17
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ] 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 31,848,244 shares of the Company's common stock outstanding as of May
11, 2000.
<PAGE>
TRANSIT GROUP, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1
Financial Statements
Consolidated Balance Sheets
as of March 31, 2000 (unaudited) and December 31, 1999 2
Consolidated Statements of Operations (unaudited) for the three
months ended March 31, 2000 and 1999 3
Consolidated Statement of Changes in Total Non Redeemable
Preferred Stock, Common Stock and other Shareholders' Equity (unaudited) 4
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3
Quantitative and Qualitative Disclosures About
Market Risk 14
PART II. OTHER INFORMATION
Item 6
Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRANSIT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
March 31, December 31,
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 3,051 $ 2,156
Accounts receivable (net of allowance of $2,982 and $3,441) 78,530 71,543
Other current assets 12,515 10,259
Prepaid income taxes 3,224 4,210
Deferred income taxes 9,655 9,655
---------------- ----------------
Total current assets 106,975 97,823
---------------- ----------------
Noncurrent assets:
Property, equipment, and capitalized leases 116,080 114,718
Goodwill 111,960 112,197
Other assets 1,974 1,676
---------------- ----------------
Total noncurrent assets 230,014 228,591
---------------- ----------------
Total assets $ 336,989 $ 326,414
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital leases $121,508 $ 23,990
Accounts payable 10,738 11,014
Bank overdrafts 5,893 2,856
Accrued expenses and other current liabilities 21,951 16,708
---------------- ----------------
Total current liabilities 160,090 54,568
---------------- ----------------
Noncurrent liabilities:
Long-term debt and capital lease obligations 49,044 139,530
Other liabilities 314 267
Deferred income taxes 23,131 25,482
---------------- ----------------
Total noncurrent liabilities 72,489 165,279
---------------- ----------------
Total liabilities 232,579 219,847
---------------- ----------------
Commitments and contingencies
Redeemable common stock 3,675 3,675
---------------- ----------------
Redeemable preferred stock 24,807 24,795
---------------- ----------------
Non redeemable preferred stock, common stock
and other stockholders' equity:
Preferred stock, no par value, 20,000,000 and 5,000,000
shares authorized, 5,000,000 and 5,000,000 outstanding ----- -----
Note receivable secured by stock ----- -----
Common Stock, $.01 par value, 100,000,000 and 30,000,000 shares
authorized, 31,848,244 and 31,823,751 shares issued and outstanding 308 308
Additional paid-in capital 94,641 94,577
Accumulated deficit (19,021) (16,788)
---------------- ----------------
Total non redeemable preferred stock, common stock
and other stockholders' equity 75,928 78,097
---------------- ----------------
Total liabilities and stockholders' equity $ 336,989 $ 326,414
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Total operating revenues $ 133,205 $ 64,843
-------------- --------------
Operating expenses:
Purchased transportation 55,279 25,517
Salaries, wages and benefits 32,536 15,642
Fuel 13,755 4,858
Operating supplies and expenses 12,802 6,873
Lease expense-revenue equipment 6,810 4,136
Insurance 1,836 794
Depreciation and amortization expense 5,328 2,295
Restructuring charge 1,079 -
General and administrative expense 3,956 1,767
-------------- --------------
Total operating expenses 133,381 61,882
-------------- --------------
Operating income (176) 2,961
Interest expense 3,245 1,003
-------------- --------------
(Loss) income before income taxes (3,421) 1,958
Income tax (benefit) (1,750) 1,026
-------------- --------------
Net (loss) income (1,671) 932
Preferred stock dividend requirement (562) -
-------------- --------------
(Loss) income available to common shareholders $ (2,233) $ 932
============== ==============
(Loss) income per basic and diluted common share: $ (0.07) $ 0.04
============== ==============
Weighted average number of basic
common shares outstanding 31,847,437 24,432,823
============== ==============
Weighted average number of diluted
common shares outstanding 31,847,437 25,208,372
============== ==============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL
NON REDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited
<TABLE>
<CAPTION>
Total
Common Additional Accumulated stockholders'
stock paid-in capital deficit equity
<S> <C> <C> <C> <C>
Balance December 31, 1999 $ 308 $ 94,577 $ (16,788) $ 78,097
