UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1996
Commission file number 1-19773
OTR EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Kansas
(State or other jurisdiction or of incorporation
of organization)
48-0993128
(IRS Employer Identification No.)
804 N. Meadowbrook Drive, Olathe, Kansas
(Address of principal executive offices)
66062
(Zip Code)
Registrant's telephone number, including area code (913) 829-1616
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $.01 par value
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for the
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.
(1) Yes X No (2) Yes X No
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will
not be contained to the best of Registrant's
knowledge in definitive proxy or information
statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ____
The aggregate market value of voting stock
held by non-affiliates of the registrant was
$5,751,609 as of February 28, 1997.
1,840,515
(Number of shares of common stock outstanding as of
February 28, 1997)
Part II incorporates certain information by
reference from the Registrant's Annual Report
to Stockholders for fiscal year ended December
31, 1996 and Part III incorporates certain information
by reference from the Registrant's definitive
proxy statement dated April 2, 1997.
<PAGE>
OTR EXPRESS, INC.
1996 Annual Report on Form 10-K
Table of Contents
Page
Part I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a
Vote of Security Holders 9
Part II
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 10
Item 8. Financial Statements and
Supplementary Data 10
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures 10
Part III
Item 10. Directors and Executive Officers
of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain
Beneficial Owners and Management 11
Item 13. Certain Relationships and Related
Transactions 11
Part IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 11
<PAGE>
PART I
Item 1. Business
Overview
The discussion set forth below as well as other documents incorporated
by reference herein and oral statements made by officers of the Company
relating thereto, may contain forward looking statements. Such comments
are based upon information currently available to management and management's
perception thereof as of the date of this Form 10-K. Actual results
of the Company's operations could materially differ from those forward
looking statements. Such differences could be caused by a number of
factors including, but not limited to, potential adverse affects of
regulation; changes in competition and the effects of such changes; increased
competition; changes in fuel prices; changes in economic, political or
regulatory environments; litigation involving the Company; changes in the
availability of a stable labor force; ability of the Company to hire
drivers meeting Company standards; changes in management strategies;
environmental or tax matters; and risks described from time to time in
reports filed by the Company with the Securities and Exchange Commission.
Readers should take these factors into account in evaluating any such
forward looking statements.
The Company
OTR Express, Inc., a Kansas corporation organized in 1985
(the "Company" or "OTR") operates
as a long-haul, dry van, truckload carrier. The Company
transports a diversified mix of general commodities,
including paper products, food products, furniture, wire and
retail goods for a large base of customers (currently over
1,000) throughout the continental United States. OTR is
headquartered in Olathe, Kansas, a suburb of Kansas City,
Missouri.
Operating Strategy
OTR's operating strategy is based in large part upon its
proprietary Freight Optimization System - a next move
probability based freight system. The system, developed
internally over the last nine years, utilizes the Company's
computer network and software system and consists of the
following four components: (i) rate analysis, (ii) customer
priority ranking, (iii) fleet replanning and (iv) equipment
dispersal management.
The Freight Optimization System enables the Company to
analyze historical data to prioritize customers most likely
to have freight that will produce the most profitable
combination of rates and destination. The system is designed
to maximize freight opportunities, maximize revenue per mile
and minimize empty miles.
Rate Analysis. The Company obtains market
information on freight rates and destinations on a daily
basis. This enables the Company to ensure that OTR is
obtaining market rates on all freight.
<PAGE>
Customer Priority Ranking. The Freight
Optimization System continually analyzes each customer's
freight history and develops a customer priority ranking
to direct our load planners to call customers with the highest
probability of giving OTR the most profitable combinations
of rates and destinations.
Fleet Replanning. The Freight Optimization
System replans OTR's fleet every three minutes and
provides the Company's load planners with a time sensitive
listing of the trucks that need to be reloaded.
Equipment Dispersal Management. The
equipment dispersal management system monitors the
distribution of trucks across the country to maximize
freight opportunities and minimize empty miles and downtime.
In 1996, due to changing market conditions, the Company
began marketing to larger national accounts capable of offering
increased load counts at higher revenue rates. These
larger shippers require additional services including
guaranteed equipment availability, drop trailers and
fifty-three foot trailers. Additionally, in 1996,
the Company began offering QualComm satellite communications
on every truck and electronic data interchange (EDI) for
load status information to serve the larger national
accounts. These larger shippers can
be integrated into the Company's existing operating
strategy effectively, providing a higher mix of more
profitable shipper freight. The Freight Optimization
System will continue to locate the most profitable
combination of moves, working in conjunction with the new
national accounts program.
This operating strategy has contributed to the Company's
rapid growth during the five year period ending December 31,
1996, with revenue increasing to $55.3 million in 1996 from
$16.9 million in 1991 (a compound annual growth rate of 26.7%),
and a corresponding increase in its fleet to 503 tractors from
162 during the same period. The Company intends to continue its
expansion and growth by acquiring approximately 50 new tractors
in 1997. These expansion plan commitments are flexible and
conditioned upon freight demand.
Customers and Marketing
OTR has developed a marketing strategy that is
designed to maintain a large customer base that is
diversified in terms of geographic location and types of
commodities shipped. The Company markets its services based
on dependable, time definite delivery, service and pricing.
The Company obtains freight in three different
manners: directly from shippers ("OTR Shippers"), through
Company agents ("Agent Shippers") and from freight brokers.
OTR Shippers are marketed directly by internal OTR sales
representatives. Agent Shippers are marketed by the
Company's outside sales agents. The Company's customer
database includes approximately 450 OTR Shippers, 275 Agent
Shippers and 275 freight brokers. In 1996, OTR Shippers
accounted for 46% of OTR's revenue miles, Agent Shippers
accounted for 14% and freight brokers accounted for 40%.
The freight obtained from OTR Shippers and Agent
Shippers is generally more profitable than freight obtained
from brokers, having freight rates which average 10% to 15%
more than brokered freight. To maximize this more
profitable revenue base by generating new OTR Shippers, OTR
increased the number of its internal sales representatives
and customer service representatives to thirteen at February
28, 1997 from three at December 31, 1994. These sales
representatives have historically operated primarily through
direct telemarketing efforts. In 1996,
<PAGE>
the Company began making trips to current customers
and prospective customers in conjuction
with its national account program. The Company plans to
continue aggressive expansion of its internal sales force
as well as the network of outside sales agents in 1997.
For the year ended December 31, 1996, the Company's
20, 10 and five largest customers accounted for 29.9%, 20.6%
and 13.1%, respectively, of the Company's operating revenue.
The largest customer accounted for 3.8% of the Company's
operating revenue for that period.
Freight Brokerage Division
To better service its customers, OTR has developed
a freight brokerage division which brokers loads to other
carriers. By brokering loads which the Company views as
less profitable under its Freight Optimization System, the
Company is able to increase its profitability while
satisfying its customers' shipping needs without utilizing
Company owned equipment. Freight brokerage division revenue
increased to $3.3 million in 1996 from $2.6 million in 1995.
In 1996, the Company hired additional staff for its
brokerage operation.
The Company's brokered freight is obtained through
a network of freight brokers who contract for freight
directly from shippers and re-contract with the Company to
transport the freight. A freight broker helps carriers
obtain loads in areas where the carrier does not typically
have a large number of customers, thereby minimizing the
empty miles of the carrier. Freight brokers typically earn
a margin of approximately 10%-15% of the carrier's freight
fee. The Company has developed a network of approximately
282 freight brokers. The Company believes that it has
excellent relationships with these freight brokers, and that
this network provides both profitable loads and valuable
information for the Company's Freight Optimization System.
Drivers and Other Employees
Recruiting and retaining professional, experienced
drivers is critical to the Company's success, and all of the
Company's drivers must meet specific guidelines relating
primarily to safety record, driving experience and personal
evaluation, including drug and alcohol testing. OTR's
drivers have an average age of 47.5 years and average 15.3
years of driving experience. Within the Company, drivers
are considered "managers" and are given a high level of
responsibility to manage the profitability of their
equipment.
The Company's Driver Incentive Management System
allows experienced drivers to earn higher compensation than
prevailing industry wages. The Company provides incentive
programs for its drivers based on miles driven, fuel
efficiency, safety record and profitability. OTR considers
each tractor and its driver to be a separate profit center,
with profit center reports, including the actual revenue and
expense of the equipment and fixed expense components for
administration, taxes and depreciation, generated monthly.
Under the Company's "profit center" program, drivers can
receive quarterly distributions equal to 50% of the net
income of their profit center, up to a maximum of $2,650 in
any calendar year. The program is designed to give OTR's
drivers the incentive to improve their individual
productivity, minimize costs and thereby increase overall
Company profitability.
Driver recruitment and retention is essential to
the maintenance of high equipment utilization, particularly
during periods of rapid fleet growth. OTR's drivers are
given recruiting bonuses for the referral of new drivers to
the Company. In order to attract and retain highly
qualified drivers and to promote safe operations, the
Company purchases premium quality tractors
<PAGE>
and equips them with optimal comfort and safety features,
such as on-board satellite communications, high quality
interiors, power steering, automatic braking systems, engine
brakes and oversized sleepers.
At December 31, 1996, the Company's ratio of
tractors to non-driving employees was 5.59 to one, which
management believes is well above industry standards. At
February 28, 1997, the Company had 591 employees, of whom
488 were drivers and 103 were management and administrative
personnel. The Company's employees are not represented by a
collective bargaining unit. Employees participate in OTR's
401(k) program and in Company-sponsored health, life and
dental plans. The Company does not have any employees who
are receiving post retirement benefits and does not
anticipate offering any post retirement benefits in the
future. Management considers relations with its employees
to be very good. The Company's driver turnover rate was 73%
in 1996, which is below industry average.
Revenue Equipment
The Company believes that a key to the successful
retention of drivers is the use of standardized, fuel
efficient, late-model tractors and trailers. The Company
purchases all new tractors, primarily with driver comfort,
fuel efficiency, safety and overall economy in mind. To
recruit and retain high-quality drivers, all the tractors
owned by the Company have deluxe interiors and oversized
sleepers. The average age of OTR's tractors and trailers at
December 31, 1996 was 1.8 years and 1.9 years, respectively.
The Company plans its trade cycle based on engine warranties
and routinely replaces its tractors after forty months of
use (approximately 400,000 miles).
At December 31, 1996 the Company owned 232 Navistar
tractors, 138 Peterbilt tractors and 133 Freightliner
tractors. The tractors include engines which are fully
electronic, manufactured by Detroit Diesel, Caterpillar or
Cummins. Trailers in the fleet at year end were
manufactured by Pines, Utility, Stoughton, Trailmobile and
Fruehauf. All of the Company's trailers have a 110 inch
inside and are 102 inches wide, the maximum width generally
allowed by law. The trailer fleet at December 31, 1996
included 205 fifty-three foot trailers and 403 forty-eight
foot trailers.
The following table shows the age of Company
equipment in service at December 31, 1996.
Acquisition Year Tractors Trailers
1996 67 205
1995 248 130
1994 145 120
1993 43 85
1992 _ 68
Total 503 608
The Company's preventive maintenance program
focuses on early diagnosis of problems and contracting
maintenance out to third-party providers. In addition to
annual DOT inspections, tractors are inspected when they
pass through the Company's diagnostic facilities at its
<PAGE>
headquarters. All tractors are under warranty and are
generally traded in before their engine warranties expire.
The exclusive use of third-party maintenance providers,
coupled with the effective utilization of manufacturers'
warranties and the Company's trade-in policy, allows the
Company to minimize its maintenance costs.
Fuel Availability and Cost
The Company actively manages its fuel costs through
a five component fuel management system which incorporates:
wholesale purchasing for the Company's unmanned fuel
facilities, mileage pay rates based upon fuel economy, the
"profit center" incentive driver compensation program, fuel
hedging and equipment specifications. See "_ Drivers and
Other Employees."
The Company owns five automated fuel facilities,
one located at the Company's headquarters in Kansas and one
each located on major traffic lanes in Arizona, Ohio, Texas
and Wyoming. Each of the four remote unmanned fuel
facilities consists of an above-ground fuel tank, pump and a
computer modem linking it directly to the Company's
computers. In 1996, the Company purchased 32.1% of its fuel
in bulk for distribution through its automated fuel
facilities. These facilities allow the Company to purchase
fuel at wholesale prices.
As a way to protect the Company against major fuel
price increases and "smooth" its fuel costs, since October
1994 the Company has engaged in a fuel hedging strategy.
Pursuant to this program, the Company buys six month call
options within $.10 of current market prices, to buy futures
contracts for #2 heating oil, in amounts equal to the
Company's anticipated fuel purchases for such period.
All of the Company's tractors have fully electronic
engines, which typically deliver enhanced fuel economy
compared to tractors with mechanically governed engines.
Environmental Matters
The Company's operations are subject to federal,
state and local laws and regulations concerning the
environment. There is the possibility of environmental
liability as a result of the Company's use of fuels, from
the fuel storage tanks installed at its fuel facilities and
also from the cargo it may transport. The Company's only
underground storage tanks are two fiberglass tanks installed
at its headquarters facility. One tank was installed in
1988 and the other in 1995. The tanks have overfill
protection hardware, spill containment manhole covers and
leak detection equipment. The Company believes that the use
of above-ground storage tanks at its remote fuel facilities
minimizes both potential liability and the cost of
compliance with environmental regulations. The Company
occasionally transports environmentally hazardous substances
in accordance with haz-mat guidelines. To date, the Company
has experienced no material claims for hazardous substance
shipments. The Company believes that its environmental
practices comply with applicable federal, state and local
environmental laws and regulations. In the event the
Company should fail to comply with applicable regulations,
the Company could be subject to substantial fines or
penalties and to civil or criminal liability.
