SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 K
_X_ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
PST VANS, INC.
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(Exact name of registrant as specified in its charter)
Utah 0-25506 87-0411704
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(State or other juris- (Commission File No.) (IRS Employer
diction of incorporation) Identification No.)
1901 West 2100 South
Salt Lake City, Utah 84119
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (801) 975-2500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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Common Stock, $.001 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 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 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 the 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 the Common Stock held by non affiliates of
the Registrant, based upon the closing sale price of the Common Stock on the
NASDAQ National Market System on March 26, 1997, was approximately $6,488,000.
Shares of Common Stock held by each officer and director and by each person
who may be deemed to be an affiliate have been excluded.
As of March 24, 1997, the Registrant had 4,227,215 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement relating to the Annual
Meeting of Shareholders is incorporated by reference in Part III of this
report.
<PAGE>
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders . 7
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 5. Market for Registrant's Common Stock and Related
Shareholder Matters . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 10
Item 8. Financial Statements and Supplementary Data . . . . . 16
Item 9. Changes and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . 16
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 10, 11, 12 and 13 . . . . . . . . . . . . . . . . . . . . 17
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 18
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . F-1
<PAGE>
Information contained in this Report contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology such as
"may", "will", "should", "expect", "anticipate", "estimate", or "continue" or
the negative thereof, or other variations thereon or comparable terminology.
These forward-looking statements are subject to risk and uncertainties that
include, but are not limited to, those identified in this report, described
from time to time in the Company's other Securities and Exchange Commission
filings, or discussed in the Company's press releases. Actual results may
vary materially from expectations.
PART I
Item 1. Business.
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General
PST Vans, Inc. is a truckload carrier focused on serving three markets in
the United States: transcontinental, intrawest and midwest-southeast. Manage-
ment believes its three primary operating areas complement each other to create
a network which enhances equipment utilization and marketing of PST's truckload
carrier services. Approximately 62% of the Company's revenues during 1996 was
from transcontinental traffic lanes with an average length of haul of approxi-
mately 1,600 miles. The balance of revenues was generated in the intrawest
and midwest-southeast traffic lanes with an average length of haul of approxi-
mately 750 miles. The Company transports a wide variety of freight, much of
which is time sensitive, including paper products, retail products, non-
perishable food products, tires and electronic equipment. The Company was
incorporated in Utah in 1984 and its executive offices are located at 1901
West 2100 South, Salt Lake City, Utah 84119.
In June 1993, after incurring substantial net losses (before extraordinary
gains) from 1989 through 1992 and after the Company was unsuccessful in volun-
tarily restructuring its existing indebtedness, the Company filed for protec-
tion under Chapter 11 of the United States Bankruptcy Code in order to improve
its capital structure and reduce its debt service requirements and overall
indebtedness. The Company's Plan of Reorganization was confirmed in February
1994 and significantly improved the Company's capital structure by reducing
the Company's debt and lowering lease and interest payments. In March 1995,
the Company paid the remaining balance owing to its unsecured creditors under
the Plan of Reorganization with the exception of a few contested unsecured
claims.
The Company's strategy has been to simplify its operations by operating
exclusively a fleet of standardized, modern fleet of tractors and 53-foot dry
van trailers and to focus its marketing efforts on serving as a core carrier
for high volume, service-sensitive customers. Increasingly, major shippers
are reducing the number of authorized carriers they utilize and instead have
decided to establish service-based, long term relationships with a small group
of preferred partners or "core carriers" who can meet the service demands
required by these shippers, including quick response times, meeting of just-
in-time inventory scheduling needs, on-time pick up and delivery and real time
load monitoring. The Company attempts to meet these needs by providing a high
level of service to its customers including on time pick up and appointment
deliveries, a modern fleet of equipment that enhances on-time deliveries, a
fleet of 53-foot dry van trailers capable of handling high volumes and high
weight shipments and advanced information capabilities that provide customers
with access to information concerning the location and status of shipments.
<PAGE>
The Company decreased its fleet in 1996 by approximately 20% to 1,167
tractors (including independent contractors) as of December 31, 1996, compared
to 1,460 tractors (including independent contractors) as of December 31, 1995.
This reduction was made in response to significant overcapacity in the truck-
ing industry in 1995 and 1996 which resulted from carriers expanding fleets
based on very strong customer demand in 1994 coupled with an economic slowdown
in the second half of 1995. This overcapacity resulted in downward pressure
on pricing in the industry during 1995 and 1996. As a result of these condi-
tions, the Company currently plans to continue to emphasize productivity and
utilization of existing equipment, but does not plan on expanding the size of
its fleet until these conditions improve.
Operations
General. Since 1990, the Company has simplified its operations by focus-
ing exclusively on operating a standardized, modern fleet of tractors and 53-
foot dry van trailers in its primary operating areas. The Company operates
its fleet with dispatchers and customer service representatives who work from
the Company's operations center in Salt Lake City, Utah. The Company consoli-
dated its Atlanta operations center into its Salt Lake City facility in the
fourth quarter of 1996 and the first quarter of 1997. This was done in order
to have more cohesive management of the Company's customer service and dis-
patch functions, and to reduce operating expenses.
Customer service representatives are assigned to a particular geographic
area and work closely with customers and marketing personnel. The Company's
customer service representatives are responsible for soliciting and accepting
shipments from customers in accordance with prioritized traffic lanes esta-
blished by management. Load planners and dispatchers coordinate with the
customer service representatives to match customer needs with Company capacity
and location of revenue equipment. Once a load has been accepted by a customer
service representative, the load planner for the geographic area where the
load originates coordinates the assignment of the load to a truck with a
dispatcher who is responsible for its proper and timely delivery. The
dispatcher tracks the status and location of that load while in transit. In
order to enhance productivity among its operations group, the Company has a
profit sharing plan for its non-driver employees, under which a percentage of
the Company's profits is distributed monthly as a bonus to those employees
that meet established performance criteria.
Technology. The Company's management information system provides real-
time, on-line management information, such as daily operating reports and
costing and location of loads, which assists management in tracking shipments
and performing long-range planning and trend analysis. Information concerning
the status and location of shipments in transit, together with information
concerning unassigned loads, is constantly updated on the system. Computer-
generated reports are used to meet delivery schedules, respond to customer
inquiries concerning loads in transit and match available equipment with loads.
The system has EDI capability to allow customers access to the Company's
computer data from which transit and delivery information can be obtained.
EDI also offers customers the ability to place orders for their transportation
needs directly into the computer system and allows the Company to bill customers
electronically. The Company is currently evaluating and considering a
computer system and software replacement and upgrade in 1997.
<PAGE>
PST currently uses the "Highway Master" on-board communications system on
all of its tractors, which assists the Company in tracking loads, servicing
customers, and communicating with drivers. Highway Master utilizes AT&T
cellular service to link the Company's drivers to its operations center.
Highway Master has voice communication capabilities as well as data communi-
cations, which allows drivers to communicate verbally with customers, driver
assistants, dispatchers and family. The Company is currently considering
changing to a satellite-based communication system in 1997.
The Company uses an optical disk imaging system that scans documents such
as bills of lading, driver logs and fuel receipts on to optical disks. Manage-
ment believes that this system substantially reduces clerical time required to
enter and retrieve documents, while enhancing the utilization of data.