Dividends on redeemable preferred stock ----- ----- (562) (562)
Stock issued to employee stock ownership plan ----- 64 ----- 64
Net loss ----- ----- (1,671) (1,671)
----------- --------------- ---------------- ---------------
Balance March 31, 2000 $ 308 $ 94,641 $ (19,021) $ 75,928
=========== =============== ================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TRANSIT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,671) $ 932
---------------- ----------------
Adjustments to reconcile net income to cash
(used) provided by operations:
Depreciation and amortization 5,328 2,295
Deferred income taxes (1,750) -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (8,569) 274
(Increase) decrease in other assets (1,591) 344
(Decrease) increase in accounts payable and accrued expenses 4,653 279
Other 420 (618)
---------------- ----------------
Total adjustments (1,509) 2,574
---------------- ----------------
Net cash (used) provided by operating activities (3,180) 3,506
---------------- ----------------
Cash flows from investing activities:
Business combinations, net of cash acquired - (2,695)
Proceeds from disposal of equipment 1,260 1,479
Purchase of equipment (5,725) (2,025)
Stock redeemed - (1,385)
---------------- ----------------
Net cash used by investing activities (4,465) (4,626)
---------------- ----------------
Cash flows from financing activities:
Stock issued to employee stock ownership plan 64 -
Dividends paid on preferred stock (562) -
Increase in long-term debt 15,453 6,513
Repayment of long-term debt and
capital lease obligations (9,452) (4,517)
Increase (decrease) in bank overdraft 3,037 (952)
---------------- ----------------
Net cash provided by financing activities 8,540 1,044
---------------- ----------------
Decrease in cash 895 (76)
Cash beginning of period 2,156 2,020
---------------- ----------------
Cash end of period $ 3,051 $ 1,944
================ ================
Supplemental cash flow data:
Cash paid for interest $ 2,403 $ 848
================ ================
Business combinations:
Fair value of assets acquired $ - $ 41,437
Fair value of liabilities assumed - (30,093)
Common stock issued - (8,319)
---------------- ----------------
Net cash payments $ - $ 3,025
================ ================
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The information presented herein as of March 31, 2000, and for the three months
ended March 31, 2000 and 1999 is unaudited. The December 31, 1999 balance sheet
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
1. Basis of Presentation
Our consolidated balance sheet as of March 31, 2000, our consolidated statements
of operations, and our consolidated statements of cash flows for the three month
periods ended March 31, 2000 and 1999 include our nineteen acquired subsidiaries
and the results of their operations and cash flows for the periods since
acquisition. We have made the following acquisitions:
Company Date Acquired
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
R&M Enterprises, Inc. 07/19/99
MDR Cartage, Inc. 07/30/99
Bestway Trucking Services, Inc. 07/30/99
Fox Midwest, Inc. 09/27/99
Land Transportation, LLC 11/04/99
Certain prior year balances have been reclassified to conform to the current
year financial statement presentation.
2. Summary of Significant Accounting Policies
Management's Representation
The accompanying interim consolidated financial statements have been prepared by
us in accordance and consistent with the accounting policies stated in our 1999
Annual Report on Form 10-K 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.
3. Business Combinations
From July 1997 through November 1999 we acquired 19 truckload carriers. The
business combinations of the acquired companies are accounted for under the
purchase method of accounting. Accordingly, the operating results of the
acquired companies have been included in our 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
acquired companies as if they all had been acquired on January 1, 1999. The
following adjustments were made to the historical financial statements of
acquired companies prior to their acquisition by us:
o Reduced depreciation expense due to changes in depreciation policies and
estimated lives; o Amortization of goodwill recorded in connection with the
acquisitions; o Additional interest costs for the cash portion of the
acquisition costs; o Interest costs of the acquired companies have been adjusted
to reflect the Company's financing costs;
and
o Provision for income taxes at the Company's estimated annual tax rate.
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, 1999 through the date of acquisition.
