<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NUMBER 0-24576
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AASCHE TRANSPORTATION SERVICES, INC.
-------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3964954
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10214 NORTH MOUNT VERNON ROAD
SHANNON, ILLINOIS 61078
(Address of Principal Executive Offices)
815-864-2421
(Registrant's telephone number, including area code)
N/A
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date 3,994,177 SHARES
OF PAR VALUE $.0001 COMMON STOCK
<PAGE> 2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
AASCHE TRANSPORTATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Trade receivables, less allowance for doubtful accounts of $71 $ 5,618 $ 6,682
Prepaid expenses and other current assets 3,107 2,033
-------------- --------------
Total current assets 8,725 8,715
Property and equipment, at cost 37,260 43,901
Less accumulated depreciation and amortization (12,933) (14,349)
-------------- --------------
Net property and equipment 24,327 29,552
-------------- --------------
Excess of cost over net assets acquired, less accumulated
amortization of $528 and $448 7,542 7,622
Deferred income taxes 3,022 3,022
Other assets 403 415
TOTAL ASSETS $ 44,019 $ 49,326
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 193 $ 349
Accounts payable 1,217 2,299
Accrued liabilities 2,164 2,366
Guaranteed obligation of Employee Stock Ownership Plan 244 244
Line of credit 4,892 5,242
Current maturities of long-term debt with unrelated parties 3,553 4,922
Current maturities of long-term debt with related party 995 995
Current maturities of capital lease obligations with unrelated parties 2,390 2,596
Current maturities of capital lease obligations with related parties 1,434 1,303
-------------- --------------
Total current liabilities 17,082 20,316
Long-term debt with unrelated parties, less current maturities 5,285 5,767
Long-term debt with related party, less current maturities 2,225 2,545
Capital lease obligations with unrelated parties, less current maturities 5,046 6,163
Capital lease obligations with related parties, less current maturities 9 327
Deferred income taxes 3,677 3,677
-------------- --------------
Total liabilities 33,324 38,795
Stockholders' equity:
Common stock, $.0001 par value, 10,000,000 shares authorized, 3,994,177 and
3,953,077 shares issued and outstanding - -
Additional paid-in capital 14,698 14,598
Guarantee of Employee Stock Ownership Plan obligation (244) (244)
Accumulated deficit (3,759) (3,823)
-------------- --------------
Total stockholders' equity 10,695 10,531
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,019 $ 49,326
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE> 3
AASCHE TRANSPORTATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
NET REVENUES $17,313 $19,038
OPERATING EXPENSES:
Salaries, wages and benefits 6,145 6,407
Fuel 3,099 3,089
Purchased transportation 2,825 2,899
Supplies and maintenance 1,487 1,700
Depreciation and amortization 1,395 2,191
Taxes and licenses 462 491
Insurance 511 654
Communications and utilities 222 202
(Gain) loss on disposition of equipment (37) 30
Litigation settlement - 150
Other 518 253
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Total operating expenses 16,627 18,066
---------- ----------
OPERATING INCOME 686 972
OTHER (EXPENSES) INCOME:
Interest expense (588) (964)
Other 5 23
---------- ----------
INCOME BEFORE INCOME TAX (PROVISION) BENEFIT 103 31
INCOME TAX (PROVISION) BENEFIT (39) 40
---------- ----------
NET INCOME $ 64 $ 71
========== ==========
NET INCOME PER COMMON SHARE $ 0.02 $ 0.02
========== ==========
Weighted average common and
common equivalent shares outstanding 4,096,080 3,966,593
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
AASCHE TRANSPORTATION SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Guarantee
Common Stock of Employee
----------------------- Stock
$.0001 Par Value Additional Ownership Total
----------------------- Paid-In Plan Accumulated Stockholders'
Shares Amount Capital Obligation Deficit Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 3,953,077 $ - $14,598 $(244) $(3,823) $10,531
Exercise of Series A warrants 41,100 - 100 - - 100
Net income - - - - 64 64
----------------------------------------------------------------------------------------------
Balance at March 31, 1997 3,994,177 $ - $14,698 $(244) $(3,759) $10,695
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
AASCHE TRANSPORTATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 64 $ 71
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,395 2,191
(Gain) loss on disposition of equipment (37) 30
Deferred income taxes - (21)
Changes in other current operating items:
Trade receivables 1,065 (472)
Prepaid expenses and other assets (1,074) (475)
Accounts payable (1,082) 326
Accrued liabilities (204) (263)
---------- ----------
Net cash provided by operating activities 127 1,387
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions:
Revenue equipment (600) -
Building, office equipment and other (48) (46)
Proceeds from the sale of equipment 4,608 726
---------- ----------
Net cash provided by investing activities 3,960 680
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on line of credit (350) 1,047
Principal payments on long-term debt with unrelated parties (1,922) (1,675)
Principal payments on long-term debt with related party (249) (249)
Principal payments on capital leases with unrelated parties (1,323) (1,048)
Principal payments on capial leases with related parties (187) (209)
Proceeds from exercise of Series A warrants 100 -
---------- ----------
Net cash used in financing activities (3,931) (2,134)
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (CASH OVERDRAFT) 156 (67)
CASH AND CASH EQUIVALENTS (CASH OVERDRAFT):
Beginning of period (349) 503
---------- ----------
End of period $ (193) $ 436
========== ==========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ 588 $ 907
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
AASCHE TRANSPORTATION SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(in thousands, except per share and share data)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management believes these
disclosures are adequate to make the information presented not misleading. In
the opinion of management, all adjustments necessary for fair presentation for
the periods presented have been reflected and are of a normal recurring nature.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
for the three years ended December 31, 1996, 1995, and 1994, as filed with the
Securities and Exchange Commission as part of the Company's Annual Report on
Form 10-K. Results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.