Competition
The truckload industry is extremely competitive and
highly fragmented, with numerous regional, inter-regional
and national truckload carriers, none of which dominates the
market. The Company competes primarily with other long-haul
truckload carriers, rail-truck intermodal transportation,
railroads and, to a lesser degree, with less-than-truckload
(LTL) carriers. Most of
<PAGE>
OTR's larger truckload competitors
utilize "core carrier" or "lane density" marketing concepts,
which emphasize greater individualized service to a smaller
number of shippers. Many long haul truck load carriers
utilize driver teams which allow them to provide expedited
service while complying with DOT regulations concerning
driver's duty hours. OTR's drivers consist principally
of single drivers. Intermodal transportation and railroads
typically have created downward pressure on the truckload
industry's pricing structure. The Company competes for
freight based primarily on freight rates, service and
reliability.
Governmental Regulation
The Company is a contract and common motor carrier
subject to the authority of federal and state agencies.
These regulatory authorities have broad powers, but the
rates and charges of the Company are not directly regulated
by these authorities. OTR, as primarily a contract carrier,
negotiates competitive rates directly with its customers as
opposed to adhering to scheduled tariffs.
The trucking industry is subject to regulatory and
legislative changes such as increasingly stringent
environmental regulations and limits on weight and size that
can affect the economics of the industry by requiring
changes in operating practices or influencing the demand
for, and the costs of providing, services to shippers.
In August 1994, the Federal Aviation Administration
Authorization Act of 1994 (the "1994 FAA Act") became law.
Effective January 1, 1995, the 1994 FAA Act preempted
certain state and local laws regulating the prices, routes
or services of motor carriers (other than household
carriers). State agencies may continue to impose tax,
license, bonding and insurance requirements. The 1994 FAA
Act does not limit the authority of a state or other
political subdivision to impose safety regulations or
highway route limitations or controls based on the size or
weight of the motor vehicle, the hazardous nature of cargo
being transported by motor vehicles or minimum financial
responsibility requirements relating to insurance and self-
insurance authorization.
The Negotiated Rates Act of 1993 ("NRA"), in
tandem with the Trucking Industry Regulatory Reform Act of
1994 ("TIRRA"), further redefined the regulatory structure
applicable to interstate transportation of goods. The NRA
provided further regulation governing interstate
transportation, including prohibitions on off-bill
discounting, certain re-regulation of contract shipping
arrangements, and, with respect to common carriers,
regulation regarding the collection of undercharge claims,
and applicable defenses and exceptions to such claims. The
TIRRA further deregulated the trucking industry by partially
repealing the "filed-rate" doctrine previously applicable to
common carriers. Under the TIRRA, while collectively-made
bureau rates must still be published in tariffs,
individually negotiated rates are not.
The Company's drivers must be licensed as
"commercial drivers" pursuant to requirements established by
the Federal Highway Administration ("FHA") of the DOT. In
addition to the knowledge and driving skills tests required
to obtain a commercial driver's license (a "CDL"), there are
various disqualifying offenses set forth in the FHA rules,
which, if committed, result in suspension or termination of
the operator's CDL, as well as potential civil or criminal
liabilities. Also, DOT regulations impose mandatory drug
testing of drivers and the Company has its own ongoing drug-
testing program. DOT alcohol testing rules require certain
tests for alcohol levels in drivers and other safety
personnel.
<PAGE>
Motor carrier operations are also subject to
safety, equipment and operators' hours of service
requirements prescribed by the DOT. During 1993, the
Company underwent a DOT audit of its driver logs and
currently has a satisfactory rating.
Safety
The Company maintains a program for training and
supervising personnel to keep safety awareness at its
highest level. The emphasis on safety begins in the hiring
and training process. A minimum of 1.5 years of over-the-
road driving experience is required for new drivers. OTR
also verifies the driving records of all new drivers before
they begin employment. Prospective employees are given
physical examinations and drug tests, and newly hired
drivers are trained in the Company's safety procedures.
In general, any driver who violates the Company's safety
standards will receive a warning letter, and any driver who
has more than two such violations within certain periods of
time is subject to termination. The Company continuously
monitors driver performance and has final authority
regarding employment and retention of drivers. OTR
currently has a "satisfactory" safety and fitness rating
from the DOT. See "_ Governmental Regulation."
Item 2. Properties
The Company owns real estate in Olathe, Kansas, where
the Company is headquartered. The property includes a
22,000 square foot office facility and a 9,400 square foot
diagnostic and inspection facility. The property also
includes approximately 258,000 square feet of parking space
and the Kansas fuel facility. Additionally, the Company
owns tracts, each approximately one acre in size, in
Arizona, Ohio, Texas and Wyoming, on which its remote fuel
facilities are located. See "Item 1, Fuel Availability and Cost."
Item 3. Legal Proceedings
The Company is routinely a party to litigation
incidental to its business, primarily involving claims for
personal injuries and property damage incurred in the
transportation of freight. All litigation in which the
Company is currently involved is covered by the Company's
liability insurance (personal injury, physical damage and
cargo) or workers' compensation insurance. The Company
believes the ultimate outcome of current litigation will not
have a material adverse effect on its financial position or
results of operations.
The Company maintains liability insurance (including
umbrella coverage) in the amount of $10 million per
occurrence for personal injury, property damage and cargo.
Under the terms of the policy, the Company retains the first
$100,000 of losses paid and loss adjusting expense. The
Company is self-insured for workers' compensation insurance.
The Company is responsible for claims up to $250,000 per
occurrence. The Company carries excess insurance to cover
losses over $250,000, subject to a maximum coverage of $10
million per occurrence and per year.
Item 4. Submission of Matters to a Vote of
Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The information required by this Item is incorporated
by reference from the Company's Annual Report to Stock-
holders for the fiscal year ended December 31, 1996, under
the caption "Price Range of Stock."
Item 6. Selected Financial Data
The information required by this Item is incorporated
by reference from the Company's Annual Report to Stock-
holders for the fiscal year ended December 31, 1996, under
the caption "Financial Highlights."
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information required by this Item is incorporated
by reference from the Company's Annual Report to Stock-
holders for the fiscal year ended December 31, 1996 under
the caption "Financial Review."
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
The information required by this Item is incorporated
by reference from the Company's annual report to security-
holders for the fiscal year ended December 31, 1996 under
the caption "Financial Statements" and "Quarterly Financial
Data."
Annual Report Page
Report of Independent Public Accountants 13
Balance Sheets 14
Statements of Operations 15
Statements of Stockholders' Equity 16
Statements of Cash Flows 17
Notes to Financial Statements 18
Supplemental Financial Information 26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures.
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the
Registrant
The information required by this Item is incorporated
by reference from the Company's definitive Proxy Statement
under the headings "Proposal One: Election of Class B
Directors-Nominees," "The Board of Directors-Continuing
Directors," "Executive Officers-Information About Other
Executive Officers" and "Miscellaneous-Section 16
Reporting" to be filed with the Commission not later than
120 days after the end of the fiscal year covered by this
Form 10-K.
Item 11. Executive Compensation
The information required by this Item is incorporated
by reference from the Company's definitive Proxy Statement
under the heading "Executive Officers-Executive Compensation and Other
Information" to be filed with the Commission not later than
120 days after the end of the fiscal year covered by this
Form 10-K.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The information required by this Item is incorporated
by reference from the Company's definitive Proxy Statement
under the heading "Stock Ownership of Certain Beneficial
Owners and Management" to be filed with the Commission not
later than 120 days after the end of the fiscal year covered
by this Form 10-K.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
List of Documents filed as part of this Report on Form 10-K.
(1) Financial Statements
All financial statements of the Registrant as
set forth under Item 8 of this Report on Form 10-K.
(2) Financial Statements Schedules
Page of
Schedule Number Description 1996 10-K
II Valuation and Qualifying Accounts 16
The report of the Registrant's independent public
accountants with respect to the above listed financial
statements and financial statement schedules appears on page
15 of this Annual Report on Form 10-K.
All other financial statement schedules not listed
above have been omitted since the required information is
included in the financial statements or the notes thereto,
or is not applicable or required.
Reports on Form 8-K
No reports on Form 8-K were filed for the year ended
December 31, 1996.
<PAGE>
Exhibits
Exhibit
Number Description Page Number orIncorporation
By Reference To
3(a) Articles of Incorporation, Exhibit 3(a) to AnnualReport
as, amended for the year ended Dec 31, 1994
on Form 10-K (SEC File
No. 1-19773)
3(b) Restated By-Laws Exhibit 3(b) to Annual Report
for the year ended Dec 31, 1995
on Form 10-K (SEC File
No. 1-19773)
4 The Registrant, by signing
this Report, agrees to furnish
the Securities and Exchange
Commission, upon its request,
a copy of any instrument which
defines the rights of holders
of long-term debt of the
Registrant.
4(a) Specimen Common Stock Certificate Exhibit 4(a) to Amendment No. 1
to Registration Statement on
Form S-18(SEC File
No. 33-44422FW)
10(a) 1991 Incentive Stock Option Exhibit 10(a) to Registration
Plan of OTR Express, Inc Statement on Form S-18 (SEC File
No. 33-44422FW)
10(b) Assignment regarding post Exhibit 10(aa) to Annual
office box dated June 26, Report for the year ended
1992 between Registrant and Dec 31, 1992 on Form 10-K
Boatmen's First National Bank (SEC File No. 1-19773)
of Kansas City
10(c) Mortgage note dated January 10, Exhibit 10(xx) to Annual
1995 between Registrant and Report for the year ended
Toni J. Waggoner and Robert E. Dec 31, 1994 on Form 10-K
Waggoner , as Trustees (SEC File No. 1-19773)
10(d) Accounts Receivable Loan Exhibit 10(zz) to Annual
Agreement dated August 27, Report for the year ended
1995 between Registrant and Dec 31, 1995 on Form 10-K
Boatmen's First National (SEC File No. 1-19773)
Bank of Kansas City
10(e) Amendment to Accounts Exhibit 10(aaa) to Annual
Receivable Loan Agreement Report for the year ended
dated April 27, 1995 between Dec 31, 1995 on Form 10-K
Registrant and Boatmen's (SEC File No. 1-19773)
First National Bank of
Kansas City
10(f) OTR Express, Inc. 1996 Stock Exhibit 10(bbb) to Annual
Option Plan Report for the year ended
Dec 31, 1995 on Form 10-K
(SEC File No. 1-19773)
<PAGE>
10(g) OTR Express, Inc. 1996 Exhibit 10(ccc) to Annual
Directors' Stock Option Report for the year ended
Plan Dec 31, 1995 on Form 10-K
(SEC File No. 1-19773)
10(h) Form of Carrier/Shipper Page 17 of sequentially
Transportation Contract numbered pages
10(i) Contract to Purchase Tractors Page 19 of sequentially
in 1997 between Registrant and numbered pages
KCR International Trucks, Inc.
10(j) Contract to Purchase Trailers Page 20 of sequentially
in 1997 between Registrant and numbered pages
Utility Trailer Sales of
Kansas City
10(k) Accounts receivable Loan Page 21 of sequentially
Agreement dated May 1, 1996 numbered pages
between Registrant and UMB
Bank, N.A.
11 Statement re: Computation of Page 26 ofsequentially
Earnings per Share numbered pages
13 Annual Report to Stockholders Page 27 of sequentially
for the year ended December numbered pages
31, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registration has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OTR EXPRESS, INC.