Unaudited Pro Forma Combined Results of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
2000 1999
------------------- ------------------
<S> <C> <C>
Revenue $ 133,205 $ 121,003
=================== ==================
Net (loss) income $ (1,671) $ 2,094
Preferred stock dividend requirement (562) ----
------------------- ------------------
(Loss) income available
to common shareholders $ (2,233) $ 2,094
=================== ==================
(Loss) income per basic common share $ (.07) $ .07
=================== ==================
(Loss) income per diluted common share $ (.07) $ .06
=================== ==================
Weighted average number of basic common shares
outstanding 31,847,437 31,848,263
=================== ==================
Weighted average number of diluted
common shares outstanding 31,847,437 32,623,182
=================== ==================
</TABLE>
4. Income Taxes
At December 31, 1999, we had $31 million of federal net operating loss
carryforwards potentially available to offset taxable income which expire during
the years 2009 to 2018. At March 31, 2000 the net operating loss carryforwards
are approximately $32.7 million.
We determine our provisions for income taxes using our 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 amortization expense and certain other nondeductible
expenses.
5. Credit Facility
In 1999 we entered into a $150 million credit facility, which replaced our $35
million revolving credit and term facility. The facility contains customary
financial covenants that include limitations on dividends, indebtedness,
mergers, sale of assets, and the repurchase of common stock. Requirements exist
to maintain minimum levels of coverage for a Fixed Charge Coverage Ratio, Asset
Coverage Ratio, and a Minimum Consolidated Net Worth (all defined). We were not
in compliance with certain of the covenants at March 31, 2000.
We have received a 30 day waiver to allow the participant banks time to consider
an amendment to the facility at the expiration of that waiver period. In
consideration for this waiver, the unused commitment under the acquisition
facility will be cancelled, the maximum borrowings under the revolving credit
facility will be capped at the lesser of the borrowing base or $95.9 million,
($94.5 million currently outstanding) and we will incur a fee. In accordance
with the technical requirements of Generally Accepted Accounting Principles this
debt has been classified as a current liability.
In May 1999 we issued five million shares of 9% Redeemable Preferred Stock for
$5.00 per share. Each Redeemable Preferred Share may be converted at any time,
at the option of the preferred shareholder, for one share of our common stock.
The Redeemable Preferred Stock agreement contains certain anti-dilutive
provisions which would require the issuance of additional Redeemable Preferred
Shares if we issue any of our common stock at less than $5.00 per share.
Beginning three years from the date of issuance of the Redeemable Preferred
Shares, (and for the succeeding two years) the preferred shareholders can cause
us to purchase up to 33% per year of the outstanding Redeemable Preferred Stock
for $5.00 per share. In addition, certain conditions such as a change in
ownership can accelerate the redemption requirement.
We are required to provide financial information and maintain certain financial
conditions. The conditions involve limitations on mergers, acquisitions, asset
sales and additional indebtedness. We were in compliance of all of requirements
of this Agreement. Should an Event of Default occur and remain, the holders of
the Preferred Stock will have the right to elect two members of the Board of
Directors of the Company.
7. Restructuring Charge
Early in 1999 we began formulating a plan to consolidate most "back office
operations" at our service center in Groveland, Florida. The plan was finalized
during the fourth quarter of 1999 with the completion of the last acquisition.
The first phase of the plan involves consolidating the back office functions of
the companies acquired during 1999 with a resulting increase to the purchase
price of $0.5 million which was recorded as part of the acquisition cost of the
companies acquired and charged to goodwill. The charge is intended to cover
severance for approximately 100 employees affected and the relocation of three
employees to Groveland service center. The amount of severance each employee is
entitled to is based on the years of employment of each employee affected. In
the first quarter of 2000 there were no charges or adjustments to these
accruals. The plan is expected to be completed by September 2000 at which time
the severance will be paid. Beginning in 2001, we expect the elimination of
these positions will result in annual pretax savings of $1.0-$2.0 million.
During the first quarter of 2000, we finalized a plan to consolidate the back
office operations of all remaining divisions. In connection with the plan, we
recorded a charge to income of $1.1 million to cover severance from the
termination of 55 employees and costs associated with phasing out our Atlanta
headquarters. Each employee affected will be entitled to an amount based on the
number of years of employment with us and his position within the Company. In
the first quarter of 2000 there were no charges or adjustments to these accruals
We expect the project to be completed by December 2000 at which time the
severance will be paid and we expect that the elimination of these positions
will result in annual pretax savings of $1.0-$2.0 million.
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
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
Income, 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 our business which are not historical facts are
forward looking statements that involve risks and uncertainties. Among these
risks are that we are in a highly competitive business, have a history of
operating losses, and are 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 our highly competitive business environment, we will
successfully improve our operating profitability or consummate such
acquisitions.