Fuel. The Company has established a nationwide fuel purchase program which
enables the Company's drivers to purchase fuel at specified fuel stops through-
out the United States at volume discounts. In order to reduce PST's vulnera-
bility to rapid price increases, the Company enters into purchase contracts
with fuel suppliers from time to time for a portion of its estimated fuel
requirements at a guaranteed price. As of December 31, 1996, the Company had
entered into agreements with fuel suppliers under which the Company may
purchase approximately 18% of its estimated fuel needs through June 30, 1997,
at a guaranteed price. These agreements include an arrangement with a national
truckstop operator to store and pump this fuel at truckstops located throughout
the United States. The Company also has bulk fuel storage capacity at one of
its terminals and its Salt Lake City operations center. The Company attempts
to offset rapid increases in fuel prices with fuel surcharges to its customers
which are standard in the industry.
Marketing
The Company concentrates its marketing efforts on serving as a core carrier
for high volume, service-sensitive customers with "driver friendly" freight
for transportation in PST's targeted traffic lanes. The Company has targeted
the service-sensitive segment of the truckload market rather than the segment
which uses price as its primary consideration. The Company transports a wide
variety of freight, much of which is time sensitive, including paper products,
non-perishable food products, retail products, tires and electronic products.
The Company's largest 20 customers accounted for approximately 54% of revenues
in 1996, with the largest customer accounting for 9% of revenues.
The Company maintains marketing offices at its headquarters in Salt Lake
City. Senior management is directly involved in marketing and maintaining
relationships with customers. The Company fosters the concept of maintaining
a "transportation partnership" with each customer to respond to individual
customer requirements and become a core carrier for service-sensitive
customers. Once a customer relationship is established, the Company's customer
service representatives, working from the Company's operations center in Salt
Lake City, regularly contact that customer to solicit additional business on a
load-by-load basis, particularly when equipment will be available nearby
following a completed haul. In addition, a customer representative meets at
least annually with each customer at the customer's place of business. Each
customer service representative is assigned a particular geographic area and
works with a dispatcher to monitor the overall transportation and service
requirements of shippers in the assigned area as well as movements of the
shippers' freight within that area. This personal and continuing customer
contact is designed to ensure a high level of customer satisfaction and enhance
utilization of the Company's equipment.
<PAGE>
Drivers
The truckload segment of the industry has been experiencing an acute short-
age of employee drivers and independent contractors, particularly in the longer
haul segments. As a result of the driver shortage, some truckload carriers,
including the Company, have been forced to idle tractors. Management has
designed a driver recruitment and retention program which features: (i) main-
taining a close working relationship with various independent driver training
schools, (ii) providing a positive training experience to all new drivers, and
(iii) providing a competitive, incentive-based compensation package and other
driver amenities. The Company believes that this program is effectively
meeting its driver requirements. However, because of the acute shortage of
drivers in the industry, the Company believes it is necessary to constantly
evaluate its driver retention and recruitment program and to make changes as
necessary in order to improve driver recruitment and retention.
Recruiting. PST employs full-time recruiters located throughout the
United States who make recruiting presentations at truck stops, Company-
sponsored job fairs and other locations frequented by drivers. The Company
also advertises for drivers on television, radio and in print media. The
Company carefully screens all new driver applicants on the basis of prior
driving and safety records and provides applicants with a realistic view of
the work requirements and lifestyles required of a PST driver. The Company
also works closely with independent driver training schools and community
colleges to recruit and train prospective drivers. Two of the independent
driver training schools are conducted in PST's facilities, one in Salt Lake
City and the other in Atlanta. The Company provides the facilities and equip-
ment while the schools provide the instructors.
Training. All newly-hired drivers with limited over-the-road experience
must complete the Company's training program. The Company's training program,
which was recently modified, is intended to provide the trainee with a positive
training experience, ease the driver's transition from driving school to full-
time driving and improve safety. During the training, each new driver is
teamed up with an experienced driver trainer for 30,000 miles to gain over-the-
road experience. Upon meeting certain criteria, the driver may upgrade to a
team or solo driver. For a period of time, the driver is monitored as a
trainee by the safety department for service and safety performance.
All newly-hired drivers, regardless of experience, are required to pass an
examination and attend a three day orientation program which includes both
classroom and over-the-road training, emphasizing safety and proper operation
of Company tractors and trailers. The orientation program also trains drivers
in all aspects of the Company's operations, particularly customer service
requirements, fuel conservation and equipment maintenance. In addition, the
Company has implemented a training program for all of its drivers dealing with,
among other safety measures, maintaining a "space cushion" around their vehicle.
Compensation and Benefits. The Company compensates its drivers based on
miles driven, with base pay increasing with the driver's length of employment.
Drivers also participate in PST's 401(k) program, in Company-sponsored health,
life and dental plans and the employee stock purchase plan.
Driver Retention. Management believes that its competitive compensation
package, its policy to have each driver home at least once every 14 days or to
accrue time off at the rate of one day for each week on the road and its focus
on "driver friendly" freight have enhanced the Company's ability to retain
drivers. The Company also provides drivers with various amenities, including
modern, spacious conventional tractors that are designed for driver comfort
and safety, the Highway Master communication system that allows drivers to
communicate with their families and the Company's contract with truckstop
<PAGE>
operators that allow drivers to use those facilities. In addition, all drivers
are assigned to a driver assistant who monitors up to 50 drivers from the
Company's operations center and is responsible for assisting assigned drivers
in resolving administrative or work-related problems. Management also believes
that the Company's career advancement opportunities for drivers, such as
becoming a driver trainer or an independent contractor, are important to
driver retention.
Independent Contractors
During the last several years, the Company has utilized independent
contractors who, through a contract with the Company, supply one or more
tractors and drivers for Company use. Independent contractors are compensated
on the basis of a fixed rate per mile and are responsible for all expenses of
operating a tractor, including wages, benefits, fuel, maintenance, highway use
taxes and debt service. The contract between the independent contractor and
the Company generally is terminable by either party upon short notice. The
Company's use of tractors supplied by independent contractors was approximately
23% at December 31, 1996. The Company expects the number of tractors provided
by independent contractors to generally remain constant relative to the number
of Company-operated tractors during 1997.
The Company believes that carefully selected independent contractors allow
the Company to expand its fleet while minimizing its capital investment and
fixed costs, improving its return on invested capital and reducing the cost of
financing revenue equipment. In addition, independent contractors generally
have a lower turnover rate than company drivers for the industry as a whole
because of their ownership of their equipment. The ratio of independent
contractors to Company-operated equipment varies from time to time based on
such factors as the demand for freight, the cost of obtaining and operating
new revenue equipment, the availability of qualified independent contractors
and the rates being charged by them. By using independent contractors, the
Company seeks to improve its return on invested capital and reduce the
financing costs associated with owning its own fleet.
Revenue Equipment
The Company's equipment strategy is to (i) purchase both tractors and
trailers with uniform specifications to reduce parts and maintenance costs,
(ii) keep equipment covered by manufacturers' warranties, and (iii) operate a
fleet of only modern, comfortable driver-preferred tractors and 53-foot dry
van trailers. Over the last three years, the Company has reduced the average
age of its tractors to 1.8 years at December 31, 1996, from 2.4 years at
January 1, 1994. The Company's current policy is to replace its tractors
every three years and its trailers every seven years and to maintain an
approximate 2.2 to one trailer-to-tractor ratio.