Date: March 15, 1997 /s/WILLIAM P. WARD
Chairman of the Board
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ WILLIAM P. WARD Chairman of the Board March 15, 1997
William P. Ward President and
Principal Executive Officer
/s/ GARY J. KLUSMAN Executive Vice President March 15, 1997
Gary J. Klusman and Director
/s/ JANICE K. WARD Vice President March 15, 1997
Janice K. Ward Compensation and
Administration, Secretary
and Director
/s/ STEVEN W. RUBEN Vice President Finance March 15, 1997
Steven W. Ruben Principal Financial Officer
and Principal Accounting
/s/ CHRISTINE D. SCHOWENGERDT Treasurer March 15, 1997
Christine D. Schowengerdt
/s/ JAMES P. ANTHONY Director March 15, 1997
James P. Anthony
/s/ DEAN W. GRAVES Director March 15, 1997
Dean W. Graves
/s/ RALPH E. MACNAUGHTON Director March 15, 1997
Ralph E. MacNaughton
/s/ TERRY G. CHRISTENBERRY Director March 15, 1997
Terry G. Christenberry
/s/ CHARLES M. FOUDREE Director March 15, 1997
Charles M. Foudree
/s/ FRANK J. BECKER Director March 15, 1997
Frank J. Becker
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES
To the Board of Directors and Stockholders of OTR Express,
Inc.:
We have audited in accordance with generally accepted
auditing standards, the financial statements included in OTR
Express, Inc.'s annual report to shareholders incorporated
by reference into this Form 10-K, and have issued our report
thereon dated February 4, 1997. Our audits were made for
the purpose of forming an opinion on those statements taken
as a whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's
rules and is not a required part of the basic financial
statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic
financial statements, and, in our opinion, fairly states in
all material respects, the financial data required to be set
forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Kansas City, Missouri
February 4, 1997
<PAGE>
<TABLE>
Schedule II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Balance at Additions Balance at
Beginning Charged to End
of Year Expense Deductions of Year
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
1994 40,279 30,989 31,272 39,996
1995 39,996 21,840 4,904 56,932
1996 56,932 38,070 37,986 57,016
</TABLE>
CORPORATE INFORMATION
Corporate Offices Common Stock Listing
OTR Express, Inc. OTR Express, Inc. common stock
804 N. Meadowbrook Drive is traded on the NASDAQ National
Olathe, Kansas 66062 Market System under the symbol:
(913) 829-1616 OTRX
Mailing address:
PO Box 2819
Olathe, Kansas 66063-0819
<PAGE>
CARRIER/SHIPPER TRANSPORTATION CONTRACT
rev 12/14/95
THIS CONTRACT, made this day of by and between
___________ (Shipper) and OTR Express, Inc. (Carrier)
for the transportation of specified goods in accordance with
the following conditions:
WITNESSETH:
WHEREAS, Carrier is a motor vehicle contract carrier
in interstate commerce, holding Interstate Commerce
Commission operating authority in Docket MC-181996; and
WHEREAS, Shipper desires to engage the services of
Carrier for the transportation of Shipper's goods in
interstate commerce between points within Carrier's ICC
authorized licenses;
NOW, THEREFORE, in consideration of the following
mutual covenants, the Shipper and Carrier agree as follows:
1. BILATERAL COMMITMENT: Shipper shall tender to
Carrier and Carrier shall transport a series of shipments
between points designated by Shipper. Carrier shall advise
Shipper if it is unable to supply transportation service
within the time requested by Shipper in which case Shipper
may arrange other transportation. Carrier shall use its
best efforts to transport shipments tendered by Shipper in a
timely fashion.
2. DISTINCT NEEDS: Carrier shall provide service to
meet the unique, distinct needs of the Shipper which shall
include but not be limited to team service, driver
loading/unloading, overnight delivery, stops in transit,
drop trailers, detention, weekend/holiday shipments and
dedication of equipment.
3. COMMON CARRIER RATES: Rates offered by Carrier
under its common authority in individual or bureau tariffs
do not apply to shipments tendered to Carrier by Shipper
under this agreement.
4. RATES AND CHARGES: Shipper shall pay Carrier for
the transportation services described herein at the rates
and subject to the rules set forth in Appendix A or
agreements/modifications later written between the parties
which shall be deemed as additional appendices to this
contract.
5. INDEMNIFICATION: Carrier shall furnish tractors and
trailers to transport the goods tendered hereunder and to
assume all costs and liabilities incident to the
transportation of such goods and shall indemnify and hold
the Shipper harmless from any costs and liabilities except
those caused solely by acts of the Shipper, its employees or
agents.
6. C.O.D. SHIPMENTS: In the absence of advance
notification by Shipper and written acceptance by Carrier,
no C.O.D. shipments will be tendered by Shipper.
7. INSURANCE: Carrier shall maintain public liability
insurance with a single limit of not less than $1,000,000.
Carrier shall maintain
<PAGE>
cargo insurance against Carrier's
liabilities for loss or damage to goods shipped pursuant to
this Contract with a limit of $500,000 per truckload which
shall be carrier's maximum liability. For those shipments
valued in excess of $500,000 Carrier shall not be liable to
pay for a greater proportion of liability for loss or damage
than $500,000 bears to 100% of the value of the goods.
Carrier's insurance shall be primary insurance irrespective
of any other insurance carried by Shipper in effect at the
time of loss.
8. CLAIMS: All loss and damage claims and any salvage
arising therefrom shall be handled and processed in
accordance with the regulations of ICC as published in the
Code of Federal Regulations (49 C.F.R. 1005).
9. COLLECTION FEE: If Shipper's account should
necessitate outside collection action, Carrier reserves the
right to add collection costs, finance charges, court costs
and/or legal fees to the invoice amounts.
10. DURATION: This Contract shall continue for a
period of (1) year and shall be renewed automatically for
durations of an additional year but either party shall have
the right to cancel this Contract upon 30 days prior notice
to the other party.
11. PAYMENT TERMS: Net/30 Days from date of invoice.
IN WITNESS WHEREOF, the parties hereto have executed
this Contract in duplicate the date above first written.
OTR Express, Inc
(Carrier) (Shipper)
By____________________________ By__________________________
Title_________________________ Title_______________________
<PAGE>
KCR INTERNATIONAL TRUCKS, INC.
FINANCIAL SUMMARY
PURCHASE CONTRACT
9300 SFA 6X4
DESCRIPTION PRICE
TOTAL PRICE PER VEHICLE, INCLUDING FREIGHT (Less
F.E.T.) $69,585.77
FEDERAL EXCISE TAX PER VEHICLE 7,437.00
TOTAL PRICE PER VEHICLE (With F.E.T) $77,022.77
EXTENDED WARRANTY COVERAGE 2,865.00
TOTAL PRICE PER VEHICLE $79,887.77
TOTAL PRICE FOR 200 VEHICLES $15,977,554.00
LESS TRADE-IN ALLOWANCE (150 TRADES) ($6,000,000.00)
TOTAL NET SALES PRICE FOR 200 VEHICLES $9,977,554.00
We at KCR INTERNATIONAL TRUCKS thank you for the opportunity
to make this proposal and will appreciate your acceptance.
RANDY O'SHEA
(816) 455-1833
APPROVED BY SELLER: APPROVED BY PURCHASER:
KCR INTERNATIONAL TRUCKS, INC. OTR EXPRESS, INC.
/s/ R. S. KING /s/ WILLIAM P. WARD
BY: BY:
C.E.O. 12/6/96 PRESIDENT 12/6/96
OFFICIAL TITLE DATE OFFICIAL TITLE DATE
Proposal: 2606 -13- 12/05/96
<PAGE>
SALES ORDER
UTILITY TRAILER SALES OF KC, INC.
11 N. James Street Kansas City, Ks 66118
(913) 321-6060
Purchaser OTR Express, Inc. Date 1/22/97
Address 804 N. Meadowbrook Dr. Delivery Per OTR Schedule
City Olathe State KS ZIP 66063 Customer P.O. # Per Marc H.
Telephone (913) 829-1616 Factory order # CA-2281
Quantity (190) Make 1997/8 Utility Model VS2DC Size 53'x102-3/8"x13'6"
General specifications are as follows: Specifications are
per OTR request dated 12/30/96
FIFTH WHEEL HEIGHT SIDE DOOR
KING PIN SETTING
SUPPORT LEG LOCATION FLOOR
CRANK LOCATION FORKLIFT REINFORCING
CROSSMEMBER FLOOR FILLERS
REAR SUBFRAME TURN-UP
DOCK BUMPER & STEPS INSULATION: FRONT WALL
SUSPENSION ROOF SIDE WALL
SUSP LOCATION FLOOR REAR DOORS
SPRINGS FLOOR UNDERSKIN
AXLES FRONT WALL LINING
BRAKES SIDE WALL LINING
OIL SEALS ROOF LINING
HUBS REAR DOOR LINING
DRUMS WEARBAND
SLACK ADJUSTERS WIRING HARNESS
FRONT CORNER POST CLEARANCE LIGHTS
FRONT PANELS CLEARANCE LIGHT QTY
UNIT PREP S/T/T LIGHTS
SIDE PANELS TIRE CARRIER
SIDE POSTS MUD FLAPS
ROOF SKIN TIRES
ROOF BOWS WHEELS
REAR DOORS REFRIGERATION UNIT
REAR DOOR PANELS
DOOR HINGES/CROSSBRACES WEIGHT W/O UNIT
LOCK RODS MISC. OTR Express, Inc. To have an
REAR DOOR CASE option to purchase and additional (75)
RUBBER BUMPERS trailers at the end of the original
schedule for the
same price w/o trades.
You are hereby authorized to enter our order on your books
for the above specified equipment and/or labor for which we
agree to pay the sum of:
AMOUNT EACH $20,570.00 TERMS: C.O.D. DEPOSIT: -0-
F.E.T. Included CONTRACT :Number months TBA Down
payment TBA
SALES TAX ICC Exempt Contract conditions:
TOTAL EACH $20,570.00 TOTAL ORDER $3,908,300.00
Trade-in allowance $1,778,000.00 Make Various Serial # Per OTR Schedule
CONDITIONS OF SALES
The seller is not responsible for loss, damage or delays in
transportation after shipment, nor for failure to supply any
goods where prevented by strikes, fires or accidents or by
the demand exceeding the available supply or by any other
causes beyond its reasonable control. In case the purchaser
refuses to receive and pay for said goods in full as
provided, the seller may retain as liquidated damages all
money or goods paid on account of said goods herein
furnished. If a tax is imposed by a State or Federal
Government because of the sale of the specified articles an
amount equal to such tax will be added to the above price
and paid by the purchaser to the vendor.
This order is subject to a change in price which may be
effective at the time of delivery. The future labor and
material costs may make it necessary for us to modify this
price at the date of delivery.
Order taken by /s/ Jeff Janssen Price OK Signed OTR Express, Inc.
By: /s/ William P. Ward,
Pres.
<PAGE>
MASTER NOTE
UMB BANK, N.A.
1010 GRAND AVE, KANSAS CITY, MO 64106
Loan Number:0015644 TST Date: NOVEMBER 1, 1996 AMOUNT: $5,500,000.00
FOR VALUE RECEIVED the undersigned (the "undersigned"
means each maker and each endorser, and if more than one,
each shall be jointly and severally liable hereunder)
promises to pay to the order of UMB BANK, N.A., (hereinafter
"Bank") at its main office or at such other place as the
holder hereof may from time to time designate in writing, on
MAY 1, 1997, the principal sum of FIVE MILLION FIVE HUNDRED
THOUSAND AND NO/100 Dollars ($5,500,000.00), or such other
lessor amount as shall be noted as the Unpaid Principal
Balance on the Schedule of Disbursements and Payments of
Principal included herein or attached hereto pursuant to the
authority set forth herein, together with interest on the
unpaid principal balance hereof from time to time
outstanding from date(s) of disbursement(s) until Maturity
(as herein defined) at the rate (the "Loan Interest Rate")
indicated below:
X Periodic Variable Rate. From the date hereof until
the first Adjustment Date (as herein defined) the Loan
Interest Rate shall be EIGHT AND 250/1000 percent per annum.
On each Adjustment Date hereafter, the Loan Interest Rate
shall be adjusted to a rate equal to NO/1000 percentage
points above the Index Rate (as herein defined) in effect as
of such date. The term "Adjustment Date" shall mean
FEBRUARY 1, 1997, and the 1ST day of each QUARTER
thereafter.
The Bank's Index Rate for this Note is defined as: UMB
BANK,N.A. INDEX RATE
Accrued interest shall be payable Monthly. The term
"Maturity shall mean MAY 1, 1997, or any earlier date on
which payment hereunder is due pursuant to any demand or
acceleration rights provided in this Note.
The term "Index Rate", if applicable to this Note, shall
mean that rate of interest per annum determined from time to
time by Bank as its base or index rate for loans to
commercial borrowers. Such base or index rate does not
necessarily reflect the rate that Bank charges its best or
most creditworthy customers. If the Bank is precluded by
law or otherwise from using the above base or index rate,
the term "Index Rate" shall mean that substitute index rate
selected by Bank in place of its base or index rate, which
substitute index rate shall be comparable to Bank's base or
index rate provided for herein.
Interest hereunder shall be computed on the basis of
days elapsed and assuming a 360-day year. Each payment
received shall be applied first to accrued interest, and
then to a reduction of the principal sum and any expense or
other sums owed under this Note, or in any other order as
determined by Bank in Bank's sole discretion and as
permitted by law. Any sum remaining unpaid after Maturity
shall thereafter bear interest at a rate (the "Default
Interest Rate") which shall be at all times TWO AND NO/1000
percentage points in excess of the Loan Interest Rate
(adjusted, if applicable, as provided above) that would have
been applicable but for such Maturity. If not paid at
Maturity, interest thereafter shall be compounded monthly.
The privilege is hereby reserved to prepay without
penalty all or any part of the outstanding amount due
hereunder at any time prior to Maturity. If at any time
prior to Maturity the outstanding principal balance due
hereunder is less than the face amount of this Note, the
undersigned, or any of them, may from time to time until
Maturity request, and Bank may in its sole discretion make,
further disbursements hereunder which shall be evidenced by
this Note; provided, however, the aggregate amount of all
principal amounts outstanding hereunder shall at no time
exceed the face amount of this
<PAGE>
Note; and provided further,
that each and every disbursement made under this Note shall
be at the Bank's sole discretion, Bank having made no
commitment to make any such disbursements. The principal
amount due hereunder shall be the last amount stated to be
the Unpaid Principal Balance on the Schedule of
Disbursements and Payments of Principal, and the undersigned
hereby authorizes any officer of the Bank to make notations
on the Schedule of Disbursements and Payments of Principal
from time to time to evidence payments and disbursements
hereunder. The Bank is hereby directed by the undersigned
to credit all future disbursements, if any, under this Note
to account number 987-072-839-7 carried on the books of Bank
in the name of OTR EXPRESS, INC., and the undersigned agrees
that the Bank or holder hereof may make disbursements, at
its discretion, upon oral or written instructions of any of
the undersigned, or any other person(s) authorized by any of
the undersigned.
