix discussed above.
Lease expense - revenue equipment increased from $1.1 million in 1998 to $8.6
million, or 681.4% in 1999. Expressed as a percent of operating revenues, lease
expense - revenue equipment increased from 1.8% in 1998 to 6.2% in 1999. This
increase is related to the utilization of the Company's $50 million equipment
operating lease facility.
Insurance expense increased from $1.1 million in 1998 to $1.8 million, or 61.1%,
in 1999. Insurance expense as a percentage of operating revenues decreased from
1.8% in 1998 to 1.3% in 1999. The decrease as a percentage of operating
revenues is due to the Company's ability to negotiate more favorable insurance
rates because of its larger, more diverse insurance base.
Depreciation and amortization expense increased from $3.0 million in 1998 to
$5.1 million, or 72.0%, in 1999. Depreciation and amortization expense as a
percentage of operating revenues decreased from 4.8% in 1998 to 3.7% in 1999.
The decrease as a percentage of operating revenues is due to the increased use
of leased equipment.
General and administrative expense increased from $1.7 million in 1998 to $4.0
million, or 135.1%, in 1999. General and administrative expense as a percentage
of operating revenues remained relatively flat.
Operating income increased from $3.9 million in 1998 to $7.7 million, or 98.6%,
in 1999. Operating income as a percentage of operating revenues decreased from
6.3% in 1998 to 5.5% in 1999 as a result of the factors discussed above.
Interest expense increased from $1.6 million in 1998 to $2.5 million, or 53.5%,
in 1999 as a result of increased borrowings to fund acquisitions offset by more
favorable interest rates and the increased use of leased equipment.
14
<PAGE>
In 1999, as a result of changes in Federal tax laws, the Company reduced the
valuation allowance for net operating loss carryforwards and recognized a
benefit of $2.7 million. The difference between the provision for income taxes
that would be expected using the federal statutory rate and the Company's actual
rate is attributed to non-deductible goodwill and the limitations imposed on the
deductibility of the meal component of per diem payments made to the Company's
drivers.
Results of Operations - Unaudited Pro Forma results three and six months ended
- ------------------------------------------------------------------------------
June 30, 1999 compared with the three and six months ended June 30, 1998
- -------------------------------------------------------------------------
Since July 1997, the Company has acquired 17 truckload carriers. Transit Group
has enabled these companies to reduce certain costs particularly in the areas of
insurance, interest and leasing costs, fuel, and redundant overhead. The
Company's strategy is to allow the acquired companies to focus on marketing,
customer service, and operations while administrative and financial costs are
centralized in the Corporate Services Division of Transit Group Transportation,
LLC.
The unaudited pro forma financial information reflects the operations of the 17
acquired companies as if they all had been acquired on January 1, 1998. The
following adjustments were made to the historical financial statements of
acquired companies prior to their acquisition by the Company:
. Reduced depreciation expense due to changes in depreciation policies and
estimated lives;
. Amortization of goodwill recorded in connection with the acquisitions;
. Additional interest costs for the cash portion of the acquisition costs;
. Interest costs of the acquired companies have been adjusted to reflect the
Company's financing costs;
. Provision for income taxes at the Company's estimated annual rates; and
. Excluded the impact of the change in the valuation allowance for deferred tax
assets.
No projected provision for cost reductions (such as insurance, overhead,
purchasing, and fuel) have been reflected in the historical financial statements
of the subsidiaries from January 1, 1998 through the date of acquisition.