At December 31, 1996, the Company owned or held directly under lease 896
tractors and 2,753 trailers, all of which were 53-foot long x 102-inch wide
dry vans, capable of handling high volume and high weight shipments. The
Company's trailers are of sheet and post construction and can be used to haul
full loads of heavy freight, such as carpet and tires. The following table
shows the model years of the Company's tractors and trailers in service as of
December 31, 1996.
<PAGE>
Model Year Tractors Trailers
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1996 . . . . . . . . . . . . . . . 272 450
1995 . . . . . . . . . . . . . . . 597 550
1994 . . . . . . . . . . . . . . . 24 100
1993 . . . . . . . . . . . . . . . 0 399
1992 . . . . . . . . . . . . . . . 0 150
1991 . . . . . . . . . . . . . . . 1 832
1990 and prior . . . . . . . . . . 2 272
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Total Company owned . . . . . . . 896 2,753
Total independent contractor . . . 271 ---
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Total . . . . . . . . . . . 1,167 2,753
======= =======
The Company fleet consists of 100% conventional tractors all equipped with
Detroit Diesel electronic engines, which management believes provides increased
fuel efficiency, performance improvements and reduced maintenance over conven-
tional engines. All of the tractors are equipped with air ride suspension and
other modern features designed to enhance performance and driver comfort. The
Company currently has 200 tractor and 1,000 trailer production slots reserved
to replace equipment that is to be retired in 1997.
The Company has a comprehensive preventative maintenance program for its
Company-operated tractors and trailers to improve safety, minimize equipment
downtime and enhance resale value. Inspections, repairs and maintenance are
performed on a regular basis at Company facilities. Additional maintenance and
repair can be performed at independent contract maintenance facilities in the
Company's service territories when circumstances require. The Company also
obtains manufacturer extended warranties, including full engine and power
train coverage.
Safety and Risk Management
The Company is committed to the safe operation of its revenue equipment.
The Company regularly evaluates its safety program and makes changes in order
to improve the safe operation of its equipment. In order to help emphasize
safe driving, the Company performs on-the-road observations of drivers and
distributes safety recognition awards to drivers with exemplary driving and
productivity records. Driver assistants and dispatchers regularly communicate
with Company drivers to promote safety and safe work habits. In addition, the
Company's new tractors are equipped with optional safety features such as speed
governors, daytime running lights, mirrors on each fender that provide improved
views and turning horns that activate when the turn signal on a tractor is
engaged. Because of the increase in insurance claims incurred in 1996, the
Company has implemented the following new safety programs: 1) speed governor
settings for all newly-hired drivers have been reduced from 65 miles per hour
to 57 miles per hour; 2) all drivers are required to take the Smith System
Safety Cushion course; 3) pass/fail testing criteria for all newly-hired
drivers; and 4) prompt accident counseling and training for all drivers
involved in preventable accidents.
The Company has an accident review committee that meets on a regular basis
to review accidents, examine trends and implement changes in procedures or
communications to address safety issues. The committee also works closely
with drivers who have been involved in accidents to improve their driving
performance.
<PAGE>
The Company requires prospective drivers to meet higher qualifications
than those required by the Department of Transportation (the "DOT"). The DOT
requires the Company's drivers to obtain national commercial drivers' licenses
and also requires that the employer implement a drug testing program in accord-
ance with the DOT regulations. The Company's program includes pre-employment,
random, post-accident and post-injury drug testing.
The primary insurance risks associated with the Company's business are
bodily injury and property damage, workers' compensation claims and cargo loss
and damage. The Company maintains insurance against these risks and is subject
to liability as a self insurer to the extent of its deductible. The Company
currently maintains liability insurance coverage for bodily injury and property
damage with a deductible of $50,000 per incident and carries cargo insurance
coverage with a $25,000 deductible per incident. The Company also has a
$250,000 deductible for workers' compensation claims in those states that
allow a deductible. The Company is effectively self insured for physical
damage to its revenue equipment.
Employees
As of December 31, 1996, the Company employed 1,403 persons, 1,104 of whom
were drivers, 56 were mechanics and maintenance personnel and 243 were support
personnel, including management and administration. None of the Company's
employees is represented by a collective bargaining unit, and the Company
considers relations with its employees to be good.
Competition
The entire trucking industry is highly competitive and fragmented. PST
competes primarily with other truckload carriers and shippers' private fleets,
and, particularly in the longer haul segments with intermodal transportation,
railroads and providers of second day air freight service. Intermodal
transportation has increased in recent years as reductions in train crew sizes
and the development of new rail technologies have reduced the cost and improved
dependability of intermodal shipping.
Competition for the type of freight transported by PST is based, in the
long term, primarily on service and efficiency and, to a lesser degree, on
freight rates. The Company believes that its principal competitive strength
is its ability to consistently provide reliable service to its customers,
including on time pick ups and deliveries. Several truckload carriers that
compete with PST have substantially greater financial resources, own more
equipment and carry a larger volume of freight than PST.
Regulation
The Company is a motor common and contract carrier and was previously
regulated by the Interstate Commerce Commission ("ICC") and various state
agencies. Effective as of December 31, 1995, the ICC was closed and its
remaining responsibilities were transferred to the DOT. The Company has not
realized any adverse impact as a result of this action. The DOT and state
agencies have broad powers, generally governing matters such as authority to
engage in motor carrier operations, rates and charges, accounting systems,
certain mergers, consolidations and acquisitions and periodic financial report-
ing. The Motor Carrier Act of 1980 substantially increased competition among
motor carriers and reduced the level of regulation in the industry.
<PAGE>
Motor carrier operations are also subject to safety requirements governing
interstate operations prescribed by the DOT. Such matters as weight and
dimension of equipment are also subject to federal and state regulations. The
failure of the Company to comply with the rules and regulations of the DOT or
state agencies could result in substantial fines or revocation of the Company's
operating licenses. The trucking industry is also subject to regulatory and
legislative changes which can affect the economics of the industry by requiring
changes in operating practices or influencing the demand for, and the cost of
providing services to shippers.
The Company currently has authority to carry freight on an intrastate basis
in 48 states. The Federal Aviation Administration Authorization Act of 1994
(the FAAA Act) amended sections of the Interstate Commerce Act to prevent states
from regulating rates, routes or service of motor carriers after January 1,
1995. The FAAA Act did not address state oversight of motor carrier safety
and financial responsibility, or state taxation of transportation.
The Company has underground storage tanks for diesel fuel at its facilities
in Salt Lake City, Utah and Bowling Green, Kentucky. As a result, the
Company is subject to regulations promulgated by the EPA in 1988 governing the
design, construction and operation of underground fuel storage tanks from
installation to closure. For underground fuel storage tanks in existence at
the time the regulations were promulgated in 1988 (which includes the tank at
the Bowling Green terminal), the regulations require that tanks be upgraded to
meet specified standards concerning corrosion protection, spill or overfill
protection and release detection on a phased timetable which began in 1989 and
ends in 1998. The Company believes all of its tanks are in substantial
compliance with EPA regulations. The Company's truckload carrier operations
are also subject to other environmental laws and regulations, including laws
and regulations dealing with the transportation of hazardous materials. The
Company believes that it is in compliance with all material applicable environ-
mental laws and regulations. In the event the Company should fail to comply
with applicable environmental laws and regulations, the Company could be
subject to substantial fines and/or penalties and to civil and criminal
liability.