Liquidity and Capital Resources
Our acquisition strategy and requirements for replacing our revenue equipment
require significant capital resources. For the three months ended March 31, 2000
and 1999 cash flow from operating activities was $(3.2) million, and $3.5
million, respectively, and capital expenditures were $5.7 million, and $2.0
million, respectively, for new trucks and trailers. The first fiscal quarter is
typically the weakest quarter in the fiscal year. Beginning in the fourth
quarter of 1999, and continuing into the first quarter of 2000 higher fuel costs
and the poor performance by certain of our 1999 acquisitions resulted in losses
for the quarters ended December 31, 1999 and March 31, 2000. Annual fees for
tags, plates and permits require significant cash payments during the first
quarter of 2000. The cash required to fund our growth strategy and the capital
requirements for new equipment is significant. In addition, our internal growth
has required us to finance a significant increase in accounts receivable. These
factors have combined to negatively impact our cash flow. We expect that the
seasonal increase in business and the continued concentration on collection of
accounts receivable will alleviate these cash constraints. Capital expenditures
for 2000 are expected to range from $36.0-$40.0 million and will be financed
under our existing credit facility and by other commercial lenders. Amounts
available from future cash flows, funds available under our credit facilities,
and other lending sources should be sufficient to meet our expected operating
needs and planned capital expenditures for the foreseeable future. However,
there can be no assurance that we can continue to finance our business strategy
through operations or commercial lenders.
In 1999 we entered into a $150 million credit facility, which replaced our $35
million revolving credit and term facility. The facility contains customary
financial covenants that include limitations on dividends, indebtedness,
mergers, sale of assets and the repurchase of common stock. Requirements exist
to maintain minimum levels of coverage for a Fixed Charge Coverage Ratio, Asset
Coverage Ratio, and a Minimum Consolidated Net Worth (all defined). We were not
in compliance with certain of the covenants at March 31, 2000.
We have received a 30 day waiver to allow the participant banks time to consider
an amendment to the facility at the expiration of that waiver period. In
consideration for this waiver, the unused commitment under the acquisition
facility will be cancelled, the maximum borrowings under the revolving credit
facility will be capped at the lesser of the borrowing base or $95.9 million,
($94.5 million currently outstanding) and we will incur a fee. In accordance
with the technical requirements of Generally Accepted Accounting Principles this
debt has been classified as a current liability. We believe that we can either
amend the facility to change the covenants or refinance the debt. At such time
as we amend the covenants or obtain alternative financing , we will notify the
readers of these financial statements. There is, however, no assurance that we
will be able to amend the covenants or obtain alternative financing.
Redemption Rights for Selling Shareholders in Acquisitions
In connection with the acquisitions in 1997, we granted the selling shareholders
the right to require us to redeem a portion of the shares which they received in
exchange for selling their businesses to us. The dollar amount of stock subject
to mandatory redemption by us aggregated approximately $8.1 million upon
acquisition of those companies.
At March 31, 2000, holders of redemption rights with respect to $3.7 million of
stock may require that either 1.) we redeem the stock or 2.) a major shareholder
of the Company acquire the stock at a price of $3.60 per share. To the extent
such redemption rights are exercised, we will be required to fund the cash
required to meet our obligations under the redemption rights by drawing on bank
lines which may be available, 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 months ended March 31, 2000 compared with the
three months ended March 31, 1999
The following table sets forth items in the Consolidated Statement of Operations
for the three months ended March 31, 2000 and 1999 as a percentage of operating
revenues.
<TABLE>
<CAPTION>
Percentage of
Operating Revenues
March 31,
----------------------------
2000 1999
------------ -------------
<S> <C> <C>
Operating revenues 100.00% 100.00%
------------ -------------
Purchased transportation 41.50 39.35
Salaries, wages and benefits 24.43 24.12
Fuel 10.32 7.49
Operating supplies and expenses 9.61 10.60
Lease expense - revenue equipment 5.11 6.38
Insurance 1.38 1.22
Depreciation and amortization expense 4.00 3.54
Restructuring charge .81 -
General and administrative expense 2.97 2.73
-------------
------------
Total expenses 100.13 95.43
------------ -------------
Operating (loss) income (.13) 4.57
Interest expense 2.43 1.55
------------ -------------
(Loss) income before income taxes (2.56) 3.02
Income tax (benefit) (1.31) 1.58
------------ -------------
Net (loss) income (1.25)% 1.44%
============ =============
</TABLE>
Operating revenue increased from $64.8 million in 1999 to $133.2 million, or
105.4%, for 2000. The increase is due to the acquisition of eight companies in
1999 ($62.8 million) and an increase in comparable revenue of $5.5 million
(9.49%).