15
<PAGE>
Unaudited Results of Operations - Three months ended June 30, 1999 vs. three
- ----------------------------------------------------------------------------
months ended June 30, 1998
- --------------------------
Unaudited Pro Forma Combined Results of Operations
(In thousands except share data)
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------------
June 30, 1999 June 30, 1998
--------------------------- ---------------------------
$ % $ %
<S> <C> <C> <C> <C>
Operating revenues $ 101,690 100.0% $ 92,867 100.0%
------------ ------ ------------ ------
Operating expenses 86,341 84.9 80,038 86.2
Depreciation and amortization 5,071 5.1 5,494 5.9
General and administrative expenses 2,880 2.8 2,398 2.6
------------ ------ ------------ ------
Total operating expenses 94,292 92.8 87,930 94.7
------------ ------ ------------ ------
Operating income 7,398 7.2 4,937 5.3
Interest expense 3,080 3.0 2,769 3.0
------------ ------ ------------ ------
Income before income taxes 4,318 4.2 2,168 2.3
Income taxes 2,144 2.1 1,075 1.2
------------ ------ ------------ ------
Net income $ 2,174 2.1 $ 1,093 1.1
============ ====== ============ ======
Income per basic common share $ .07 $ .03
============ ============
Income per diluted common share $ .07 $ .03
============ ============
Weighted average number of basic common
shares outstanding 31,246,132 31,568,681
============ ============
Weighted average number of diluted
common shares outstanding 32,290,994 33,109,060
============ ============
</TABLE>
Comparable revenues increased by 9.5% in the three months ended June 30, 1999
vs. the same period a year ago. The Company believes that these increases are
related to the continued strength in the US economy as well as improvements in
load sharing arrangements among the Company's operating divisions.
Operating expenses as a percent of revenue declined from 86.2% for the three
months ended June 30, 1998 to 84.9% in the current three month period. The
fixed component of operating supplies and expense represented a lower percentage
of revenue due to the increase in comparable revenues.
Depreciation expense declined by 7.7% in the three months ended June 30, 1999
compared to the three months ended June 30, 1998. As a percentage of revenue
depreciation and amortization declined from 5.9% of revenue in the three months
ended June 30, 1998 to 5.1% in the current three month period due to the higher
sales levels.
General and administrative expenses increased as the Company continues to build
its information technology and corporate services infrastructure. As a percent
of revenue, general and administrative expense increased from 2.6% in the three
month period ended June 30, 1998 to 2.8% in the three month period ended June
30, 1999.
16
<PAGE>
Because of the items discussed above, the Company's operating ratio improved to
92.8% in the current three month period (from 94.7%) in the prior year.
Interest expense remained constant at three percent of revenue and the pre-tax
margin improved to 4.2% in the current three month period compared to 2.3% in
the same period a year ago.
The Company's tax rate exceeds the Federal statutory rate of 34% primarily
because of non-deductible goodwill and limits on the deductibility of meal
reimbursements paid to drivers. As a result, income taxes as a percent of
revenues increased to 2.1% in the current three month period compared to 1.2% in
the same period a year ago.
Unaudited Results of Operations - Six months ended June 30, 1999 vs. six months
- -------------------------------------------------------------------------------
ended June 30, 1998
- -------------------
Unaudited Pro Forma Combined Results of Operations
(In thousands except share data)
<TABLE>
<CAPTION>
Six months ended
-------------------------------------------------------
June 30, 1999 June 30, 1998
------------------------ -----------------------
$ % $ %
------------ ------ ----------- ------
<S> <C> <C> <C> <C>
Operating revenues $ 196,674 100.0% $ 186,277 100.0%
------------ ------ ----------- ------
Operating expenses 167,500 85.1 159,733 85.8
Depreciation and amortization 9,839 5.0 9,897 5.3
General and administrative expenses 5,638 2.9 5,265 2.8
------------ ------ ----------- ------
Total operating expenses 182,977 93.0 174,895 93.9
------------ ------ ----------- ------
Operating income 13,697 7.0 11,382 6.1
Interest expense 5,432 2.8 5,533 3.0
------------ ------ ----------- ------
Income before income taxes 8,265 4.2 5,849 3.1
Income taxes 4,163 2.1 3,027 1.6
------------ ------ ----------- ------
Net income $ 4,102 2.1 $ 2,822 1.5
============ ====== =========== ======
Income per basic common share $ .13 $ .09
============ ===========
Income per diluted common share $ .13 $ .09
============ ===========
Weighted average number of basic common
shares outstanding 31,242,118 31,578,812
============ ===========
Weighted average number of diluted
common shares outstanding 32,152,324 32,968,300
============ ===========
</TABLE>
Pro forma revenues increased $10.4 million (5.6%) in the six months ended June
30, 1999 compared to the same period in the prior year due to improved load
sharing arrangements among the operating divisions.