Notwithstanding anything contained herein to the
contrary, in no event shall interest accrue under this Note,
before or after Maturity, at a rate in excess of the highest
rate permitted by applicable law, and if interest (including
any charge or fee held to be interest by a court of
competent jurisdiction) in excess thereof shall be paid,
then the excess shall constitute a payment of, and be
applied to, the principal balance hereof, or at Bank's
option, shall be repaid to the undersigned.
The undersigned warrants and represents that all
proceeds of the loan evidenced by this Note are to be used
solely for business or agricultural purposes, and not for
personal, family or household purposes. The undersigned
agrees that if the proceeds are to be used for agricultural
purposes, such proceeds will be used only for the specific
operating purposes described to Bank by the undersigned, and
not for the acquisition of fixed assets or capital
expenditures. No collateral security securing this Note
will be sold unless Bank is first notified and approves in
writing of such sale.
As security for the payment of all amounts due under
this Note and all renewals and extensions hereof, and for
the payment of all other present or future indebtedness and
obligations to the Bank of any party liable hereon, however
and whenever created, arising or evidenced, direct or
indirect, contingent, secured, unsecured, matured or not yet
due, the undersigned pledges and grants to Bank a lien and
security interest in all indebtedness of Bank to any of the
undersigned, including (without limitation) any moneys,
credit balances or deposits (general or special) due from or
standing on deposit with the Bank, which belongs to, is in
the name of, or is subject to withdrawal by, any party
liable hereon, whether now existing or hereafter arising or
deposited, and in all items, moneys, instruments,
certificates of deposit, securities and other personal
property of or in the name of any of the undersigned now or
hereafter in the possession or control of, or in transit to,
the Bank for any purpose and in any capacity (but excluding
however from the foregoing any accounts or deposits held in
or by any trust qualified under sections 401(a) or 408 of
the Internal Revenue Code of 1986), including all proceeds
and products thereof and all accessions and accruals thereto
and all dividends, rights, payments, shares and property
received in respect thereto, the undersigned further
agreeing that the aforesaid indebtedness (if any) of Bank to
any of the undersigned may, at any time that all or any part
of this Note remains unpaid (whether before or after
Maturity), be held or applied to the payment of this Note by
the holder hereof. Nothing herein shall in any way limit
any of Bank's rights of setoff. This Note may also be
secured by other collateral in which the undersigned or
others may have granted a security interest or lien to Bank,
including, without limitations, the following:
ACCOUNTS RECEIVABLE AS FURTHER DESCRIBED IN SECURITY AGREEMENT DTD 5-1-96.
Bank may retain any and all of the above collateral
security, irrespective of the payment in full of the
indebtedness evidenced by this Note, until all indebtedness
secured thereby
<PAGE>
has been repaid and performed in full. It
is intended that the above security interests and liens
secure all of each of the undersigned's existing and future
indebtedness to Bank of all types and nature, including
indebtedness unrelated or dissimilar to the indebtedness
evidenced by this Note. If this Note is secured by a
mortgage or deed of trust, such mortgage or deed of trust is
dated ________ and is a lien on real property located in the
State of ________ and recorded in such state. The
undersigned agrees to give to Bank upon Bank's request, from
time to time, such other and further security as Bank, in
its sole discretion, may deem necessary or appropriate, such
additional security to become collateral security for this
Note under the provisions hereof.
Presentment, demand, notice of nonpayment, dishonor,
protest, notice of protest, notice of dishonor or default,
and any and all lack of diligence and suit are hereby waived
by all parties liable hereon. The undersigned and each
endorser, guarantor, surety or other person who may now or
hereafter be liable for the payment of this Note, by
executing, endorsing, guaranteeing or assuming this Note,
jointly and severally consent and agree to all of the terms
and conditions herein, and without limitation of the
foregoing and without affecting their liabilities hereunder
or under any other document or instrument, agree and consent
without further notice to (i) all renewals, deferrals,
extensions and modifications hereof, (ii) the impairment,
alteration, compromise, acceleration, extension or change in
the time or manner of the payment of any of the
undersigned's indebtedness to Bank, (iii) the impairment,
substitution, exchange or release at any time of all or any
part of any collateral security or any guaranty for this
Note, (iv) the release of, or impairment of the right of
recourse against, any of the undersigned or any endorser,
guarantor, surety or any other person now or hereafter
liable hereon, (v) the substitution of extension or renewal
notes for this Note, and (vi) the modification of any terms
hereof or of any mortgage, deed of trust or other agreement
now or hereafter given in connection with or as security for
this Note.
To the full extent (if any) permitted by applicable law,
the undersigned agrees to pay, and to indemnify Bank from
and against, all costs, charges, expenses, judgements,
fines, penalties and reasonable attorneys' fees incurred by
the holder in: (a) collecting this Note, (b) enforcing
rights with respect to or realizing upon any collateral
security therefor, (c) defending any action brought against
Bank with respect to this Note, any matter relating thereto
or to any relationship or transaction between Bank and any
of the undersigned, or (d) complying with, or failing to
comply with, any Environmental Regulations (as herein
defined) including abatement and cleanup costs. Any sums
paid by the holder for any such expenses shall be
immediately due and payable by the undersigned and shall
bear interest at the rate then applicable to any outstanding
principal hereunder from the date advanced until paid.
The occurrence of any of the following shall constitute
an "Event of Default": (i) default in the payment of any sum
due hereunder, or in the payment or performance of any other
obligation of any of the undersigned to Bank or the
occurrence of any default by any of the undersigned pursuant
to any obligation or undertaking under any security
agreement, assignment, pledge agreement, deed of trust,
mortgage or other instrument or document governing or
relating to the indebtedness evidenced hereby or granting or
providing for a security interest, pledge or other lien as
security for any obligations of any of the undersigned to
Bank (including, but not limited to, the indebtedness
evidenced by this Note); (ii) the occurrence of any adverse
development with respect to the financial condition of any
of the undersigned or any other person or
entity("Guarantor") who is directly or indirectly liable for
any of the indebtedness evidenced by this Note, which
materially affects the ability of any of the undersigned or
such Guarantor to perform their respective obligations to
Bank; (iii) any material representation or warranty made by
any of the undersigned or any Guarantor to Bank being
untrue, inaccurate or incomplete as of the day it was made
or given; (iv) the death, dissolution or termination of
existence of any of the undersigned or any Guarantor or the
failure of any of the undersigned or any Guarantor to pay
debts as they mature, the appointment of
<PAGE>
a receiver for any
part of the property of any of the undersigned or any
Guarantor, an assignment for the benefit of creditors by any
of the undersigned or any Guarantor, or the commencement of
any proceedings under bankruptcy or insolvency laws by or
against any of the undersigned or any Guarantor; *(v) a
levy, attachment, restraint or other legal process filed
against any of the undersigned or any Guarantor or any
collateral security securing this Note; (vi) as a result of
its reasonable determination that any collateral security
given for this Note is impaired or has a value insufficient
to adequately secure the obligations of the undersigned
secured thereby, Bank has requested additional collateral
and such additional collateral has not been promptly
provided by the undersigned or a Guarantor, of a type and in
the manner satisfactory to Bank; (vii) that subsequent to
the date of this Note (or any predecessor note(s) for which
this Note constitutes a renewal, extension or refinancing)
there has occurred a "change of control" in any of the
undersigned that is a corporation or partnership (for
purposes of this Note, a "change of control" is deemed to
have occurred upon the transfer, directly or indirectly, in
one or more transactions, of any general partnership
interest or of n/a % or more of any class of voting stock of
a corporation or the right to vote or control such stock or
partnership interest, or if the percentage of a
corporation's issued and outstanding shares that are held by
any one shareholder changes (for any reason) by more that
n/a percentage points) or (viii) Bank has deemed itself
insecure with respect to the undersigned's indebtedness
under this Note or with respect to any of the undersigned's
other obligations to Bank.
Upon the occurrence of any Event of Default, Bank may,
at its sole option and without limitation on the demand
feature of this Note and without notice or demand: (A)
declare the entire principal sum owed hereunder and all
other indebtedness of the undersigned to Bank, immediately
due and payable; (B) appropriate and apply toward the
payment of the undersigned's obligations to Bank (including,
but not limited to, the indebtedness evidenced by this
Note), in such order of application as it elects, any or all
balances, credits, deposits,
*LIMITED TO LAWSUITS OF $2.5 MILLION OR GREATER
accounts or moneys of or in the name of any of the
undersigned then or thereafter with Bank in any capacity;
and (C) exercise, in addition to all other rights hereunder
or under any other applicable agreements and
instruments, its rights under applicable law, including
those of a secured party under the Uniform Commercial Code
of the State of Missouri. Upon the occurrence of an Event
of Default described in clause (iv) of the immediately
preceding paragraph, this Note shall automatically and
immediately become due and payable without notice or demand.
The failure of the Bank to exercise any option or right or
remedy shall not preclude Bank from exercising any other
right or remedy Bank may be entitled to exercise upon the
occurrence of any Event of Default hereunder, and shall not
constitute a waiver of such option or any other right at any
time thereafter. Bank's acceptance of a partial payment of
any sum due hereunder after any Event of Default or after
Maturity, shall not rescind, waive or otherwise affect any
such Event of Default or Maturity or any acceleration or any
other exercise by Bank of any of its rights hereunder or
under any other documents or applicable law. The
undersigned agrees that time is of the essence. If any
provision of this Note violates the law or is unenforceable,
the other provisions of this Note shall remain valid.
The undersigned shall furnish to Bank such information
and reports regarding any collateral security, the
undersigned's financial condition and operations, and such
other matters as Bank may from time to time reasonably
request. Specifically, and without limitation on the
foregoing, the undersigned shall provide to Bank upon
reasonable request, current financial statement for each of
the undersigned and each Guarantor including, but not
limited to, balance sheets and profit and loss statements.
<PAGE>
The undersigned shall comply with all federal, state and
local laws, statutes, rules, regulations, standards,
ordinances and orders pertaining to the environment,
hazardous substances, pollutants or contaminants
("Environmental Regulations") and shall immediately deliver
to Bank copies of any notice or other communication received
by any of the undersigned alleging a violation of, or a
failure to maintain any permit or license required by, any
Environmental Regulations. The undersigned covenants,
represents and warrants to Bank that any property now or
hereafter or previously owned or operated by any of the
undersigned, has not been, and will not be, used by any of
the undersigned, or to the best knowledge and belief of each
of the undersigned, by any prior owner or operator, to
refine, produce, store, handle, process or transport any
hazardous substance, pollutant or contaminant except in full
compliance with all applicable Environmental Regulations,
and that any substance disposed of off-site by any of the
undersigned have been, and will be, disposed of in
accordance with all applicable Environmental Regulations.
The loan evidenced hereby has been made, and this Note has
been delivered, at
Bank's office at the address indicated above, and such loan,
this Note and the rights, obligations and remedies of Bank
and the undersigned shall be governed by and construed in
accordance with the laws of the State of Missouri. All
obligations of the undersigned, and the rights, powers and
remedies of Bank, expressed herein shall be in addition to,
and not in limitation of, those provided by law or in any
written agreements or instruments (other than this Note)
relating to any obligation of any of the undersigned to
Bank, the loan evidenced by this Note or any collateral
security.
It is the intent hereof that each of the undersigned (if
more than one) remain liable as principal until the full
amount of all indebtedness evidenced by this Note has been
paid, notwithstanding any act, omission or event that might
otherwise operate as a legal or equitable discharge or
defense with respect to any of the undersigned.
No setoff or counterclaim of any kind claimed by any
person liable under this Note shall stand as a defense to
the enforcement of this Note against any such person, it
being agreed that any such setoff or counterclaim must be
maintained by separate suit.
The undersigned and Bank hereby agree to trial
by court and irrevocably waive jury trial in any
action or proceeding (including but not limited to
any counterclaim) arising out of or in any way
relating to or connected to this Note, any
relationship or transaction between any of the
undersigned and Bank, the origination,
administration or enforcement of the indebtedness
evidenced or secured by this Note, or any other
matter.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER(S) AND US (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS
WE REACH COVERING SUCH MATTERS ARE CONTAINED IN
THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE
MAY LATER AGREE IN WRITING TO MODIFY IT.
Address: 804 N. MEADOWBROOK DRIVE Borrower: OTR EXPRESS,
INC.
OLATHE, KS 66063-0819 By: /S/WILLIAM P. WARD
Title: Pres.
Borrower:
By: /S/ GARY J. KLUSMAN
Title: Ex. V. P.
<PAGE>
OTR Express, Inc.
Exhibit 11. Statement Re: Computation of Earnings Per Share
Earnings per share is calculated by dividing net income by
the average weighted number of shares of common stock and
common stock equivalents outstanding during the period.
Common stock equivalents include the outstanding convertible
preferred stock.
<PAGE>
OTR EXPRESS, INC.