Purchased transportation increased from $25.5 million in 1999 to $55.3 million,
or 116.6%. Purchased transportation as a percentage of operating revenues
increased from 39.35% in 1999 to 41.50% in 2000 as a result of increased
emphasis on growth through owner operators and brokerage versus company
equipment.
Salaries, wages and benefits increased from $15.6 million in 1999 to $32.5
million, or 108.0%, in 2000. Salaries, wages and benefits as a percentage of
operating revenues increased from 24.12% in 1999 to 24.43% in 2000. The increase
as a percentage of operating revenues is attributed to higher driver wages, and
increased group health and workers compensation costs. Should these costs
continue to increase there can be no assurance that they can be passed along
through increased freight rates.
Fuel increased from $4.9 million in 1999 to $13.8 million, or 183.1%, in 2000.
Fuel as a percentage of operating revenues increased from 7.49% in 1999 to
10.32% in 2000. Fuel costs as a percentage of operating revenues increased as a
result of higher fuel prices compared with the prior year. Fuel costs have
increased significantly over the prior year. 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 $6.9 million in 1999 to $12.8
million, or 86.3%, in 2000. Operating supplies and expenses as a percentage of
operating revenues decreased from 10.60% in 1999 to 9.61% in 2000. 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 $4.1 million in 1999 to $6.8
million, or 64.7% in the first three months of 2000. Expressed as a percent of
operating revenues, lease expense - revenue equipment decreased from 6.38% in
1999 to 5.11% in 2000 as a result of the increase in comparable revenues.
Insurance expense increased from $.8 million in 1999 to $1.8 million, or 131.2%,
in 2000. As a percent of operating revenues insurance expense increased
nominally from 1.22% to 1.38%.
Depreciation and amortization expense increased from $2.3 million in 1999 to
$5.3 million, or 132.2%, in 2000. Depreciation and amortization expense as a
percentage of operating revenues increased from 3.54% in 1999 to 4.00% in 2000
primarily as a result of higher levels of goodwill amortization incurred in
connection with the 8 companies acquired in 1999.
During the first quarter of 2000, we finalized a plan to consolidate the back
office operations of our operating divisions. In connection with the plan, we
recorded a charge to income of $1.1 million to cover severance from the
termination of 55 employees. Each employee affected will be entitled to an
amount based on the number of years of employment with us and his position
within the Company. We expect the project to be completed by December 2000 at
which time the severance will be paid and we expect that the elimination of
these positions will result in annual pretax savings of $1.0-$2.0 million.
General and administrative expense increased from $1.8 million in 1999 to $4.0
million, or 123.9%, in 2000. General and administrative expense as a percentage
of operating revenues increased from 2.73% in 1999 to 2.97% in 2000 primarily as
a result of consulting costs incurred in connection with the consolidation of
back office functions.
Operating income decreased from $3.0 million in 1999 to a loss of $.2 million in
2000. Operating income as a percentage of operating revenues decreased from
4.57% in 1999 to (.09%) in 2000 as a result of the factors discussed above.
Interest expense increased from $1.0 million in 1999 to $3.2 million, or 223.5%,
in 2000. Interest expense as a percentage of operating revenues increased from
1.55% in 1999 to 2.43% in 2000. The increase in interest costs is related to
higher interest rates and increased seasonal borrowings.
Income taxes decreased from an expense $1.0 million in 1999 to a benefit of $1.8
million in 2000 as we recognized the value of net operating loss.
Results of Operations - Unaudited Pro Forma three months ended March 31, 2000
compared with the three months ended March 31, 1999
Since July 1997, we have acquired 19 truckload carriers and have enabled these
companies to reduce certain costs particularly in the areas of insurance,
interest and leasing costs, fuel, and redundant overhead. Our 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 TGT.