Operating expense and depreciation and amortization expense declined slightly in
the current six month period as a percentage of revenues as a result of the
increase in comparable revenues.
General and administrative expenses increased $0.4 million (7.1%) due to higher
initial costs associated with centralizing the data processing and transaction
processing functions into a corporate services group. As a
17
<PAGE>
percentage of revenues general and administrative expenses increased to 2.9% in
the current six month period compared with 2.8% in the same period a year ago.
Because of the above factors, the Company's operating ratio improved to 93.0%
in the six months ended June 30, 1999 compared with 93.9% in the six month
period ended June 30, 1998.
The improved operating ratio combined with relatively flat interest expense
caused the pre-tax margin to increase from 3.1% for the six months ended June
30, 1998 to 4.2% in the six months ended June 30, 1999.
The Company's tax rate exceeds the federal statutory rate of 34% primarily
because of non-deductible goodwill and limits on the deductibility of meal
reimbursements paid to drivers. As a result, income taxes as a percent of
revenues increased to 2.1% in the current six month period compared to 1.6% in
the same period a year ago.
Year 2000
- ---------
The Company is aware of the seriousness associated with the issues related to
the Year 2000 and its potential impact. In response to this unprecedented
event, management believes that it has identified, outlined and set forth
actions that will upgrade all information technology and non-information
technology systems that are not Year 2000 compliant with year 2000 compliant
systems by no later than September 1999. Currently, management estimates that
the Company is 90% complete in its efforts to be Year 2000 compliant.
Due to the contractual relationships with current software and hardware vendors,
the majority of the costs associated with Year 2000 compliance have been covered
under the annual maintenance fees that the Company normally pays. Since the
majority of expenses are spread throughout the year, management has not
specifically itemized expenses related to the Year 2000. Management estimates
that the Company has spent approximately $225,000 to date on Year 2000
compliance and estimates spending an additional $75,000 towards Year 2000
compliance during the remainder of 1999.
During its review of the Company's Year 2000 compliance plan, management
realized that as important as internal systems are to its mission of Year 2000
compliance, customers, vendors and community resources (utilities, local
telephone company, etc), represent a significant portion of the business
processes as well. To that end, the Company is asking its critical partners to
provide to the Company in writing, their own Year 2000 progress plans. Although
management cannot guarantee the Company's compliance, it will continue to
monitor its progress during the remainder of 1999 and refine plans, as
information becomes available.
The Company has identified its billing, dispatch, settlement, and fleet
monitoring system as its mission critical internal systems that could be
affected by the Year 2000. The Company began testing the Year 2000 compliant
version of this software in the third quarter of 1999.
The Company has developed a contingency plan that includes external vendor
readiness as well as the possibility of an internal system failure. If external
vendors are not Year 2000 compliant by September 1999, the Company will find
alternate sources to supply it with needed products and services if at all
possible. If internal systems were to fail, the Company will have a manual
system in place to provide the necessary business activities to its customers
until the Company can correct any such failure.
Although the possibility of failure exists, management believes that its Year
2000 efforts will be completed, and its systems tested in a production
environment in accordance with its plan by September 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
18
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
Part II - Other Information
Item 4 - Submission Matters to a Vote of Security Holders
The following proposals were submitted to the Company's shareholders at its
annual shareholders meeting on May 13, 1999:
1. The proposal to elect T. Wayne Davis, Philip A. Belyew, Derek E. Dewan,
Carroll L. Fulmer, Robert R. Hermann, Jr., and Ford G. Pearson as Directors
to serve until the 2000 annual shareholders' meeting. For T. Wayne Davis,
Philip A. Belyew, Derek E. Dewan, Robert R. Hermann, and Ford G. Pearson
this proposal was approved with 21,148,666 shares or 81% voting for the
proposal, and 8,391 shares or .03% withholding. For Carroll L. Fulmer this
proposal was approved with 20,603,273 shares or 79% voting for the proposal,
and 553,784 shares or 2.14% withholding.