Item 2. Properties.
The Company's executive offices and operations center are located in Salt
Lake City, Utah. PST owns this property, subject to a mortgage of approximately
$829,000 as of December 31, 1996. The property has full maintenance and shop
capabilities with four maintenance bays for tractors and four maintenance bays
for trailers. The property also has approximately 15 acres for tractor and
trailer parking and contains an office building of approximately 36,000 square
feet for the Company's executive offices and operations center. Management
believes that this facility is suitable for PST's present and future needs.
The Company also operates terminals in Atlanta, Georgia; Bowling Green,
Kentucky; Fontana, California; and Valdosta, Georgia. The Atlanta terminal
includes tractor and trailer maintenance facilities, office space and driver
lounges and is used for driver recruiting. The Atlanta facility is located on
approximately 17 acres. The Bowling Green terminal is located on approximately
two acres. These properties are leased for terms ranging from month to month
to five years, with renewal or purchase options. The Company bears the costs
of insurance, maintenance and repairs, taxes, special assessments and utilities
on most of its leased facilities. The Company does not anticipate any diffi-
culties renewing or continuing these leases or obtaining leases on replacement
or additional properties, if necessary. Management estimates that its Salt
Lake facility and its other terminals are being utilized to approximately 60%
to 75% of their capacity.
<PAGE>
Item 3. Legal Proceedings.
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred in
the transport of freight. Management does not believe that any pending liti-
gation will have a materially adverse effect on the Company's financial
condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters.
The Company's Common Stock is listed and traded on The NASDAQ Stock Market
(National Market System) under the symbol "PSTV." The following table sets
forth, for the periods indicated, the high and low sale prices for the Company's
Common Stock, as reported on The NASDAQ Stock Market for the year ended
December 31, 1996.
High Low
-------- --------
Year Ended December 31, 1996:
First Quarter . . . . . . . . $4.625 $3.125
Second Quarter. . . . . . . . 4.625 3.750
Third Quarter . . . . . . . . 4.250 2.875
Fourth Quarter. . . . . . . . 3.000 2.375
High Low
-------- --------
Year Ended December 31, 1995:
First Quarter*. . . . . . . . $16.875 $14.500
Second Quarter. . . . . . . . 15.875 6.250
Third Quarter . . . . . . . . 7.875 6.063
Fourth Quarter. . . . . . . . 7.125 4.125
__________________________
* The Company's stock began trading for the first time on March 7, 1995.
The Company did not pay or declare dividends on its Common Stock during
the years ended December 31, 1995 and 1996. The Company currently anticipates
that it will retain all available funds to finance its operations. The
Company does not presently intend to pay cash dividends in the foreseeable
future. The Company's revolving loan agreements with The Bank of New York and
Congress Financial Corporation (Northwest) prohibit the Company from paying
dividends without the consent of The Bank of New York and Congress Financial
Corporation (Northwest).
As of March 24, 1997, the Company had 4,227,215 shares of its Common Stock
outstanding, held by 20 shareholders of record, which does not include share-
holders whose shares are held in securities position listings.
<PAGE>
Item 6. Selected Financial Data and Operating Data.
The following selected financial data of the Company for the five years
ended December 31, 1996, has been derived from the Company's Financial State-
ments which have been audited by Arthur Andersen LLP, independent public
accountants. This selected financial data should be read in conjunction with
the Financial Statements and accompanying Notes included elsewhere in this
report. Operating data has been derived from the Company's books and records.
All amounts are expressed in thousands, except per share amounts and operating
data.
<TABLE> <C> <C> <C> <C> <C>
<S> Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Statements of Operations Data:
Revenues . . . . . . . . . . . . . . . . . . $147,419 $164,794 $136,541 $125,591 $135,020
Costs and expenses:
Salaries, wages and benefits . . . . . . . 43,848 45,208 35,935 40,693 46,079
Purchased transportation . . . . . . . . . 32,393 41,281 33,842 20,273 17,456
Fuel and fuel taxes. . . . . . . . . . . . 20,555 21,245 17,615 20,556 22,849
Revenue equipment lease expense. . . . . . 8,022 12,224 14,904 17,991 16,620
Maintenance. . . . . . . . . . . . . . . . 7,491 8,822 8,584 7,078 8,969
Insurance and claims . . . . . . . . . . . 11,942 9,315 6,854 6,662 5,441
General supplies and expenses. . . . . . . 5,558 5,996 4,364 5,909 5,847
Taxes and licenses . . . . . . . . . . . . 3,309 3,445 2,677 3,360 3,994
Communications and utilities . . . . . . . 3,430 3,562 1,870 2,021 2,514
Depreciation and amortization. . . . . . . 13,175 8,804 2,078 1,772 3,154
(Gain) loss on sale of equipment . . . . . (1,614) (151) 302 595 167
Amortization and write down of goodwill. . 272 272 272 272 8,549(1)
--------- --------- --------- --------- ---------
Total costs and expenses . . . . . . . 148,381 160,023 129,297 127,182 141,639
--------- --------- --------- --------- ---------
Operating income (loss). . . . . . . . . . . (962) 4,771 7,244 (1,591) (6,619)
--------- --------- --------- --------- ---------
Other income (expense):
Interest expense . . . . . . . . . . . . . (5,080) (4,283) (2,595) (2,069) (2,813)
Reorganization expense items . . . . . . . --- --- (338) (2,928) ---
Other, net . . . . . . . . . . . . . . . . 182 147 119 116 219
--------- --------- --------- --------- ---------
Income (loss) before provision for income
taxes and extraordinary gains. . . . . . . (5,860) 635 4,430 (6,472) (9,213)
Provision for income taxes . . . . . . . . . --- 251 120 36 242
--------- --------- --------- --------- ----------
Income (loss) before extraordinary gains . . (5,860) 384 4,310 (6,508) (9,455)
Extraordinary gains from debt
restructuring(2) . . . . . . . . . . . . . --- --- 6,206 --- ---
--------- --------- --------- --------- ----------
Net income (loss). . . . . . . . . . . . . . $ (5,860) $ 384 $ 10,516 $ (6,508) $ (9,455)
========= ========= ========= ========= ==========
Pro forma net income per common share(3):
Income (loss) before extraordinary gain. . $ (1.39) $ .10 $ 1.66
Extraordinary gain from debt
restructuring. . . . . . . . . . . . . . --- --- 2.38
--------- --------- ---------
Pro forma net income (loss) per common
share. . . . . . . . . . . . . . . . . . $ (1.39) $ .10 $ 4.04
========= ========= =========
Pro forma weighted average shares
outstanding(3) . . . . . . . . . . . . . . 4,212 3,950 2,600
</TABLE>
<PAGE>
<TABLE> <C> <C> <C> <C> <C>
<S> Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Operating Data:
Average revenue per tractor per week . . . . $ 2,297 $ 2,363 $ 2,465 $ 2,318 $ 2,279
Average miles per trip . . . . . . . . . . . 1,204 1,133 1,110 944 925
Average revenue per total mile . . . . . . . $ 1.053 $ 1.062 $ 1.087 $ 1.046 $ 1.037
Empty miles percentage . . . . . . . . . . . 9.2% 9.0% 7.8% 10.1% 10.6%
Average number of tractors during the year:
Company operated . . . . . . . . . . . . . 915 911 721 820 937
Independent contractor . . . . . . . . . . 322 430 341 218 204
--------- --------- --------- --------- ---------
Total tractors . . . . . . . . . . . . 1,237 1,341 1,062 1,038 1,141
Average number of trailers during the year . 2,931 2,713 2,204 2,412 2,551
Pre tax margin(4). . . . . . . . . . . . . . (4.0)% .4% 3.2% (5.2)% (6.8)%
Balance Sheet Data:
Working capital (deficit). . . . . . . . . . $ (9,157) $ 2,935 $ (8,377) $ (5,071) $(16,054)
Total assets . . . . . . . . . . . . . . . . 90,260 108,882 48,664 37,341 40,642
Long-term and capitalized lease
obligations, net of current portion(5) . . 34,894 55,687 17,124 4,181 13,066
Stockholders' equity (deficit) . . . . . . . 21,772 27,605 5,473 (12,816) (6,308)
______________________
</TABLE>
(1) In 1992, the Company recorded a one time $8.5 million write down in recog-
nition of an impairment of goodwill which had been recognized in connection
with the 1988 leveraged buyout of the Company.