1996 ANNUAL REPORT
(Pictured on cover OTR tractor omitted)
<PAGE>
OTR uses technology and its proprietary
Freight Optimization System to profitably acquire and haul
freight in the full truckload industry.
OTR maximizes freight oportunities from a large base of
more than 1,000 customers, geographically dispersed
throughout the United States.
OTR implemented a marketing program in 1996 to provide total
transportation solutions to larger shippers. We now offer
QualComm satellite communications on every truck, electronic
data interchange (EDI) for load status information and 53-
foot air-ride trailers for premium capacity and safety.
In 1996, OTR began marketing its services to larger national
accounts capable of offering increased load counts at higher
rates.
OTR's unique operating strategy and its technological
leadership have enabled it to grow revenues at an annual
compound growth rate of 27% over
the past five years.
Table of Contents
Highlights 1
Report to Stockholders 3
Technology, Customer Service and Marketing 6
Driver Incentive Management System 8
Financial Review 9
Financial Statements 13
Directors and Officers 25
Quarterly Financial Data 26
Stockholder Information 28
<PAGE>
(Graphs-five year histories of various operating statistics omitted)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
(In thousands except per share data)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income Statement Data
Operating revenue $55,261 $49,211 $42,760 $30,646 $21,993
Operating income 2,195 2,029 3,648 2,452 1,780
Net income (loss) (368) (157) 1,278 744 546
Outstanding shares 1,836 1,830 1,825 1,817 1,725
Earnings (loss) per
share $ (0.20) $ (0.09)$ 0.70 $ 0.41 $ 0.32
Operating ratio (1) 96.0% 95.9% 91.5% 92.0% 91.9%
Balance Sheet Data
Current assets $ 7,681 $ 6,799 $ 6,109 $ 4,413 $ 2,990
Current liabilities 19,152 17,187 10,781 7,402 4,420
Total assets 50,576 48,883 36,720 28,508 22,291
Short-term debt 15,751 13,968 7,913 5,606 3,340
Long-term debt, less
current portion 21,019 20,844 14,595 11,995 10,090
Stockholders' equity 8,805 9,156 9,301 7,973 7,207
(1) Operating expenses as a percentage of operating revenue
Operational Highlights
1996 1995 1994 1993 1992
Total miles (in thousands) 52,330 47,197 40,279 30,644 22,195
Average number of tractors 506 450 345 262 189
Revenue per loaded mile $ 1.042 $ 1.031 $ 1.041 $ 1.013 $ 0.997
Revenue per mile $ 0.973 $ 0.963 $ 0.983 $ 0.957 $ 0.936
Miles per week per truck 1,984 2,015 2,247 2,249 2,247
Empty miles percentage 6.6% 6.6% 5.6% 5.6% 6.1%
Miles per load 1,464 1,506 1,576 1,552 1,460
Licensed tractors - end of
period 503 503 394 301 228
Licensed trailers - end of
period 608 567 449 329 244
Average equipment age (in
years)
Tractors - end of
period 1.82 1.23 1.50 1.34 1.12
Trailers - end of
period 1.88 3.05 2.92 2.81 2.60
Fuel purchases at wholesale
(% of total ) 32.1% 31.9% 36.4% 32.3% 28.2%
Blended average fuel cost
per gallon $ 1.17 $ 1.07 $ 1.04 $ 1.04 $ 1.06
<PAGE>
</TABLE>
To Our Stockholders:
The trucking industry was very challenging again in
1996, which included the second consecutive year of weak
freight demand, high fuel prices and a shortage of qualified
drivers. The end result was a disappointing loss of $0.20
per share accompanied by a decline in the stock price and
market capitalization.
The adversity faced by the company in the past two
years has encouraged us to continue to modify our marketing
approach to a changing industry. We began with a goal of
increasing our percentage of shipper freight with a
corresponding reduction in less profitable broker freight.
Today we have a new focus on marketing, customer service and
national account development.
During 1996, OTR implemented major programs, all of
which are significant changes designed to provide total
transportation solutions to expand our customer base. These
included on-board satellite communications; electronic data
interchange (EDI) with our customers, guaranteed equipment
and rates for customer contracts; conversion of the trailer
fleet from 48 foot to 53 foot air-ride; additional drop-
trailers for customers; and expanded brokerage services to
cover logistics packages.
Our marketing department is now three times its former
size and 400 new shippers generating 6,000 loads were added
in 1996 . We are targeting larger national accounts to
complement our freight optimization system, which maximizes
the profitability of freight acquired on the spot market.
Our 1996 shipper statistics reflect the success of our
new marketing effort. Shipper freight increased from 52% to
66% of total miles, reducing broker freight from 48% to 34%.
Revenue increased by $6.0 million or 12% from 1995 in the
midst of a weak market. We accomplished these results with
an emphasis on technological excellence and on-time
reliability for our customers.
We believe we have made the correct decisions in 1996
with our investment in customer service and marketing. The
company is now in a position to compete for freight on any
level. The future for OTR and the truckload industry
depends on technology, reliability and customer service.
(Picture of Executive Officers omitted)
<PAGE>
1996 Results
Revenues increased by 12% to $55.2 million in 1996
from $49.1 million in 1995. Operating income improved 8% to
$2.2 million from $2.0 million. The company reported a net
loss for the year of $368,000 or $0.20 per share compared to
a loss of $157,000 or $0.09 per share in 1995.
The revenue increase was primarily related to a 12%
increase in the fleet size in 1996. Although the economy
continued to grow in 1996, freight demand was weak
throughout the year as a result of an over-capacity of
trucks nation-wide. At 1,984 miles per unit per week,
utilization was comparable with 1995.
Fuel costs were expected to trend downward during
1996. Forecasted increases in exports from Iraq and lower
crude oil costs never developed. Inventories declined to
minimum levels while refineries waited in vain for a decline
in crude oil prices to build up diesel stocks for the
winter.
As a result, diesel fuel prices trended higher
throughout the year, peaking at an average of $1.28 per
gallon in the fourth quarter. For the year, higher fuel
costs (net of recovery from fuel surcharges and fuel
hedging) reduced earnings by $0.20 per share.
Wages and benefits as a percentage of revenue
stabilized during 1996. OTR continues to pay premium wages
to attract experienced drivers. The average compensation
for a driver with OTR for all of 1996 was $39,400. Staffing
the trucks with the quality of driver we demand continues to
be a challenge in the face of a national driver shortage.
Our unmanned truck percentage was 6.0% in 1996 compared to
4.6% in 1995 and a target of 3.5%. Our demographics
remained strong with a fleet average of 17 years over-the-
road driving experience.
1997
It appears that 1997 will see a continuation of the
dramatic changes that are reshaping the truckload segment of
our industry. We have already altered the direction and
strategy at OTR to capitalize on these changes.
We expect over-capacity in the truckload market to be
reduced in 1997, improving the demand for freight services.
Only those carriers providing shippers with increasingly
reliable service and sophisticated technology will benefit
from the improvement, however. We will strive to be a
leader in providing advanced technology as well as high
quality freight services to our customers.
(Picture of OTR tractor omitted)
<PAGE>
In August 1996, we completed the installation of on-
board satellite communications in all our trucks. We now
have continuous communication with our drivers and the
current location of any truck through satellite positioning.
This capability is required by many larger shippers who use
EDI for inventory control purposes.
Expansion plans for 1997 will add 50 units to the
fleet, bringing the total to 553 units. The expansion is
contingent on strong freight demand and fleet staffing
experience during the year.
We are proud of the creativity and hard work of our
people in management information systems (MIS) and the
strides they have made in the past two years. They have
successfully integrated our on-board satellite messaging
system with our load order system and developed new EDI
solutions for five of our larger shippers in 1996.
Our local area network now links all of our 130 computers, using
internally developed software that can be modified
continuously to
meet our changing requirements. We have made excellent
progress in positioning ourselves as a company that can
provide technological solutions for customer service
requirements.
Technology and customer focus will determine
the success of truckload carriers in the future. These
areas will receive the highest priority in the years ahead.
We expect 1997 to be a year in which our efforts to adapt to
industry changes will allow us to achieve a position of
leadership in the industry. Our size will allow us to be
flexible and innovative in an increasingly sophisticated and
competitive market.
All associates of OTR Express remain committed to
achieve our mission statement of becoming the most efficient
provider of high quality truckload service in America. We
want to thank our investors for their continuing interest
and confidence. We will strive to provide you an
interesting and profitable investment as a result of your
ownership in our company.
Very truly yours,
/S/ William P. Ward
William P. Ward
President and Chairman
(Picture of Vice Presidents omitted)
<PAGE>
OTR Technology
OTR has utilized its leading edge technological capabilities
to be an industry leader in customer service and on time
reliability. Our historical on-time delivery percentage is
in excess of 96%.
In 1996, we made several investments in technology that will
enable OTR to maintain its customer service leadership. Our
new investments include:
o Qualcomm Omnitracs System - Each OTR truck is
equipped with a Qualcomm Omnitracs on-board satellite
communications system that provides on-demand, immediate
contact with any driver and global positioning reports for
equipment location, anywhere in the nation. The company
receives hourly position reports on all of its trucks. This
service is critical for customers with just-in-time
inventory management programs.
o Electronic Data Interchange (EDI) - Using set
protocols, OTR provides daily or on-demand transfer of load
status information to our customers by computer.
o Bar coding (October 1997) - Cartons will contain bar
coding information input by shippers. This will enable
receivers to swipe the bar codes with a "wand" and obtain
the corresponding receiving information to input into their
inventory system.
Customer Service and Marketing
In the past eighteen months, OTR's marketing strategy
has adapted to changing market conditions, primarily as a
result of our goal to achieve higher levels of shipper
freight. The company will continue to maximize the number
of customers and, therefore, freight opportunities for the
freight optimization system. In addition, we are continuing
to market OTR to larger national accounts capable of
offering increased load counts at higher revenue rates.
These larger shippers can be integrated into our existing
operating strategy effectively, providing a higher mix of
more profitable shipper freight.
In addition to the advanced technology, we are offering
customers the following services:
o Guaranteed equipment availability and rates, a
commitment to a higher level of customer service.
o Total transportation solutions, including additional
drop trailers, expanded brokerage department to cover loads
and warehousing.
o Fifty-three-foot trailers in order to market to a new
segment of shippers with requirements for higher cubic
capacity. As of December 31, 1996, more than one-third of
our trailer fleet had been converted to the 53-foot format.
o In late 1996, OTR established a new customer service
department dedicated to serving the freight needs of our
larger national account shippers. The customer service
department provides those customers with a dedicated contact
within OTR who can respond to all customer needs.
OTR Services
OTR Services is our brokerage division, which includes
a base of more than 900 quality carriers who can provide
service beyond our own equipment availability. OTR Services
enables OTR to meet all of a shippers needs in just one
phone call. In 1996, OTR Services revenues increased by
more than 50% primarily due to the increase in OTR's
customer base.
OTR Efficiency
OTR continues to be one of the most efficient carriers in
the industry due to our focus on technology and our
experienced drivers. Our tractor-to-administrative staff
ratio, a measure of operating efficiency, is 5.59 to 1 in
an industry where 3.5 to 1 is considered very good.
<PAGE>
Freight Optimization System
OTR continues to utilize the Freight Optimization
System as the core of its dispatching and freight selection
process. The OTR operating strategy places a premium on
management information and load planning systems. The
Freight Optimization System utilizes the company's computer
network and a software system developed internally during
the past eight years. This unique system allows OTR to
maximize rates and minimize empty miles.
The Freight Optimization System consists of the
following four continuous systems:
o Rate Analysis - The company obtains the most current
market information on freight rates and destinations from
brokers. This enables the company to ensure that OTR is
obtaining market rates on all freight.
o Customer Priority Ranking - The system continually
analyzes our customers' freight history and develops a
customer priority ranking to direct our load planners to
call customers with the highest probability of giving OTR
the most profitable combinations of rates and destinations.
o Fleet Replanning - The system replans the fleet every
three minutes, and provides the load planners with a time
sensitive listing of the trucks that need to be reloaded.
o Equipment Dispersal Management - The dispersal
management system monitors the distribution of trucks across
the country to maximize freight opportunities and minimize
empty miles and downtime.
The Freight Optimization System will continue to
locate the most profitable combination of moves, working in
conjunction with the new national accounts program.
On-time reliability
OTR continues to offer customers and potential
customers on-time reliability in a manner that few can
match:
o Experienced drivers with an average of 47 years of age
and more than 15 years driving experience.
o High-quality, low mileage, reliable equipment to
minimize downtime.
o Superior service record- with a historical on-time
delivery percentage of greater than 96%.
OTR's approach also reduces the company's dependence
on any single customer. The largest customer accounted for
only 3.8% of revenues in 1996, while the top five customers
combined for only 13.1% of revenues.
The dry van segment of the domestic truckload market
is estimated by trucking analysts at $24 billion. The
largest three carriers in this market have captured
approximately 10% of the market on a combined basis. OTR
revenues for 1996 were 0.2% of the total dry van market in
the U.S.
(Picture of OTR tractor omitted)
<PAGE>
Driver Incentive Management System
An article in the industry publication Transport
Topics characterized driving for OTR as "A thinking man's
job." Driver/managers are given a high level of
responsibility to manage the profitability of their
equipment. OTR provides financial incentives to its
equipment managers to analyze each decision based on the
impact on net income. This system results in higher
revenues and utilization with reduced fuel costs,
maintenance, accidents, insurance premiums and road
expenses.