The unaudited pro forma financial information reflects the operations of the 19
acquired companies as if they all had been acquired on January 1, 1999. The
following adjustments were made to the historical financial statements of
acquired companies prior to their acquisition by us:
o Reduced depreciation expense due to changes in depreciation policies and
estimated lives; o Amortization of goodwill recorded in connection with the
acquisitions; o Additional interest costs for the cash portion of the
acquisition costs; o Interest costs of the acquired companies have been adjusted
to reflect the Company's financing costs;
and
o Provision for income taxes at the Company's estimated annual rates.
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, 1999 through the date of acquisition.
Unaudited Pro Forma Combined Results of Operations
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
--------------------------------- --------------------------------
$ % $ %
---------------- ------------- ---------------- ------------
<S> <C> <C> <C> <C>
Operating revenues $ 133,205 100.00% $ 121,003 100.00%
---------------- ------------- ---------------- ------------
Operating expenses 109,263 82.03 95,395 78.84
Fuel 13,755 10.32 10,079 8.33
Depreciation and amortization 5,328 4.00 5,344 4.41
Restructuring charge 1,079 .81 ---- ----
General and administrative expenses 3,956 2.97 3,323 2.75
---------------- ------------- ---------------- ------------
Total operating expenses 133,381 114,141 94.33
100.13
---------------- ------------- ---------------- ------------
Operating (loss) income (176) (.13) 6,862 5.67
Interest expense 3,245 2.33 2,757 2.28
---------------- ------------- ---------------- ------------
(Loss) income before income taxes (3,421) (2.46) 4,105 3.39
Income tax (benefit) (1,750) (1.31) 2,011 1.66
---------------- ------------- ---------------- ------------
Net income (loss) (1,671) (1.15) 2,094 1.73
Preferred stock dividend requirement (562) (.42) ---- ----
---------------- ------------- ---------------- ------------
(Loss) income available
to common shareholders $ (2,233) (1.57) $ 2,094 1.73%
================ ============= ================ ============
(Loss) income per basic common share $ (.07) $ .07
================ ================
(Loss) income per diluted common share $ (.07) $ .06
================ ================
Weighted average number of basic common
shares outstanding 31,847,437 31,848,263
================ ================
Weighted average number of diluted
common shares outstanding 31,847,437 32,623,812
================ ================
</TABLE>
Comparable unaudited pro forma revenues increased by approximately $12.2 million
(10.1%) for the three months ended March 31, 2000 compared to the same period in
1999.
Operating expenses increased from $95.4 million in unaudited pro forma 1999 to
$109.3 million in unaudited pro forma 2000. Operating expenses as a percent of
total revenues and other income increased from 78.84% in 1999 to 82.03% in 2000.
Fuel costs have increased dramatically over prior year periods. Expressed as a
percentage of operating revenues fuel has increased from 8.33% in 1999 to 10.32%
in 2000.
During the first quarter of 2000, we finalized a plan to consolidate the back
office operations of all remaining divisions. In connection with the plan, we
recorded a charge to income of $1.1 million to cover severance from the
termination of 55 employees. Each employee affected will be entitled to an
amount based on the number of years of employment with us and his position
within the Company. We expect the project to be completed by December 2000 at
which time the severance will be paid and we expect that the elimination of
these positions will result in annual pretax savings of $1.0-$2.0 million.
General and administrative expenses have increased on a pro forma basis as a
result of higher staff levels required for the consolidation of back office
functions and the consulting costs incurred in connection with this process.
Expressed as a percentage of operating revenues, pro forma general and
administrative costs increased from 2.75% in 1999 to 2.97% in 2000.
Due to higher operating costs, significantly higher fuel costs, and the
restructuring charge pro forma operating income declined from $6.9 million in
1999 to a loss of $.2 million in 2000.
Interest expense increased by $.5 million as a result of higher interest rates
in 2000 compared with 1999 and the cost associated with the growth of our
business.
As a result of the above factors we incurred a loss of $1.7 million in the pro
forma three months ended March 31, 2000 compared with net income of $2.1 million
in the comparable prior year pro forma period.
<PAGE>
TRANSIT GROUP, INC. AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
TRANSIT GROUP, INC. AND SUBSIDIARIES
Part II - Other Information
Item 3 - Default on Senior Securities
In 1999 we entered into a $150 million credit facility, which replaced our $35
million revolving credit and term facility. The facility contains customary
financial covenants that include limitations on dividends, indebtedness,
mergers, sale of assets, and the repurchase of common stock. Requirements exist
to maintain minimum levels of coverage for a Fixed Charge Coverage Ratio, Asset
Coverage Ratio, and a Minimum Consolidated Net Worth (all defined). We were not
in compliance with certain of the covenants at March 31, 2000.