(2) The Company recognized an extraordinary gain of $6.2 million in 1994 from
reduction of indebtedness accomplished through the Company's Plan of
Reorganization.
(3) Pro forma per share amounts in 1994 reflect cancellation of all previously
outstanding shares of Common Stock of PST and the issuance of shares to
the current shareholders of the Company pursuant to the Plan of Reorganiza-
tion as if these transactions had occurred on January 1, 1994. The per
share amounts in 1996 and 1995 reflect the actual weighted average shares
and earnings per share.
(4) The Company finances the acquisition of some of its revenue equipment under
operating leases rather than through debt financing or capitalized leases.
As a result, the Company believes that its pre-tax margin (earnings before
income taxes and extraordinary gains as a percentage of revenues) is a more
appropriate measure of its operating efficiency than its operating ratio
(operating costs and expenses as a percentage of revenues).
(5) Long term and capitalized lease obligations do not include $12.7 million of
obligations under operating leases of revenue equipment at December 31,
1996.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
From 1989 through 1993, the Company incurred substantial net losses
(before extraordinary gains). In June 1993, after the Company was unsuccessful
in voluntarily restructuring its existing indebtedness, the Company filed for
protection under Chapter 11 of the United States Bankruptcy Code in order to
improve its capital structure and reduce its debt service requirements and
overall indebtedness. The Company's Plan of Reorganization was confirmed in
February 1994 and significantly improved the Company's capital structure by
reducing the Company's debt and lowering lease and interest payments. In
March 1995, the Company paid the remaining balance owing to its unsecured
creditors under the Plan of Reorganization with the exception of a few contested
unsecured claims. The Company is still making payment on its priority tax
claims in accordance with its Plan of Reorganization.
The Company returned to profitability in the second half of 1993 as a
result of the Company's focused and simplified strategy, the implementation of
which was accelerated after the Company filed for reorganization. The trucking
industry, however, experienced significant overcapacity in 1995 as a result of
carriers expanding fleets based on very strong customer demand in 1994 coupled
with an economic slowdown in the second half of 1995. This overcapacity
resulted in significant downward pressure on pricing in the industry during
1995 and 1996, and adversely affected the Company's operations which resulted
in a lower average rate per mile and lower equipment utilization in 1996 and
1995 compared to 1994, and an operating loss in 1996.
The Company finances the acquisition of some of its revenue equipment
through operating leases. Under generally accepted accounting principles, the
interest component of an operating lease is not treated as interest expense.
Because of the Company's use of operating leases, the Company's operating
ratio (operating costs and expenses as a percentage of revenues) is higher
than it would be if it utilized only debt and/or capital leases. As a result,
the Company believes that its pre-tax margin (earnings before income taxes and
extraordinary gains as a percentage of revenues) is a more appropriate measure
of its operating efficiency than its operating ratio.
At December 31, 1996, the Company operated a revenue equipment fleet
comprised of 1,167 tractors, including 271 operated by independent contractors,
and 2,753 trailers. The Company currently intends to maintain the number of
independent contractors at approximately 273 and maintain the Company tractors
at 896 in 1997.
<PAGE>
The following table sets forth the percentage relationship of expense
items to revenues for the years indicated.
Percentage of Revenues
---------------------------
Year Ended December 31,
---------------------------
1996 1995 1994
------ ------ ------
Revenues: 100.0% 100.0% 100.0%
Costs and expenses:
Salaries, wages and benefits. . . . . . . . 29.7 27.4 26.3
Purchased transportation. . . . . . . . . . 22.0 25.0 24.8
Fuel and fuel taxes . . . . . . . . . . . . 13.9 12.9 12.9
Revenue equipment lease expense . . . . . . 5.4 7.4 10.9
Maintenance . . . . . . . . . . . . . . . . 5.1 5.4 6.3
Insurance and claims. . . . . . . . . . . . 8.1 5.7 5.0
General supplies and expenses . . . . . . . 4.0 3.6 3.2
Taxes and licenses. . . . . . . . . . . . . 2.2 2.1 2.0
Communications and utilities. . . . . . . . 2.3 2.2 1.4
(Gain) loss on sale of equipment. . . . . . (1.1) (0.1) 0.2
Depreciation and amortization . . . . . . . 8.9 5.3 1.5
Amortization of goodwill. . . . . . . . . . 0.2 0.2 0.2
------- ------- -------
Total operating costs and expenses. . . 100.7 97.1 94.7
------- ------- -------
Operating income (loss) . . . . . . . . . . (0.7) 2.9 5.3%
Other income (expense):
Interest expense. . . . . . . . . . . . . . (3.2) (2.6) (1.9)
Reorganization expense items. . . . . . . . --- --- (0.2)
Other, net. . . . . . . . . . . . . . . . . (0.1) 0.1 *
------- ------- -------
Income (loss) before income taxes and extra-
ordinary gain. . . . . . . . . . . . . . . (4.0)% 0.4% 3.2%
======= ======= =======
______________________
*Less than 0.1%.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues decreased by 11% in 1996 to $147.4 million compared to $164.8
million in 1995. This revenue reduction resulted primarily from a decrease in
revenue equipment as the average number of tractors decreased to 1,237 in 1996
compared to 1341 in 1995. Revenues in 1996 were adversely affected by a 1%
decrease in the average revenue per total mile. This decrease resulted from a
combination of an increase in empty miles percentage and a decrease in revenue
per loaded mile. In addition, equipment utilization (as measured by average
miles per tractor) decreased 2% between the two periods. Management believes
the decrease in average revenue per total mile and equipment utilization was a
result of slower than anticipated economic conditions and overcapacity in the
trucking industry in 1996. Management does not expect these conditions to
significantly change during 1997, and plans to continue to emphasize produc-
tivity and utilization of its existing equipment, while maintaining the size
of its current fleet in 1997.
Operating costs and expenses were 100.7% of revenues in 1996 compared
to 97.1% in 1995. Operating costs and expenses, as a percent of revenue, were
adversely affected by the 1% reduction in average revenue per total mile as
well as the 2% decrease in utilization between the two periods, an acute
shortage of drivers in the first half of 1996, and adverse developments in a
number of insurance claims.