Management has recognized from the start the
importance of quality, experienced equipment managers. The
company is committed to paying managers a premium wage and
providing them with equipment they are proud to drive. This
approach has produced a group of managers averaging 48 years
of age and 15 years of experience.
The company's Driver Incentive Management System
rewards equipment managers with mileage pay, profit center
distributions and an ESOP based on the profitability of
their equipment. All manager pay programs provide incentive
for managers to keep expenses low and equipment running efficiently.
Mileage pay at OTR is based on fuel efficiency achieved by a
manager. Above-average fuel economy is rewarded with
premium pay per mile. Managers have a large incentive to
run equipment at efficient speeds, reduce out of route
miles, idle less and maintain the equipment in peak
operating condition.
Profit Center Distributions
OTR maintains each truck as a separate profit center.
Profit center reports include the actual revenues and
expenses of the equipment and fixed expense components for
administration, taxes and depreciation. Managers earn 50%
of the net income of their profit center.
A typical monthly profit center statement for one of
our managers might look like the one shown below. This
manager would receive 50% of $1,040 for the current quarter.
<TABLE>
OTR Express, Inc. PROFIT CENTER STATEMENT
Report Period Ended 3/31/96 Manager: JD7 Jeff Driver
Profit Center Start Date 1/1/96 Tractor: 1545
<CAPTION>
March Percent Quarter Percent
<S> <C> <C> <C> <C>
REVENUES
Mileage income $10,866 100.0 $31,490 100.0
OPERATING EXPENSES
Wages 3,002 27.6 8,483 26.9
Payroll taxes 280 2.6 848 2.7
Fuel and fuel taxes 1,945 17.9 5,826 18.5
Tractor oil 75 0.7 140 0.4
Tractor tires 380 3.5 656 2.1
Tractor additives 20 0.2 45 0.1
Tractor maintenance 278 2.6 1,016 3.2
Tractor wash 25 0.2 73 0.2
Tractor parts 42 0.4 185 0.6
Trailer expense (fixed) 500 4.6 1,500 4.8
Trailer maintenance (fixed) 185 1.7 555 1.8
Road expenses 110 1.0 314 1.0
Insurance (fixed) 400 3.7 1,200 3.8
Accidents and claims 0 0.0 0 0.0
Licensing and permits (fixed) 435 4.0 1,305 4.1
Management expenses
(% of revenue) 1,195 11.0 3,464 11.0
Total 8,872 81.7 25,610 81.3
OPERATING INCOME 1,994 18.3 5,880 18.7
Principal payment
(per mile) 1,232 11.3 3,571 11.3
Interest payment (fixed) 423 3.9 1,269 4.0
NET CASH FLOW $ 339 3.1 $ 1,040 3.3
<PAGE>
</TABLE>
<TABLE>
Selected Financial Data
<CAPTION>
(In thousands except per share data)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Operating revenue $55,261 $49,211 $42,760 $30,646 $21,993
Operating expenses
Salaries, wages and
benefits 22,395 19,837 15,912 10,779 7,570
Purchased
transportation 2,930 2,402 2,094 825 833
Fuel 7,011 5,511 4,546 3,777 2,883
Maintenance 3,310 3,005 2,648 1,896 1,323
Depreciation 6,723 6,517 5,243 4,276 2,896
Insurance and
claims 1,639 1,594 1,738 1,624 1,060
Taxes and
licenses 6,048 5,541 4,684 3,508 2,602
Supplies and
other 3,010 2,775 2,247 1,509 1,046
Total operating
expenses 53,066 47,182 39,112 28,194 20,213
Operating income 2,195 2,029 3,648 2,452 1,780
Interest expense 2,789 2,283 1,449 1,143 913
Income (loss) before income
taxes (594) (254) 2,199 1,309 867
Income tax expense (benefit) (226) (97) 921 497 321
Income (loss) before change
in acct principle (368) (157) 1,278 812 546
Cumulative effect of change
in acct principle - - - (68) -
Net income (loss) $ (368) $ (157) $ 1,278 $ 744 $ 546
Outstanding shares 1,836 1,830 1,825 1,817 1,725
Earnings (loss) per share $ (0.20) $ (0.09) $ 0.70 $ 0.41 $ 0.32
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and
benefits 40.5 40.3 37.2 35.2 34.4
Purchased
transportation 5.3 4.9 4.9 2.7 3.8
Fuel 12.7 11.2 10.6 12.3 13.1
Maintenance 6.0 6.1 6.2 6.2 6.0
Depreciation 12.2 13.2 12.3 14.0 13.2
Insurance and
claims 3.0 3.3 4.1 5.3 4.8
Taxes and
licenses 10.9 11.3 11.0 11.4 11.8
Supplies and
other 5.4 5.6 5.3 4.9 4.8
Total operating
expenses 96.0 95.9 91.5 92.0 91.9
Operating income 4.0 4.1 8.5 8.0 8.1
Interest expense 5.1 4.6 3.4 3.7 4.2
Income (loss) before income
taxes (1.1) (0.5) 5.1 4.3 3.9
Income tax expense (benefit) (0.4) (0.2) 2.1 1.7 1.5
Income (loss) before change
in acct principle (0.7) (0.3) 3.0 2.6 2.4
Cumulative effect of change
in acct principle - - - (0.2) -
Net income (loss) (0.7) (0.3) 3.0 2.4 2.4
</TABLE>
<PAGE>
Financial Review
1996 Compared to 1995
Operating Revenue. Operating revenue increased by
12% to $55.3 million in 1996 from $49.2 million in 1995.
The average number of tractors in service increased by 12%
from 450 to 506 for the year . Revenue per loaded mile
increased by 1.0% to $1.042 from $1.031. The company
continued to allocate additional resources to the brokerage
operation in 1996, resulting in a 25% increase in brokerage
revenue to $3.3 million in 1996 from $2.6 million in 1995.
Management expects the brokerage division to expand in 1997
as a result of increased marketing efforts.
Operating Expenses. The operating ratio (total
operating expenses as a percent of operating revenue)
increased to 96.0% in 1996 compared to 95.9% in 1995.
Salaries, wages and benefits increased to 40.5% of
revenue in 1996 compared to 40.3% in 1995. The company
increased wage rates for drivers twice in 1995 to attract
and retain highly qualified and experienced drivers in a
very competitive market. There were no increases in wage
rates for drivers in 1996.
Purchased transportation, which represents payments to
other trucklines for hauling loads contracted through the
company's brokerage division, was 5.3% of revenue compared
to 4.9% in 1995 because of the 25% increase in brokerage
revenue. As a percentage of brokerage revenue, purchased
transportation was 90.1% in 1996 versus 92.5% in 1995.
Fuel increased to 12.7% of revenue from 11.2% in 1995.
The increase is primarily due to an increase in the average
fuel cost per gallon ($1.17 in 1996 vs. $1.07 in 1995). The
cost in 1996 is net of $220,000 of gain on fuel hedging
contracts which were in the money as a result of higher fuel
prices.
Depreciation as a percent of revenue was 12.2% in 1996
compared to 13.2% in 1995. The increase is primarily a
result of an extended holding period for tractors. In 1996,
the company began depreciating its tractors straight line
over 40 months to an estimated salvage value versus 36
months to an estimated salvage value in 1995.
Insurance and claims decreased to 3.0% of revenue in
1996 from 3.3% in 1995. Effective January 1, 1996, the
company's liability insurance carrier reduced its premium
rate, reducing premiums by $115,000 in 1996. In addition,
the company had a more favorable loss experience per mile in
1996.
Supplies and other expenses decreased to 5.4% of
revenue from 5.6% in 1995. In 1995, the company took a one-
time charge of $171,000 to write off the cost of a stock
offering which was withdrawn in June 1995 due to market
conditions.
Interest Expense. Interest expense increased to 5.1%
of revenue in 1996 from 4.6% in 1995 as a result of higher
debt levels. In 1996, 81% of the company's capital was
interest bearing compared to 79% in 1995.
Net Income (Loss). The net loss for 1996 was $368,000
or $0.20 per share compared to net loss of $157,000 or $0.09
per share in 1995.
1995 Compared to 1994
Operating Revenue. Operating revenue increased by
15% to $49.2 million in 1995 from $42.8 million in 1994.
The average number of tractors in service increased by 30%
from 345 to 450 for the year . Revenue per loaded mile
decreased by 1.0% to $1.031 from $1.041 primarily due to an
over capacity of trucks and weaker freight demand.
Operating Expenses. The operating ratio increased to
95.9% in 1995 compared to 91.5% in 1994.
Salaries, wages and benefits increased to 40.3% of
revenue in 1995 compared to 37.2% in 1994. The company
<PAGE>
increased wage rates for drivers twice in 1995 to attract
and retain highly qualified and experienced drivers in a
very competitive market. The increased wages, combined with
lower revenue rates per mile, caused the wages as a percent
of revenue to increase.
Fuel increased to 11.2% of revenue from 10.6% in 1994.
The increase is primarily due to an increase in the average
fuel cost per gallon ($1.07 in 1995 vs. $1.04 in 1994) and a
decrease in revenue per mile. The fleet fuel economy
improved to 5.53 miles per gallon in 1995 from 5.50 in 1994.
Depreciation as a percent of revenue was 13.2% in 1995
compared to 12.3% in 1994. The increase as a percent of
revenue in 1995 is a result of fixed expenses being spread
over lower revenue per unit in 1995.
Insurance and claims decreased to 3.3% of revenue in
1995 from 4.1% in 1994. Effective January 1, 1995, the
company's liability insurance carrier reduced its premium
rate from 0.0135% of revenue to 0.0101%, reducing premiums
by $156,000 in 1995. In addition, the company had a more
favorable loss experience per mile in 1995.
Taxes and licenses as a percent of revenue increased
to 11.3% from 11.0% in 1994, primarily as a result of lower
revenue rates per mile in 1995.
Supplies and other expenses increased to 5.6% of
revenue from 5.3% in 1994, representing an increase in
advertising for new drivers and a one-time charge of
$171,000 to write off the cost of the withdrawn stock
offering.
Interest Expense. Interest expense increased to 4.6%
of revenue in 1995 from 3.4% in 1994 as a result of lower
revenue per mile in 1995. In addition, 79% of the company's
capital was interest bearing in 1995 compared to 71% in
1994.
Net Income (Loss). The net loss for 1995 was $157,000
or $0.09 per share compared to net income of $1,278,000 or
$0.70 per share in 1994.
Seasonality
Seasonality causes variations in the operations of the
company as well as industry-wide operations. Demand for the
company's service is generally the highest during the summer
and fall months. Historically, expenses are greater during
the winter months when fuel costs are higher and fuel
efficiency is lower.
Inflation
The effect of inflation on the company has not been
significant during the last three years. An extended period
of inflation could be expected to have an impact on the
company's earnings by causing interest rates, fuel and other
operating costs to increase. Unless freight rates could be
increased on a timely basis, operating results could be
adversely affected.
Liquidity and Capital Resources
The growth of the company's business has required
significant investments in new revenue equipment acquired
primarily through secured borrowings. Net capital
expenditures, principally for revenue equipment, were $11.9
million, $18.0 million and $7.6 million for the years ended
December 31, 1994, 1995 and 1996, respectively. Included in
the 1996 figure is $1.6 million for on-board satellite
communications equipment. The company plans to expand its
fleet by 50 tractors in 1997, conditioned upon improvement
in freight market conditions. At February 28, 1997, the
company had conditional arrangements for 200 tractors (50
new units and 150 replacement units) at a cost of $16.0
million, as well as 190 new trailers (all replacement units)
at a cost of $3.9 million. The company's capital
expenditures will be financed through internally generated
funds and secured borrowings.
Historically, the company has obtained loans for its
revenue equipment which are of shorter duration (three years
for trailers, four years for tractors) than the economic
useful lives of the equipment. While such loans have
current maturities
<PAGE>
that tend to create working capital
deficits that could adversely affect cash flows, management
believes these factors are mitigated by the more attractive
interest rates and terms available on these shorter
maturities. This financing practice has been a significant
cause of the working capital deficit which has existed since
the company's inception.
The company intends to continue to obtain loans with
shorter maturities than the useful lives of its revenue
equipment. However, beginning in 1997, the company will
finance tractors over forty months to reflect the longer
holding period. Trailers will be financed over sixty
months. This method of financing can be expected to
continue to produce working capital deficits in the future.
The company's working capital deficit at December 31, 1996
was $11.5 million. Primarily due to the company's equity
position and the potential for refinancing of both
unencumbered and encumbered assets, working capital deficits
historically have not been a barrier to the company's
ability to borrow funds for operations and expansion.
The company has a credit line of $5.5 million with its
primary lending bank that bears interest at the prime
lending rate.
Borrowings under this line were $1.4 million at December 31,
1996 and $1.5 million of the available credit line was
committed for letters of credit issued by the bank. The
current line matures May 1, 1997 and is secured by accounts
receivable. The company received commitments in December
1996 for up to $20 million of new revenue equipment
financing. Of the anticipated new financing, 85% will be
fixed rate debt. In the opinion of management, the company
has adequate liquidity for the foreseeable future based upon
funds expected to be generated from operations, the
company's equity position, the potential for refinancing of
assets owned by the company and the company's ability to
obtain secured equipment financing.