2. The proposal to approve the Restated and Amended Articles of Incorporation.
This proposal was approved with 20,992,162 shares or 81% voting for the
proposal, and 164,644 shares or .64% voting against the proposal and 251
shares or 0% abstaining from the proposal.
3. The proposal to ratify the selection of PriceWaterhouseCoopers LLP as our
independent public accountants for the year ending December 31, 1999. This
proposal was approved with 21,155,706 shares or 81% voting for the proposal,
100 shares or 0% voting against the proposal, and 1,251shares or 0%
abstaining from the proposal.
4. The proposal to ratify certain past actions of the Board of Directors and
the Officers of the Company. This proposal was approved with 20,957,329
shares or 80% voting for the proposal, and 164,862 shares or .64% voting
against the proposal and 34,866 shares or .13% abstaining from the proposal.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement regarding computation of earnings per share.
27.1 Financial Data Schedule.
(b) The Company filed a Current Report on Form 8-K on June 10, 1999 to report
the sale of 5,000,000 shares of the Company's Series A convertible
preferred stock to GE Capital Equity Investments, Inc.
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: April 7, 2000 By: /s/Wayne N. Nellums
--------------------
Wayne N. Nellums
Senior Vice President,
Chief Financial Officer
and Secretary
19
<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 six month periods ended June 30, 1999, the Company
paid dividends on it's outstanding convertible preferred convertible stock.
Because the impact of these preferred dividends and assumed conversion of the
preferred stock into common shares was anti-dilutive, the weighted average
number of shares resulting from this "as-if" conversion have not been included
in the weighted average share calculation.
The following tables represents the reconciliation of weighted average shares
for purposes of calculating basic and diluted earnings per share for the three
and six month periods ended June 30, 1999 and 1998.
Weighted-average shares for the three months ended June 30, 1999 is calculated
as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
April 1 - April 4 26,046,701 4/91 1,144,910
Retirement of common stock on April 5 (29,229)
----------
April 5 - April 22 26,017,472 18/91 5,146,313
Issuance of common stock on April 23 20,823
----------
April 23 - June 8 26,038,295 47/91 13,448,350
Issuance of common stock on June 9 10,081
----------
June 9 - June 15 26,048,376 7/91 2,003,721
Issuance of common stock on June 16 10,000
----------
June 16 - June 30 26,058,376 15/91 4,295,337
---------- ----------
Weighted average shares 26,038,631
==========
</TABLE>
Weighted-average shares for the six months ended June 30, 1999 is calculated as
follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
January 1 - January 3 23,610,190 3/181 391,329
Retirement of common stock on January 4 (384,637)
-----------
January 4 - January 18 23,225,553 15/181 1,924,770
Issuance of common stock on January 19 890,000
-----------
January 19 - February 22 24,115,553 35/181 4,663,228
Issuance of common stock on February 23 50,130
-----------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
February 23 - March 2 24,165,683 8/181 1,068,096
Issuance of common stock on March 3 1,069,518
-----------
March 3 - March 18 25,235,201 16/181 2,230,736
Issuance of common stock on March 19 811,500
-----------
March 19 - April 4 26,046,701 17/181 2,446,375
Retirement of common stock on April 5 (29,229)
-----------
April 5 - April 22 26,017,472 18/181 2,587,373
Issuance of common stock on April 23 20,823
-----------
April 23 - June 8 26,038,295 47/181 6,761,325
Issuance of common stock on June 9 10,081
-----------
June 9 - June 15 26,048,376 7/181 1,007,396
Issuance of common stock on June 16 10,000
-----------
June 16 - June 30 26,058,376 15/181 2,159,534
----------- ----------
Weighted average shares 25,240,162