<PAGE>
Salaries, wages and benefits increased to 29.7% of revenues in 1996
compared to 27.4% in 1995. This increase resulted primarily from driver pay
increases in October, 1995, and a decrease in independent contractor tractors
in 1996. Additional driver payroll changes, involving incentive pay, became
effective January 1, 1996. In addition, non-driver payroll increased .5% of
revenue as a result of an increase in other support and marketing personnel,
which was partially offset by a reduction in maintenance personnel. Purchased
transportation decreased to 22.0% of revenue in 1996 compared to 25.0% in 1995.
This decrease was a result of a reduction in the mileage incentive pay for
independent contractors and a 25% reduction in independent contractor tractors
in 1996 from 1995. In addition to reducing purchased transportation costs,
management believes the reduction of independent contractors may enhance
utilization of the Company tractors. Independent contractors are under
contract with the Company and are responsible for their own salaries, wages
and benefits, fuel, maintenance and depreciation. Independent contractor costs
are classified as purchased transportation expenses.
Fuel and fuel taxes increased to 13.9% of revenue in 1996 compared to
12.9% in 1995. Diesel fuel prices at the pump increased by approximately 12.8%
from December 31, 1995, to December 31, 1996 (according to the Department of
Energy), while the Company's fuel expense increased by approximately 7.8%.
This smaller increase was because of the Company's utilization of guaranteed
price purchase contracts with fuel suppliers, in addition to surcharges to
customers. The Company has approximately 18% of its estimated fuel needs under
guaranteed price purchase contracts through June 30, 1997, as compared to
approximately 50% throughout 1996. If fuel prices increase or remain at
December 31, 1996 levels, the Company's fuel expense may increase significant-
ly in 1997.
Depreciation and amortization increased to 8.9% of revenue in 1996
compared to 5.3% in 1995, and revenue equipment lease expense decreased to 5.4%
of revenues in 1996 compared to 7.4% in 1995, as a result of the Company's new
revenue equipment being financed through capitalized leases versus operating
leases. Also, interest expense increased to 3.2% of revenue in 1996 compared
to 2.6% in 1995 as a result of the majority of the Company's new revenue
equipment being financed through capitalized leases and notes payable.
In 1996, maintenance expense decreased to 5.1% of revenues, compared
to 5.4% of revenues in 1995 as a result of reduced maintenance costs associated
with a newer fleet.
Insurance and claims increased to 8.1% of revenues in 1996 compared
to 5.7% in 1995 as a result of an increase in insurance claims and losses in
1996 mainly involving new, less experienced drivers and increases in insurance
claims reserves of approximately $2.2 million following adverse developments
in a number of claims. Management has implemented several changes in the safety
process enumerated in Part I, Safety and Risk Management, in order to help
reduce insurance claims and allow the Company to achieve historical results in
insurance costs in the near future. In addition, the Company has significantly
lowered the deductible amount on liability and property damage insurance
coverage for 1997. While this caused premiums to increase, management feels
that there will be a net reduction in insurance costs from this change.
During 1996, the Company's effective tax rate was 0% because of its
pre-tax losses that exceeded any available carrybacks and an increase in the
valuation for the net operating loss generated in 1996.
As a consequence of the items discussed above, income (loss) before
extraordinary gain in 1996 was $(5,861,000) compared to $384,000 in 1995.
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues increased by 20.7% in 1995 to $164.8 million compared to
$136.5 million in 1994. This revenue growth resulted primarily from an increase
in revenue equipment as the average number of tractors increased to 1341 in
1995 compared to 1062 in 1994. Revenues in 1995 were adversely affected by a
2.3% decrease in the average revenue per total mile. This decrease resulted
from a combination of an increase in empty miles percentage and a decrease in
revenue per loaded mile. In addition, equipment utilization (as measured by
average miles per tractor) decreased 1.9% between the two periods. Management
believes the decrease in average revenue per total mile and equipment utiliza-
tion was a result of slower than anticipated economic conditions and over-
capacity in the trucking industry in 1995.
Operating costs and expenses were 97.1% of revenues in 1995 compared
to 94.7% in 1994. Operating costs and expenses, as a percent of revenue, were
adversely effected by the 2.3% reduction in average revenue per total mile as
well as the 1.9% decrease in utilization between the two periods.
Salaries, wages and benefits increased to 27.4% of revenues in 1995
compared to 26.3% in 1994. This increase resulted primarily from driver pay
increases in September, 1994 and October, 1995 and an increase in percent of
total miles driven by Company drivers. Additional driver payroll changes,
involving incentive pay, became effective January 1, 1996. In addition, non-
driver payroll increased .5% of revenue as a result of an increase in other
support and marketing personnel, which was partially offset by a reduction in
maintenance personnel. Purchased transportation increased to 25.0% of revenue
in 1995 compared to 24.8% in 1994. This increase was a result of an increase
in pay to the independent contractors effective September 1, 1994 and April 15,
1995 in anticipation of the Company obtaining rate increases from customers.
Fuel and fuel taxes remained unchanged as a percent of revenue. The
effect of the reduced revenue per total mile was offset by an increase in fuel
efficiency on Company tractors as the Company has modernized its fleet of
tractors. The average cost per gallon of diesel fuel increased only slightly
in 1995 compared to 1994.
Revenue equipment lease expense decreased to 7.4% of revenues in 1995
compared to 10.9% in 1994 primarily as a result of the Company reducing the
percentage of its tractor fleet financed through operating leases to 19% at the
end of 1995, compared to 45% at the end of 1994. Depreciation and amortization
increased to 5.3% of revenue in 1995 compared to 1.5% in 1994, as a result of
the Company's new revenue equipment being financed through capitalized leases
versus operating leases. Interest expense increased to 2.6% of revenue in 1995
compared to 1.9% in 1994 as a result of the majority of the Company's new
revenue equipment being financed through capitalized leases and notes payable.
This increase in interest expense was slightly offset as a result of the
Company's use of proceeds from its initial public offering to fund its accounts
receivable rather than factoring and financing its accounts receivable with a
finance company.
<PAGE>
Insurance and claims increased to 5.7% of revenues in 1995 compared
to 5.0% in 1994 as a result of an increase in insurance claims and losses in
1995 mainly involving new, less experienced drivers. On October 1, 1995,
management increased the training requirements for new drivers and has changed
the driver pay to attract more experienced drivers which management believes
are less accident prone.
In 1995, maintenance expense decreased to 5.4% of revenues, compared
to 6.3% of revenues in 1994 as a result of reduced maintenance costs associated
with a newer fleet. This reduction in maintenance expense was partially off-
set by costs associated with the Company trading in 343 tractors in 1995
compared to 132 in 1994.
Communications and utilities increased to 2.2% of revenues in 1995
compared to 1.4% in 1994, primarily as a result of the Company utilizing on-
board communication systems in a larger portion of its fleet of tractors. The
Company began installation of the system in June, 1994. In December, 1995,
all of the tractors are equipped with the on-board system. The costs associated
with the use of the on-board communication system has been higher than antici-
pated. The use of the on-board system generally enhances the Company's ability
to track loads, service customers, communicate with and monitor drivers.
The Company incurred $337,767 of expenses in connection with its Plan
of Reorganization during 1994, but did not incur any such expenses in 1995.
During 1995, the Company's effective tax rate was 39.6% of its pre-
tax income as a result of the Company recognizing a portion of its previously
unrecognized deferred tax assets. In 1994 the Company utilized net operating
loss and general business credit carryforwards to substantially reduce its
provision for income taxes.