NOTE 2 - PURCHASE OF AG TRANSPORTATION SERVICE, INC. AND AG. CARRIERS, INC.
On May 16, 1995, the Company purchased all of the outstanding common stock of
AG Transportation Service, Inc. and the net assets of AG. Carriers, Inc.
(collectively, AG Carriers) in exchange for $11,250 consisting of $5,275 cash,
$1,000 in the Company's common stock (115,075 shares) and two notes payable in
the amount of $4,975.
In accordance with the original purchase agreement, the Company guaranteed the
total value of the Company's common stock issued in the purchase. If during
the period from May 16, 1997 through September 12, 1997, the closing price per
share of the Company's common stock has not reached at least $8.69 per share,
then on the 30th day following September 12, 1997, the Company shall issue
sufficient additional shares of the Company's common stock such that all of the
shares issued have a total value of $1,000. In the event the additional shares
are required to be issued, management believes this will not have a material
adverse impact on the financial position or operations of the Company.
AG Carriers is a Florida-based carrier specializing in transporting
temperature-controlled foodstuffs and juice concentrates.
NOTE 3 - MERGER WITH POLAR EXPRESS CORPORATION
On December 22, 1995, the Company completed a merger, pursuant to which Polar
Express Corporation ("Polar") became a wholly owned subsidiary of the Company.
Under the terms of the merger agreement, 1,401,355 shares of the Company's
common stock were issued in exchange for all of the outstanding common shares
and unit purchase options of Polar. Approximately 5% of these shares were held
in an escrow account to cover liability and litigation costs related to the
litigation described in Note 6. In addition, the Company issued 1,006,905
warrants to purchase the Company's common stock in exchange for all the
outstanding warrants of Polar. In January 1997, 41,100 of these warrants were
exercised. The merger was accounted for as a pooling of interests.
Polar is an Arkansas-based truckload carrier specializing in transporting
temperature-controlled and time-sensitive freight.
6
<PAGE> 7
In April 1997, Polar was merged into Asche Transfer, Inc., a wholly-owned
subsidiary of the Company, and renamed Asche Transfer Inc.'s Southwest
Division. The merger will be accounted for similar to a pooling of interests.
NOTE 4 - PROPERTY AND EQUIPMENT
In December 1996, the Company entered into various agreements for the sale and
leaseback of certain Polar motor carrier equipment which reduced expenses $171
or $0.03 net income per common share in the first quarter of 1997. The leases
are classified as operating leases in accordance with SFAS No. 13, Accounting
for Leases.
In February 1997, the Company entered into a purchase agreement to sell 68
Polar tractors and 141 Polar trailers for $4,592. The transaction generated
$1,373 in net cash proceeds to the Company with no significant earnings effect
in 1997. The transaction was completed in March 1997.
NOTE 5 - NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of common and common equivalent shares outstanding.
NOTE 6 - LITIGATION SETTLEMENT
In May 1996, the Company settled all outstanding litigation related to Polar's
acquisition of Polar Express, Inc. ("PEI") for $150 or $0.02 net income per
common share. This amount, which was provided for during the quarter ended
March 31,1996, did not include the Company's legal costs incurred related to
its defense of this matter, which had been expensed as incurred and had not
been included in the settlement amount.
In conjunction with the Polar merger, 5% of the Company's common stock issued
in the merger (69,941 shares) were held in an escrow account pending final
determination of the litigation. Upon reaching a final settlement, 34,030 of
the common shares held in the escrow account were retired by the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations contain forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors.
Beginning in 1992, the Company commenced a program to increase its size and
operational efficiency. This program changed the Company's strategic direction
by implementing a shift to company-owned revenue equipment and equipping
tractors with the QUALCOMMTM two-way satellite-based tracking and communication
system and advanced computer software systems. The Company also implemented a
strategy of pursuing strategic acquisitions of other temperature-controlled
truckload carriers. Since its initial public offering, the Company acquired
all of the assets of AG Carriers (the "AG Acquisition") and merged with Polar
(the "Polar Merger"). In February 1997, the Company sold 68 Polar tractors and
141 Polar trailers.
7
<PAGE> 8
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THE THREE MONTH PERIOD ENDED MARCH 31, 1997 WITH THE THREE MONTH
PERIOD ENDED MARCH 31, 1996.
Net revenues decreased $1.7 million, or 9.1%, to $17.3 million in 1997, from
$19.0 million in 1996, largely due to having less tractors in service. During
the first three months of 1997, the Company decreased its owned tractor fleet
by 85 units. Average revenue per tractor increased 0.06% to $31,723 in 1997
from $31,704 in 1996.