Other
This annual report contains forward-looking statements
that are based on current expectations and are subject to
risks and uncertainties. Actual results could differ
materially from current expectations due to a number of
factors, including general economic conditions, competitive
factors, pricing pressures and other risks described in the
company's SEC reports.
(Picture of OTR tractor omitted)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of OTR Express,
Inc.:
We have audited the accompanying balance sheets of
OTR Express, Inc. (a Kansas corporation) as of December
31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of OTR Express, Inc. as of December 31,
1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
/S/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Kansas City, Missouri
February 4, 1997
<PAGE>
<TABLE>
Balance Sheets OTR Express, Inc.
<CAPTION>
At December 31 1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 43,107 $ 36,101
Accounts receivable, less
allowance of $57,016 and $56,932 6,436,920 6,008,392
Fuel inventory 162,826 155,568
Prepaid expenses and other 1,038,207 693,401
TOTAL CURRENT ASSETS 7,681,060 6,893,462
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation 42,894,525 41,989,346
TOTAL ASSETS $50,575,585 $48,882,808
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ 1,389,000 $ 2,522,555
Accounts payable, trade 1,396,760 1,113,192
Accrued payroll and taxes 823,811 1,036,687
Other accrued expenses 1,180,900 1,068,992
Current portion of long-term debt 14,361,651 11,445,508
TOTAL CURRENT LIABILITIES 19,152,122 17,186,934
LONG-TERM DEBT 21,019,354 20,844,188
DEFERRED INCOME TAXES 1,599,014 1,695,772
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
5,000,000 shares authorized,
1,842,209 and 1,835,209 issued 18,422 18,352
Additional paid-in capital 6,540,124 6,515,694
Retained earnings 2,283,284 2,651,604
Treasury stock, 6,690 and
5,136 shares (36,735) (29,736)
TOTAL STOCKHOLDERS' EQUITY 8,805,095 9,155,914
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $50,575,585 $48,882,808
The notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations OTR Express, Inc.
<CAPTION>
For the Years Ended
December 31 1996 1995 1994
<S> <C> <C> <C>
Operating revenue
Freight revenue $ 52,008,754 $ 46,615,804 $ 40,490,206
Brokerage revenue 3,251,842 2,595,318 2,269,373
Total operating revenue 55,260,596 49,211,122 42,759,579
Operating expenses
Salaries, wages and
benefits 22,394,911 19,837,132 15,911,573
Purchased transportation 2,930,271 2,401,605 2,093,512
Fuel 7,011,074 5,511,198 4,546,499
Maintenance 3,310,101 3,005,321 2,648,374
Depreciation 6,722,717 6,516,919 5,243,267
Insurance and claims 1,639,039 1,593,642 1,737,593
Taxes and licenses 6,047,748 5,541,240 4,683,752
Supplies and other 3,010,050 2,774,623 2,247,089
Total operating expenses 53,065,911 47,181,680 39,111,659
Operating income 2,194,685 2,029,442 3,647,920
Interest expense 2,788,749 2,283,107 1,449,202
Income (loss) before income
taxes (594,064) (253,665) 2,198,718
Income tax expense
(benefit) (225,744) (96,393) 920,815
Net income (loss) $ (368,320) $ (157,272) $ 1,277,903
Average common and common
equivalent shares
outstanding 1,835,650 1,830,246 1,825,118
Net income (loss) per
share $ (0.20) $ (0.09) $ 0.70
The notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Stockholders'Equity OTR Express, Inc.
<CAPTION>
Preferred Common Additional Retained Treasury Total
Stock Stock Paid-In Earnings Stock Stockholders'
Capital Equity
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1993 $258 $17,954 $6,417,834 $1,546,476 $(9,680) $7,972,842
Preferred
stock
converted to
common stock (258) 258 - - - -
Allocation of
common stock
held by ESOP - 70 66,430 - - 66,500
Preferred
stock
dividends - - - (15,503) - (15,503)
Repurchase of
common stock - - - - (810) (810)
Net income - - - 1,277,903 - 1,277,903
Balance,
December 31,
1994 - 18,282 6,484,264 2,808,876 (10,490) 9,300,932
Allocation of
common stock
held by ESOP - 70 31,430 - - 31,500
Repurchase of
common stock - - - - (19,246) (19,246)
Net loss - - - (157,272) - (157,272)
Balance,
December 31,
1995 - 18,352 6,515,694 2,651,604 (29,736) 9,155,914
Allocation of
common stock
held by ESOP - 70 24,430 - - 24,500
Repurchase of
common stock - - - - (6,999) (6,999)
Net loss - - - (368,320) - (368,320)
Balance,
December 31,
1996 $ - $18,422 $6,540,124 $2,283,284 $(36,735)$8,805,095
The notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Cash Flows OTR Express, Inc.
<CAPTION>
For the Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (368,320) $ (157,272) $ 1,277,903
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities
Depreciation 6,722,717 6,516,919 5,243,267
Deferred income taxes (225,744) (96,393) 920,815
ESOP expenses and other 24,500 31,500 66,500
Changes in certain working
capital items
Accounts receivable (428,528) (489,820) (1,553,553)
Other assets (223,078) (145,111) (140,068)
Accounts payable and
accrued expenses 182,600 99,866 1,080,513
Net cash provided by
operating activities 5,684,147 5,759,689 6,895,377
INVESTING ACTIVITIES
Acquisition of property and
equipment (11,335,083) (23,409,750) (13,867,295)
Disposition of property and
equipment 3,707,187 5,380,077 1,951,000
Other - - 127,870
Net cash used in investing
activities (7,627,896) (18,029,673) (11,788,425)
FINANCING ACTIVITIES
Proceeds from issuance of
long term debt 20,370,872 21,846,185 13,188,122
Repayments of long-term
debt (17,279,563) (11,331,461) (8,558,763)
Net increase (decrease)
in bank notes payable (1,133,555) 1,790,000 277,125
Other (6,999) (19,246) (16,313)
Net cash provided by
financing activities 1,950,755 12,285,478 4,890,171
Net increase (decrease)
in cash 7,006 15,494 (2,877)
Cash, beginning of year 36,101 20,607 23,484
Cash, end of year $ 43,107 $ 36,101 $ 20,607
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 2,794,254 $ 2,271,420 $ 1,445,708
Cash paid (refunded) for
income taxes, net (128,986) 250,637 16,693
The notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The company is a long-haul, dry van, truckload carrier
headquartered in Olathe, Kansas. The company is a contract
carrier authorized by the Interstate Commerce Commission and
various state authorities to transport general commodities
through the continental United States.
Pervasiveness of Estimates
Management makes estimates and assumptions which affect the
amounts reported in the financial statements and footnotes.
Actual results could differ from those estimates.
Revenue Recognition
Operating revenue is recognized upon receipt of freight.
Related transportation expenses, including driver wages,
purchased transportation, fuel and fuel taxes, are accrued
when the revenue is recognized. Management believes the
difference between the company's method of revenue
recognition, which is acceptable for generally accepted
accounting principles, and the proportional recognition
method, which is preferred, is not material to financial
position or the results of operations.
Cash Flows
For the statements of cash flows, cash consists of cash on
hand and demand deposits with financial institutions.
Concentration of Credit
The company's primary market includes medium and large sized
full truckload shippers in the United States. Loads
encompass all types of products for dry vans, excluding
perishables. Credit is offered to all qualified customers.
There are no predominant customers.
Fuel Hedging
The company purchases six month call options on No. 2
heating oil to manage exposure to fluctuations in diesel
fuel prices. The options are carried at cost. Gains and
losses are deferred and recognized as adjustments to fuel
expense when the underlying hedged transactions (fuel
purchases) occur. At December 31, 1996, option fair values
totaled $127,000, deferred gains totaled $55,000 and
notional amounts totaled $2,794,000.
Property, Equipment and Depreciation
Property and equipment are stated at cost. When equipment
is sold, the gain or loss indicated is recognized. When
equipment is traded, the basis of the new equipment is
adjusted when necessary for any gain indicated. The cost of
tires and tubes are capitalized as part of the tractors and
trailers at the time of acquisition and depreciated as a
component of the tractors and trailers. Replacement tires
and tubes are charged to maintenance expense when installed.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Depreciation of property and equipment is computed using
straight line methods and the following estimates useful
lives:
Assets Estimated Useful Lives
Tractors 3.3 years
Trailers 10 years
Computer equipment, software
and other property 5 - 12 years
Buildings and improvements 31.5 - 40 years
The company depreciates tractors to estimated salvage
values, currently 48% to 51% of original cost. The company
depreciates trailers to estimated salvage values, currently
21% to 28% of original cost.
Stock Issued to ESOP
Stock issued to the Employee Stock Ownership Plan (ESOP) is
recorded at the estimated fair market value at the date of
issuance. When stock held by the ESOP is allocated to
participants, employee benefits expense is charged for the
fair market value of the stock at the date of allocation.
Insurance and Claims
Accrued expenses include reserves for the estimated cost of
claims for health, workers' compensation, personal injury,
property damage, and cargo loss not covered by insurance.
Reserves are established by management based on the most
current information available regarding the accident or
claim. Adjustments to previously established reserves, if
required, are included in operating results. Management
does not believe future adjustments to these reserves, if
any, will have a significant impact on financial position or
results of operations.
Net Income (Loss) Per Share
Net income (loss) per share is calculated by dividing net
income (loss) by the weighted average number of shares of
common stock and common stock equivalents outstanding during
the period. Common stock equivalents include the
outstanding convertible preferred stock which was converted
on December 30, 1994.
Reclassification
Certain amounts in the 1995 financial statements have been
reclassified to conform with the presentation in the 1996
financial statements.
<PAGE>
2. PROPERTY AND EQUIPMENT
<TABLE>
1996 1995
Cost
<CAPTION>
<S> <C> <C>
Tractors $39,261,365 $39,417,573
Trailers 10,352,234 9,134,981
Land 838,962 838,961
Buildings and improvements 2,879,459 1,573,485
Computers and onboard
communications equipment 2,140,269 396,806
Construction-in-progress 5,014 554,165
Other 1,076,794 969,838
Total cost 56,554,097 52,885,809
Less accumulated depreciation 13,659,572 10,896,463
Net property and equipment $42,894,525 $41,989,346
</TABLE>
3. BANK NOTE PAYABLE
Bank note payable consists of lines of credit collateralized
by accounts receivable.
The company has a $5,500,000 line of credit limited to
qualified accounts receivable, as defined, At December 31,
1996, $1,501,000 of the available line was allocated to
outstanding letters of credit. The company has $2,029,000
available as of December 31, 1996. Borrowings on the line
totaled $1,389,000 at December 31, 1996. The line bears
interest at the prime rate (8.25% on December 31, 1996), and
expires May 1, 1997, at which time the principal balance
together with all accrued interest is payable. The weighted
average interest rate on the line of credit for the years
ended December 31, 1996 and 1995 was 8.5% and 8.2%,
respectively. The annual average balance borrowed on the
line of credit for the years ended December 31, 1996 and
1995 was $1,242,000 and $1,368,000, respectively.
4. LONG-TERM DEBT
<TABLE>
1996 1995
<S> <C> <C>
Installment notes, 5.80% to 9.25%
payable in monthly installments
of principal and interest through
December 2001, collateralized
by tractors, trailers and computer
equipment $33,824,958 $32,093,149
Installment notes, 7% to 8.75%,
payable in monthly installments through
January 2005, collateralized by
land 1,556,047 196,547
35,381,005 32,289,696
Less current portion 14,361,651 11,445,508
Long-term debt $21,019,354 $20,844,188
Maturities of long-term debt are as follows:
1997 $14,361,651
1998 11,548,491
1999 6,657,472
2000 1,257,188
2001 1,396,318
Thereafter 159,885
$35,381,005
</TABLE>
<PAGE>
5. STOCKHOLDERS' EQUITY
The company's preferred stock (25,839 shares) was converted
to common stock on December 30, 1994 at the rate of one
share of preferred stock for one share of common stock.
Warrants to purchase 50,000 shares of common stock at a
price of $6.00 per share expired unexercised on January 21,
1997.
6. STOCK OPTION PLAN
The company has reserved 110,000 shares of its common stock
for issuance to key management personnel and directors of
the company under three stock option plans. The plans
permit grants of nonqualified stock options. The option
price cannot be lower than the fair market value of the
stock at the date of grant. The options are exercisable
over a period not to exceed 10 years from the date of grant
(5 years for a more than 10% shareholder).
The company applies Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, in accounting
for its plan, and accordingly has not recognized
compensation costs in its financial statements for such
plans. Had compensation costs been recognized in accordance
with Financial Accounting Standards Board Statement No. 123,
Accounting for Stock-Based Compensation, the company's
operating results would have been reported at the unaudited
pro forma amounts indicated below :
1996 1995
Net loss:
As reported $(368,320) $(157,272)
Pro Forma $(388,216) $(191,017)
Loss per share:
As reported $ (0.20) $ (0.09)
Pro Forma $ (0.21) $ (0.10)
<PAGE>
6. STOCK OPTION PLAN (continued)
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for the 1996
and 1995 grants:
1996 1995
Dividend yield None None
Expected volatility 36.3% 43.7%
Risk-free interest rate 6.2% 5.4%
Expected option life 3 Years 3 Years
A summary of the company's stock option plans as of December
31, 1996 and changes during 1995 and 1996 is presented
below. There were no options outstanding at December 31,
1994.