We have received a 30 day waiver to allow the participant banks time to consider
an amendment to the facility at the expiration of that waiver period. In
consideration for this waiver, the unused commitment under the acquisition
facility will be cancelled, the maximum borrowings under the revolving credit
facility will be capped at the lesser of the borrowing base or $95.9 million,
($94.5 million currently outstanding) and we will incur a fee. In accordance
with the technical requirements of Generally Accepted Accounting Principles this
debt has been classified as a current liability.
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 no Current Reports on Form 8-K during the first quarter
of 2000.
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: May 22, 2000
By: /s/ N. Mark DiLuzio
N. Mark DiLuzio
Senior Vice President,
and Chief Financial
Officer
Exhibit 11.1 Statement regarding computation of earnings per share.
We have stock options and warrants outstanding which were not included in the
computation of fully diluted shares because to do so would be anti-dilutive.
The following tables represents the reconciliation of weighted average shares
for purposes of calculating basic and diluted earnings per share for the three
months ended March 31, 2000 and 1999.
Weighted-average shares for the three months ended March 31, 2000 is calculated
as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
<S> <C> <C> <C> <C> <C>
January 1 - January 3 31,823,751 3/91 1,049,135
Issuance of common stock on January 4 24,493
---------------------
January 4 - March 31 31,848,244 88/91 30,798,302
--------------------- ---------------------
Weighted average shares 31,847,437
=====================
</TABLE>
Weighted-average shares for the three months ended March 31, 1999 is calculated
as follows:
<TABLE>
<CAPTION>
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
<S> <C> <C> <C> <C> <C>
January 1 - January 3 23,610,190 3/90 787,006
Retirement of common stock on January 4 (384,637)
---------------------
January 4 - January 18 23,225,553 15/90 3,870,926
Issuance of common stock on January 19 890,000
---------------------
January 19 - February 22 24,115,553 35/90 9,378,271
Issuance of common stock on February 23 50,130
---------------------
February 23 - March 2 24,165,683 8/90 2,148,061
Issuance of common stock on March 3 1,069,518
---------------------
March 3 - March 18 25,235,201 16/90 4,486,258
Issuance of common stock on March 19 811,500
---------------------
March 19 - March 31 26,046,701 13/90 3,762,301
--------------------- ---------------------
Weighted average shares 24,432,823
=====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months ended March 31,
2000 1999
---- ----
<S> <C> <C>
Weighted-average shares: 31,847,437 24,432,823
Plus: Incremental shares from
assumed
Conversions of warrants and options 775,549
------------------ ------------------
Adjusted weighted average shares 31,847,437 25,208,372
================== ==================
Three Months ended March 31,
2000 1999
---- ----
Stock Options:
Outstanding beginning of 3,468,475 3,413,058
period
Granted during period ---- 27,500
Exercised/redeemed ---- (641,833)
Forfeited or expired (98,500) (5,500)
------------------ ------------------
Outstanding at end of period 3,369,975 2,793,225
================== ==================
</TABLE>
The equation for computing (basic and diluted) EPS is:
Income available to common stockholders
---------------------------------------------------
Weighted-average shares
<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.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-START> JAN-1-2000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 3,051,000
<SECURITIES> 0
<RECEIVABLES> 81,512,000
<ALLOWANCES> 2,982,000
<INVENTORY> 0
<CURRENT-ASSETS> 106,975,000
<PP&E> 131,112,000
<DEPRECIATION> 15,032,000
<TOTAL-ASSETS> 336,989,000
<CURRENT-LIABILITIES> 160,090,000
<BONDS> 0
<COMMON> 308,000
0
0
<OTHER-SE> 75,620,000
<TOTAL-LIABILITY-AND-EQUITY> 336,989,000
<SALES> 133,205,000
<TOTAL-REVENUES> 133,205,000
<CGS> 0
<TOTAL-COSTS> 133,381,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,245,000
<INCOME-PRETAX> (3,421,000)
<INCOME-TAX> (1,750,000)
<INCOME-CONTINUING> (1,671,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,233,000)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