==========
</TABLE>
Weighted-average shares for the three months ended June 30, 1998 is calculated
as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
----- ------ -------- ---------
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
April 1 - April 2 20,940,583 2/91 460,233
Retirement of common stock on April 3 (20,833)
----------
April 3 - May 4 20,919,750 32/91 7,356,396
Issuance of common stock on May 5 1,072,165
----------
May 5 - June 16 21,991,915 43/91 10,391,784
Issuance of common stock on June 17 878,688
----------
June 17 - June 30 22,870,603 14/91 3,518,554
---------- ----------
Weighted average shares 21,726,967
==========
</TABLE>
Weighted-average shares for the six months ended June 30, 1998 is calculated as
follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
January 1 - January 29 20,574,626 29/181 3,296,487
Issuance of common stock on January 30 365,957
-----------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
<S> <C> <C> <C>
January 30 - April 2 20,940,583 63/181 7,288,711
Retirement of common stock on April 3 (20,833)
-----------
April 3 - May 4 20,919,750 32/181 3,698,519
Issuance of common stock on May 5 1,072,165
-----------
May 5 - June 16 21,991,915 43/181 5,224,599
Issuance of common stock on June 17 878,688
-----------
June 17 - June 30 22,870,603 14/181 1,768,997
----------- ----------
Weighted average shares 21,277,313
==========
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Weighted-average shares: 26,038,631 21,726,967 25,240,163 21,277,313
Plus: Incremental shares from assumed
conversions of warrants and options 1,044,862 1,540,379 910,206 1,389,488
------------- ------------ ---------- -----------
Adjusted weighted average shares 27,083,493 23,267,346 26,150,369 22,666,801
============= ============ ========== ===========
Income for EPS Computation
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
----- ---- ---- ----
Net income available to common
shareholders $3,977 $1,164 $4,910 $2,006
====== ====== ====== ======
The basic EPS computation is as follows:
Three months ended June 30, Six months ended June 30,
---------------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
Income per common share - basic:
Total $ 0.15 $ 0.05 $ 0.19 $ 0.09
============ ============ ============ ============
Weighted average number of common
shares outstanding-basic 26,038,031 21,726,967 25,240,163 21,277,313
============ ============ ============ ============
</TABLE>
22
<PAGE>
The diluted EPS computation is as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------------ ---------------------------------------
1999 1998 1999 1998
-------------- ---------------- ------------------ ---------------
Income per common share - diluted:
<S> <C> <C> <C> <C>
Total $ 0.15 $ 0.05 $ 0.19 $ 0.09
=========== =========== =========== ===========
Weighted average number of common
shares outstanding-diluted 27,083,493 23,267,346 26,150,369 22,666,801
============ =========== =========== ===========
</TABLE>
The equation for computing (basic and diluted) EPS is:
Income available to common stockholders
---------------------------------------
Weighted-average shares
23
<TABLE> <S> <C>
<PAGE>
<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.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-START> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,020,000
<SECURITIES> 0
<RECEIVABLES> 41,463,000
<ALLOWANCES> 756,000
<INVENTORY> 0
<CURRENT-ASSETS> 51,128,000
<PP&E> 75,174,000
<DEPRECIATION> 12,188,000
<TOTAL-ASSETS> 169,546,000
<CURRENT-LIABILITIES> 37,725,000
<BONDS> 0
0
0
<COMMON> 250,000
<OTHER-SE> 61,273,000
<TOTAL-LIABILITY-AND-EQUITY> 169,546,000
<SALES> 140,011,000
<TOTAL-REVENUES> 140,011,000
<CGS> 0
<TOTAL-COSTS> 132,352,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,519,000
<INCOME-PRETAX> 5,140,000
<INCOME-TAX> (66,000)
<INCOME-CONTINUING> 5,206,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,206,000
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