As a consequence of the items discussed above, income before extra-
ordinary gain in 1995 was $384,000 compared to $4.3 million in 1994. The
Company recognized an approximate $6.2 million extraordinary gain in 1994 from
reduction of indebtedness accomplished through the Plan of Reorganization.
Liquidity and Capital Resources
The Company's sources of liquidity have been funds provided by
operations, leases on revenue equipment, a revolving line of credit and an
accounts receivable financing facility.
Net cash provided by operating activities totaled approximately $9.0
million for the twelve months ended December 31, 1996. Net cash provided by
investing activities (primarily sales of equipment) amounted to $3.3 million
in 1996. The Company made payments on debt and capitalized lease obligations
of $12.5 million in 1996.
Working capital declined from $2,934,760 to $(9,156,777) because of
the maturity of several capitalized lease contracts, aggregating approximately
$8 million at maturity, in 1997. The leases are secured by revenue equipment
which the vendor has agreed to accept in full payment of the leases upon
maturity.
As a result of the Company reducing its tractor fleet and making
contractual debt payments, capitalized lease and long-term obligations have
decreased from $67.5 million at December 31, 1995, to $55.0 million at December
31, 1996.
<PAGE>
The Company has a credit facility with the Bank of New York for
issuance of letters of credit and advances to the Company of up to $9.5
million which expires December 31, 1997. Advances under this credit facility
may not exceed $1.0 million. As of December 31, 1996, the Company had used
$87.5 million of this facility, principally for letters of credit in favor of
the Company's insurance carrier. As outstanding letters of credit issued under
this credit facility expire, the maximum commitment available under this credit
facility will be reduced by the amount of the expiring letters of credit.
Approximately $640,000 of letters of credit expire on June 30, 1997. This
credit facility had loan covenants which obligated the Company to maintain a
required level of profitability and cash flow. The Company and The Bank of
New York recently entered into an amendment to this credit facility to delete
certain financial covenants and add covenants requiring certain levels of
tangible net worth for periods through and including December 31, 1997. The
Company may be required to seek additional amendments of the revolving credit
facility with The Bank of New York in the future based on actual operating
results. The amendment also shortened the expiration date of the credit
facility from December 31, 1998 to December 31, 1997. Management believes
that following the expiration of the credit facility with The Bank of New York,
the Company will be able to satisfy its anticipated insurance related letter
of credit requirements, including the insurance related letter of credit
requirements which are currently being met with letters of credit under the
credit facility with The Bank of New York, under its working capital line of
credit with Congress Financial Corporation (Northwest) or new credit facilities.
There can be no assurance, however, that the Congress Financial Corporation
(Northwest) credit facility will be sufficient to satisfy the Company's
insurance related letter of credit requirements or that the Company will be
able to obtain additional or new credit facilities on terms favorable to the
Company, if at all.
On August 6, 1996 the Company obtained an additional $7.0 million
working capital line of credit with Congress Financial Corporation (Northwest)
which expires August, 1999. This line of credit provides the Company with
additional working capital resources. The Company anticipates that use of the
line will be primarily for insurance related letters of credit as well as
providing any short term cash requirements. As of December 31, 1996, the
Company has utilized $3.2 million of this line of credit for insurance related
letters of credit. Additionally, the Congress Agreement restricts the payment
of dividends. On February 28, 1997, this line of credit was increased to
$11.5 million.
The Company's net accounts receivable balance decreased by approxi-
mately $1.6 million between December 31, 1995 and 1996, as a result of reduced
business levels in 1996.
The Company expects capital expenditures to be approximately $14
million in 1997 primarily for replacement tractors and trailers, and the
Company's communications system. In 1996, the Company acquired no new revenue
equipment. The Company purchased $0.5 million of revenue equipment formerly
leased under operating leases in 1996. Future expansion of the fleet will be
made as future economic conditions dictate.
Management believes that it will be able to obtain adequate financing
for its planned capital expenditures in 1997. The Company's business is
capital intensive and will require the Company to seek additional debt and
possibly equity capital to enable the Company to maintain a modern fleet and
expand the size of its fleet as economic conditions improve. Whether such
capital will be available on favorable terms, or at all, will depend on the
Company's future operating results, prevailing economic and industry conditions
and other factors over which the Company has little or no control.
<PAGE>
Fuel is one of the Company's most substantial operating expenses. In
order to reduce the Company's vulnerability to rapid increases in the price of
fuel, the Company enters into purchase contracts with fuel suppliers from time
to time for a portion of its estimated fuel requirements at guaranteed prices.
As of December 31, 1996, the Company had entered into various agreements with
fuel suppliers to purchase approximately 18% of its estimated fuel needs
through June 30, 1997 at a guaranteed price. Although this arrangement helps
reduce the Company's vulnerability to rapid increases in the price of fuel,
the Company will not benefit from a decrease in the price of fuel to the extent
of its commitment to purchase fuel under these contracts.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern
as customers reduce shipments during and after the winter holiday season and
its attendant weather variations. Operating expenses also tend to be higher
during the cold weather months, primarily due to poorer fuel economy and
increased maintenance costs.
Inflation
Inflation can be expected to have an impact on the Company's opera-
tions. The effect of inflation has been minimal over the past three years.
Factors Affecting Future Results
These statements are subject to known and unknown risks and
uncertainties, including decreased demand for freight, slower than anticipated
economic conditions, shortages of drivers and such other risks as are identified
and discussed herein and in the Company's filings with the Securities and
Exchange Commission. These known and unknown risks and uncertainties could
cause the Company's actual results in future periods to be materially different
from any future performance suggested herein.
Item 8. Financial Statements and Supplementary Data.
The Company's financial statements and notes are included herewith begin-
ning on page F-1. The supplementary data is included herein immediately
following the signature page of this report on Form 10-K.
Item 9. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure.
There has been no Form 8-K filed reporting a change of accountants or
reporting disagreements on any matter of accounting principle, practice,
financial statement disclosure or auditing scope or procedure.
<PAGE>
PART III
Item 10, 11, 12 and 13.
These items are incorporated by reference to the Company's definitive
Proxy Statement relating to the Annual Meeting of Shareholders scheduled for
May 29, 1997. The definitive Proxy Statement will be filed with the Commission
not later than 120 days after December 31, 1996, pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents Filed as Part of this Report:
(1) Financial Statements. The following financial statements
are filed hereunder as provided in Item 8 of this report:
-Report of Independent Public Accountants
-Balance Sheets as of December 31, 1996 and 1995
-Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994
-Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1996, 1995 and 1994
-Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
-Notes to Financial Statements
(2) Financial Statement Schedule. The following financial
statement schedule for the years ended December 31, 1996,
1995 and 1994 is included herein immediately following the
signature page to this report:
-Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because the information required
therein is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
The following exhibits required by Item 601 of Regulation S-K are
filed herewith or have been filed previously with the Commission as indicated
below:
Regulation
S-K Sequential
Exhibit No. Description Page No.
- ------------------------------------------------------------------------------
2.1 First Amended Plan of Reorganization of the Company [Exhibit 2.1]
as confirmed by the Bankruptcy Court on February 22,
1994.*
2.2 Agreement and Plan of Reorganization of Norton [Exhibit 2.2]
Enterprises, Inc., a Delaware corporation, Great
Western Leasing, Inc., a Utah corporation, and
the Company dated March 7, 1994.*
3.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
<PAGE>
Regulation
S-K Sequential
Exhibit No. Description Page No.