Number of
Number of Option price shares
Shares Per Share Exercisable
Granted during 1995 and
outstanding at
December 31, 1995 50,000 $5.25 - $6.00 21,333
Granted during 1996 30,000 $4.94 - $5.00 5,000
Outstanding at December 31,
1996 80,000 26,333
1996 1995
Fair value of options granted during the year $32,091 $54,428
Average remaining contract life 10 Years 9 Years
7. EMPLOYEE STOCK OWNERSHIP PLAN
The company has a non-qualified ESOP which enables eligible
employees to acquire shares of the company's common stock.
The cost of the ESOP is borne by the company. In each of
the years 1996, 1995 and 1994, 7,000 shares of stock held by
the ESOP were allocated to participants, resulting in ESOP
expense of $24,500, $31,500 and $66,500 for the years ended
December 31, 1996, 1995 and 1994, respectively. The Board
of Directors has approved additional allocations of 7,000
shares per year through 1997. No provision has been made in
the financial statements for future contributions of stock
to the Plan or for allocation of additional shares to the
participants.
<PAGE>
8. INCOME TAXES
Deferred income taxes reflect the impact of temporary
differences between assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws
and regulations.
Deferred tax assets and liabilities are comprised of the
following at December 31:
1996 1995
Deferred tax assets
Claims and other reserves $ 378,341 $ 309,698
Net operating loss carryforward 2,023,708 185,986
Other 182,655 286,403
2,584,704 782,087
Deferred tax liabilities
Property and equipment 3,983,038 2,269,890
Revenue 200,680 207,969
4,183,718 2,477,859
Net deferred tax liability $ 1,599,014 $ 1,695,772
A reconciliation between the provision for income taxes and
the expected taxes using the federal statutory rate of 34%
follows:
1996 1995 1994
Tax expense (benefit) at federal
statutory rate $(201,982) $(86,246) $747,564
State income tax expense
(benefit) (23,762) (10,147) 87,949
Other - - 85,302
Income tax expense
(benefit) $(225,744) $(96,393) $920,815
The provision for income taxes consists of the following:
1996 1995 1994
Deferred tax expense (benefit)
Federal $(201,981) $(86,246) $832,866
State (23,763) (10,147) 87,949
$(225,744) $(96,393) $920,815
The company has available net operating loss carryforwards
of approximately $5,326,000 for regular income tax purposes
expiring through 2011.
<PAGE>
9. COMMITMENTS AND CONTINGENCIES
Various legal actions, claims and assessments are pending
against the company. It is the opinion of management that
these actions will have no significant impact on the
company's financial condition or its results of operations.
Under an agreement with its auto liability insurance
carrier, the company retains the first $100,000 of paid
losses for any single occurrence involving cargo, personal
injury or property damage. Liability in excess of these
amounts is generally assumed by the carrier. The agreement
with the carrier is collateralized by letters of credit
totaling $301,000 and deposits of $29,750. Prior to January
1, 1995, the company retained the first $50,000 of paid
losses and a portion of loss adjusting expense up to $50,000
for any single occurrence.
The company is self-insured for workers' compensation
through a program with the State of Kansas. All claims are
processed by a third party administrator and the company
will pay all losses and loss adjusting expense. The company
carries an excess reinsurance policy that will limit the
company's losses to $250,000 per occurrence and $10,000,000
aggregate per year.
(Picture of OTR tractor omitted)
<PAGE>
Board of Directors Executive and Other Officers
William P. Ward William P. Ward
Chairman of the Board and President and
President Chief Executive Officer
OTR Express, Inc.
Gary J. Klusman Gary J. Klusman
Executive Vice President Executive Vice President
OTR Express, Inc.
Janice Kathryn Ward Janice Kathryn Ward
Vice President Compensation and Vice President Compensation and
Administration, Secretary Administration, Secretary
OTR Express, Inc.
Dr. James P. Anthony Steven W. Ruben
Radiologist Vice President Finance and
Carondelet Radiology Group Chief Financial Officer
Frank J. Becker Christine D. Schowengerdt
President Treasurer
Becker Investments, Inc.
Terry G. Christenberry Carolyn J. Davidson
President Administrative Vice President and
Christenberry, Collet & Co., Inc. Assistant Secretary
Charles M. Foudree Gary L. Hinkle
Executive Vice President - Finance Vice President Fleet Management
Harmon Industries, Inc.
Dean W. Graves Susan K. Raymond
Owner, Dean Graves, FAIA Vice President Dispatch Management
Architectural Firm
Dr. Ralph E. MacNaughton Marc E. Hirschmann
Physician, Retired Vice President Maintenance & Purchasing
Carondelet Radiology Group
Paul A. MacNaughton
Vice President Management
Information Systems
Chip Seitz
Vice President OTR Services
Photography by: Eric T. Janzen
Larry Andrew, Andrew Photography (p. 3)Vice President Marketing
Attig Photography Studio (p. 5)
and OTR Express Managers
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
<CAPTION>
1996
(In thousands except per share data)
Mar 31 Jun 30 Sep 30 Dec 31 Year
<S> <C> <C> <C> <C> <C>
Unaudited
INCOME STATEMENT
Operating revenue $13,033 $13,406 $14,470 $14,352 $55,261
Operating expenses
Salaries, wages and
benefits 5,404 5,256 5,828 5,907 22,395
Purchased
transportation 647 734 702 847 2,930
Fuel 1,639 1,696 1,687 1,989 7,011
Maintenance 804 793 835 878 3,310
Depreciation 1,699 1,755 1,730 1,539 6,723
Insurance and
claims 392 361 417 469 1,639
Taxes and
licenses 1,523 1,441 1,554 1,530 6,048
Supplies and
other 623 663 810 914 3,010
Total operating
expenses 12,731 12,699 13,563 14,073 53,066
Operating income 302 707 907 279 2,195
Interest expense 692 646 721 730 2,789
Income (loss) before
income taxes (390) 61 186 (451) (594)
Income tax expense
(benefit) (168) 25 82 (165) (226)
Net income (loss) $ (222) $ 36 $ 104 $ (286) $ (368)
Outstanding shares 1,836 1,836 1,836 1,836 1,836
Earnings (loss) per share $ (0.12) $ 0.02 $ 0.06 $ (0.16) $ (0.20)
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and
benefits 41.5 39.2 40.3 41.2 40.5
Purchased
transportation 5.0 5.5 4.8 5.9 5.3
Fuel 12.6 12.7 11.6 13.9 12.7
Maintenance 6.2 5.9 5.8 6.1 6.0
Depreciation 13.0 13.1 12.0 10.7 12.2
Insurance and
claims 3.0 2.7 2.9 3.3 3.0
Taxes and
licenses 11.7 10.7 10.7 10.7 10.9
Supplies and
other 4.7 4.9 5.6 6.3 5.4
Total operating
expenses 97.7 94.7 93.7 98.1 96.0
Operating income 2.3 5.3 6.3 1.9 4.0
Interest expense 5.3 4.8 5.0 5.0 5.1
Income (loss) before
income taxes (3.0) 0.5 1.3 (3.1) (1.1)
Income tax expense
(benefit) (1.3) 0.2 0.6 (1.1) (0.4)
Net income (loss) (1.7) 0.3 0.7 (2.0) (0.7)
</TABLE>
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
<CAPTION>
1995
(In thousands except per share data)
Mar31 Jun 30 Sep 30 Dec 31 Year
<S> <C> <C> <C> <C> <C>
Unaudited
INCOME STATEMENT
Operating revenue $11,595 $11,819 $12,581 $13,216 $49,211
Operating expenses
Salaries, wages and
benefits 4,560 4,671 5,186 5,420 19,837
Purchased
transportation 701 586 558 557 2,402
Fuel 1,214 1,329 1,408 1,560 5,511
Maintenance 720 778 791 716 3,005
Depreciation 1,383 1,653 1,721 1,760 6,517
Insurance and
claims 405 401 361 427 1,594
Taxes and
licenses 1,269 1,301 1,425 1,546 5,541
Supplies and
other 569 656 850 700 2,775
Total operating
expenses 10,821 11,375 12,300 12,686 47,182
Operating income 774 444 281 530 2,029
Interest expense 445 547 619 672 2,283
Income (loss) before
income taxes 329 (103) (338) (142) (254)
Income tax expense
(benefit) 130 (37) (136) (54) (97)
Net income (loss) $ 199 $ (66) $ (202) $ (88) $ (157)
Outstanding shares 1,831 1,830 1,830 1,830 1,830
Earnings (loss) per share $ 0.11 $ (0.04) $ (0.11) $ (0.05) $ (0.09)
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and
benefits 39.3 39.5 41.2 41.0 40.3
Purchased
transportation 6.0 5.0 4.4 4.2 4.9
Fuel 10.5 11.2 11.2 11.8 11.2
Maintenance 6.2 6.6 6.3 5.4 6.1
Depreciation 11.9 14.0 13.7 13.3 13.2
Insurance and
claims 3.5 3.4 2.9 3.2 3.3
Taxes and
licenses 11.0 11.0 11.3 11.7 11.3
Supplies and
other 4.9 5.6 6.8 5.3 5.6
Total operating
expenses 93.3 96.2 97.8 96.0 95.9
Operating income 6.7 3.8 2.2 4.0 4.1
Interest expense 3.8 4.6 4.9 5.1 4.6
Income (loss) before
income taxes 2.8 (0.9) (2.7) (1.1) (0.5)
Income tax expense
(benefit) 1.1 (0.3) (1.1) (0.4) (0.2)
Net income (loss) 1.7 (0.6) (1.6) (0.7) (0.3)
</TABLE>
<PAGE>
Stockholder Information
At March 1, 1997, there were 179 stockholders of
record. Since many stockholders hold their certificates in
"street name," management estimates the number of individual
stockholders is approximately 1,000.
Price Range of Stock
The company's common stock is traded on The Nasdaq
Stock Market/National Market System under the symbol OTRX.
The following table sets forth for the periods indicated the
high and low sale prices of the common stock, as reported by
The Nasdaq Stock Market.
1995
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1995 $7.500 - $10.250
Apr 1 to Jun 30, 1995 $6.250 - $9.250
Jul 1 to Sep 30, 1995 $4.500 - $7.500
Oct 1 to Dec 31, 1995 $4.250 - $5.500
1996-1997
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1996 $4.250 - $5.000
Apr 1 to Jun 30, 1996 $4.500 - $5.750
Jul 1 to Sep 30, 1996 $4.875 - $5.875
Oct 1 to Dec 31, 1996 $3.250 - $5.375
Jan 1 to Feb 28, 1997 $3.000 - $4.000
To date, the company has not declared or paid any
dividends on its Common Stock and presently does not
anticipate paying any such dividends in the foreseeable
future. It is management's present intention to retain
future earnings, if any, for use in its business.
<PAGE>
Stockholder Information
Corporate Offices Transfer Agent
OTR Express, Inc. UMB Bank of Kansas City, N.A.
804 N. Meadowbrook Drive Securities Tranfer Division
Olathe, Kansas 66062 P.O. Box 410064
(913) 829-1616 Kansas City, Missouri 64141-0064
Mailing address:
P.O. Box 2819 Indepedendent Auditors
Olathe, KS 66063-0819 Arthur Andersen LLP
911 Main
Suite 1500
Kansas City, Missouri 64105
Annual Meeting General Counsel
The annual meeting of the stockholders Bryan Cave LLP
will be at 7:00 p.m., Thursday, 7500 College Boulevard
May 1, 1997, at the Doubletree Hotel, Suite 1100
10100 College Boulevard, Overland Park, Overland Park, Ks. 66210
Kansas
Form 10-K Common Stock Listing
Stockholders may receive a copy of OTR Express, Inc. common stock
the company's 1996 Annual Report to is traded on the NASDAQ National
the Securities and Exchange Commission Market System under the
on Form 10-K free of charge by writing symbol: OTRX
to:
Investor Relations
804 N. Meadowbrook Dr.
P.O. Box 2819
Olathe, Kansas 66063
<PAGE>
OTR Express, Inc.
804 N. Meadowbrook Drive Olathe, Kansas 66063-0819
1-913-829-1616 Fax 1-913-829-0622
(Back Cover picture of OTR tractor omitted)
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 43,107
<SECURITIES> 0
<RECEIVABLES> 6,493,936
<ALLOWANCES> 57,016
<INVENTORY> 162,826
<CURRENT-ASSETS> 7,681,060
<PP&E> 56,554,097
<DEPRECIATION> 13,659,572
<TOTAL-ASSETS> 50,575,585
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<BONDS> 0
<COMMON> 18,422
0
0
<OTHER-SE> 8,786,673
<TOTAL-LIABILITY-AND-EQUITY> 50,575,585
<SALES> 55,260,596
<TOTAL-REVENUES> 55,260,596
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<OTHER-EXPENSES> 53,027,841
<LOSS-PROVISION> 38,070
<INTEREST-EXPENSE> 2,788,749
<INCOME-PRETAX> (594,064)
<INCOME-TAX> (225,744)
<INCOME-CONTINUING> (368,320)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (368,320)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
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