Total miles decreased 1.0 million, or 5.9%, to 15.5 million in 1997 from 16.5
million in 1996, largely due to having less tractors in service. Average miles
per tractor decreased 2.0% to 28,444 miles in 1997 from 29,010 miles in 1996.
The Company's operating ratio (operating expenses divided by operating
revenues) increased 1.1%, to 96.0% in 1997 from 94.9% in 1996. The increase in
the operating ratio is largely due to increased fuel prices. Total operating
expenses decreased $1.4 million, or 8.0%, to $16.6 million in 1997, compared to
$18.1 million in 1996, largely due to having less tractors in service.
Salaries, wages, and benefits decreased $0.3 million, or 4.1%, to $6.1 million
in 1997 compared to $6.4 million in 1996, largely due to having less personnel
to service the fewer tractors in service, which more than offset increases in
overall compensation of drivers that were needed to enhance driver recruitment
and retention.
Fuel expenses increased $0.01 million, or 0.3% to $3.1 million in 1997 compared
to $3.1 million in 1996, largely due to increased fuel prices, which more than
offset the decrease in tractors in service.
Purchased transportation expense decreased $0.07 million, or 2.6%, to $2.8
million in 1997 compared to $2.9 million in 1996.
Supplies and maintenance expenses decreased $0.2 million, or 12.5%, to $1.5
million in 1997 compared to $1.7 million in 1996.
Depreciation and amortization expense decreased $0.8 million, or 36.3%, to $1.4
million in 1997 compared to $2.2 million in 1996, largely due to having less
tractors in service.
Litigation settlement expense represents the provision for final settlement of
all outstanding litigation related to Polar's acquisition of PEI.
Interest expense decreased $0.4 million, or 39.0%, to $0.6 million in 1997
compared to $1.0 million in 1996, due to lower debt levels and a lower overall
interest rate.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1997, the Company had a net working capital deficit of $8.4
million, attributable to the growth of the Company through acquisitions and
operations. The working capital deficit also results from the financing of
revenue equipment purchases (noncurrent assets) through borrowings, a portion
of which is in current liabilities. The Company historically has funded its
working capital requirements through a combination of operating profits, short
turnover in trade receivables, effective cash management practices and
borrowing under its revolving bank line of credit. The Company has a revolving
bank line of credit with a $6.0 million borrowing limit based on a percentage
of eligible trade receivables, $4.9 million of which was borrowed against this
line of credit at March 31, 1997, and approximately $0.1 million was available.
The Company's growth in prior years and the significant investment in its
modern fleet of tractors and temperature-controlled trailers has been financed
substantially through long-term debt and capital lease obligations
collateralized by the equipment. The Company's outstanding debt and capital
lease obligations, including current maturities, aggregated $26.1 million and
$30.1 million at March 31, 1997 and December 31, 1996, respectively.
In October 1994, the Company completed an initial public offering of its common
stock that raised net proceeds to the Company of $6.4 million. To date, the
Company has utilized proceeds to repay outstanding indebtedness under its
revolving bank line of credit and certain long-term debt obligations, to
purchase trailers, and for the AG Acquisition and the Polar Merger. The AG
Acquisition and the Polar Merger, as well as the growth of Asche Transfer's
fleet, has resulted in a debt to equity ratio (calculated excluding payables
and other liabilities) of 2.44:1 at March 31, 1997, and 2.86:1 at December 31,
1996.
In January 1997, the Company borrowed $1 million against the appraised value of
approximately $1.5 million of a terminal and maintenance facility. In February
1997, the Company entered into a purchase agreement to sell certain Polar motor
carrier equipment for $4.6 million. The transaction was completed in March
1997 and generated $1.4 million in net cash proceeds to the Company.
The Company believes that available cash, cash flow from future operations, and
borrowings available under its line of credit will be sufficient to meet its
current working capital needs. As the Company continues to facilitate its
planned future growth in 1997, the Company's capital needs may require
additional borrowings or an equity infusion.
9
<PAGE> 10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K for the quarter ended March 31, 1997 - None.
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Aasche Transportation Services, Inc.
Date May 13, 1997 BY: s/Leon M. Monachos
-----------------------------------------
Leon M. Monachos, Chief Financial Officer
Date May 13, 1997 BY: s/Larry L. Asche
-----------------------------------------
Larry L. Asche, Chairman and
Chief Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5,618
<ALLOWANCES> 71
<INVENTORY> 0
<CURRENT-ASSETS> 8,725
<PP&E> 37,260
<DEPRECIATION> 12,933
<TOTAL-ASSETS> 44,019
<CURRENT-LIABILITIES> 17,082
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,695
<TOTAL-LIABILITY-AND-EQUITY> 44,019
<SALES> 0
<TOTAL-REVENUES> 17,313
<CGS> 0
<TOTAL-COSTS> 16,627
<OTHER-EXPENSES> 583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588
<INCOME-PRETAX> 103
<INCOME-TAX> 39
<INCOME-CONTINUING> 64
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