- ------------------------------------------------------------------------------
3.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
4.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.3 Specimen Certificate.* [Exhibit 4.3]
10.1 $9,500,000 Revolving Loan Agreement with Letter of [Exhibit 10.1]
Credit Facility between The Bank of New York and
the Company dated March 7, 1994, as amended.*
10.2 Fifth Amendment to $9,500,000 Revolving Loan [Exhibit 10.1]
Agreement with Letter of Credit Facility.***
10.3 Sixth through Ninth Amendments to $9,500,000 Filed herewith
Revolving Loan Agreement.
10.4 Employment Term Sheet - Robert Hill.** [Exhibit 10.3]
10.5 PST Vans, Inc. Stock Incentive Plan dated December [Exhibit 10.2]
6, 1994.*
10.6 Amendments No. 1 and No. 2 to PST Vans, Inc. Stock [Exhibit 10.2]
Incentive Plan.**
10.7 Executive Incentive Program for Kenneth R. Norton [Exhibit 10.3]
and Robert D. Hill.*
10.8 Registration Rights Agreement dated as of March 7, [Exhibit 10.5]
1994 between the Company, The Bank of New York and
Kenneth R. Norton.*
10.9 Loan and Security Agreement with Congressional [Exhibit 10.1]
Financial Corporation.****
23.1 Consent of Arthur Andersen LLP, independent public Filed herewith
accountants.
______________________
* Incorporated by reference to the indicated exhibits in the Company
Registration Statement on Form S-1 (File No. 33-87212)
** Incorporated by reference to the indicated exhibits in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996.
**** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended September
30, 1996.
(d) Financial Statement Schedules:
See Item 14(a)(2) of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 28, 1996.
PST VANS, INC.
By: /s/ Kenneth R. Norton
---------------------------
Kenneth R. Norton
Chairman of the Board and
Chief Executive Officer
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 indicated on March 28, 1996.
Signature Capacity in Which Signed
/s/ Kenneth R. Norton Chairman of the Board and Chief Executive Officer
- ----------------------- (principal executive officer)
Kenneth R. Norton
/s/ Robert D. Hill President, Chief Operating Officer and Director
- -----------------------
Robert D. Hill
/s/ Neil R. Vos Chief Financial Officer
- ----------------------- (principal financial and accounting officer)
Neil R. Vos
/s/ John L. Adams Secretary
- -----------------------
John L. Adams
/s/ Steve Orme Treasurer
- -----------------------
Steve Orme
/s/ James F. Redfern Director
- -----------------------
James F. Redfern
/s/ Charles A. Lynch Director
- -----------------------
Charles A. Lynch
<PAGE>
EXHIBIT INDEX
Regulation
S-K Sequential
Exhibit No. Description Page No.
- ------------------------------------------------------------------------------
2.1 First Amended Plan of Reorganization of the Company [Exhibit 2.1]
as confirmed by the Bankruptcy Court on February 22,
1994.*
2.2 Agreement and Plan of Reorganization of Norton [Exhibit 2.2]
Enterprises, Inc., a Delaware corporation, Great
Western Leasing, Inc., a Utah corporation, and
the Company dated March 7, 1994.*
3.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
3.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
4.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.3 Specimen Certificate.* [Exhibit 4.3]
10.1 $9,500,000 Revolving Loan Agreement with Letter of [Exhibit 10.1]
Credit Facility between The Bank of New York and
the Company dated March 7, 1994, as amended.*
10.2 Fifth Amendment to $9,500,000 Revolving Loan [Exhibit 10.1]
Agreement with Letter of Credit Facility.***
10.3 Sixth through Ninth Amendments to $9,500,000 Filed herewith
Revolving Loan Agreement.
10.4 Employment Term Sheet - Robert Hill.** [Exhibit 10.3]
10.5 PST Vans, Inc. Stock Incentive Plan dated December [Exhibit 10.2]
6, 1994.*
10.6 Amendments No. 1 and No. 2 to PST Vans, Inc. Stock [Exhibit 10.2]
Incentive Plan.**
10.7 Executive Incentive Program for Kenneth R. Norton [Exhibit 10.3]
and Robert D. Hill.*
10.8 Registration Rights Agreement dated as of March 7, [Exhibit 10.5]
1994 between the Company, The Bank of New York and
Kenneth R. Norton.*
10.9 Loan and Security Agreement with Congressional [Exhibit 10.1]
Financial Corporation.****
23.1 Consent of Arthur Andersen LLP, independent public Filed herewith
accountants.
______________________
<PAGE>
* Incorporated by reference to the indicated exhibits in the Company
Registration Statement on Form S-1 (File No. 33-87212)
** Incorporated by reference to the indicated exhibits in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996.
**** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended September
30, 1996.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants . . . . . . . . . . F-2
Balance Sheets at December 31, 1996 and 1995 . . . . . . . . F-3
Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . F-4
Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . F-5
Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PST Vans, Inc.:
We have audited the accompanying balance sheets of PST Vans, Inc., (a
Utah Corporation) as of December 31, 1996 and 1995, and the related statements
of operations, stockholders' equity (deficit) 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 audit 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 PST Vans, 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.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
January 31, 1997 (except with respect
to matters discussed in the first
paragraph of footnote 4, as to which
the date is March 21, 1997.)
<PAGE>
<TABLE>
<S> PST VANS, INC.
BALANCE SHEETS
<C> <C>
ASSETS
December 31,
1996 1995
--------------- ---------------
CURRENT ASSETS:
Cash $ 4,098,361 $ 4,249,981
Receivables, net of allowance for doubtful
accounts of $806,000 and $784,000, respectively 14,607,292 16,235,574
Deposits 353,437 985,952
Prepaid expenses and other 3,258,669 4,088,996
Inventories and operating supplies 689,875 642,730
--------------- ---------------
Total current assets 23,007,634 26,203,233
--------------- ---------------
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization of
$23,282,064 and $13,924,360, respectively 58,116,763 73,253,423
--------------- ---------------
GOODWILL, net of accumulated amortization
of $3,296,334 and $3,024,371, respectively 8,612,150 8,884,112
--------------- ---------------
OTHER ASSETS, net 523,539 541,362
--------------- ---------------
$ 90,260,086 $ 108,882,130
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 1,388,581 $ 41,109,337
Current portion of capitalized lease obligations 18,708,614 10,736,025
Accounts payable 4,140,985 4,509,834
Current portion of accrued claims payable 5,456,316 3,656,381
Accrued liabilities 2,469,915 3,256,896
--------------- ---------------
Total current liabilities 32,164,411 23,268,473
--------------- ---------------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion 1,429,227 2,321,686
--------------- ---------------
LONG-TERM OBLIGATIONS, net of current portion 1,986,214 4,031,690
--------------- ---------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion 32,907,995 51,655,247
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 7)
</TABLE>
<PAGE>
<TABLE> <C> <C>
<S> December 31,
1996 1995
--------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares
authorized, none issued --- ---
Common stock, $.001 par value, 20,000,000 shares
authorized, 4,217,157 and 4,209,409 shares issued,
respectively 4,217 4,209
Additional paid-in capital 49,759,238 49,731,276
Accumulated deficit (27,991,216) (22,130,451)
--------------- ---------------
Total stockholders' equity 21,772,239 27,605,034
--------------- ---------------
$ 90,260,086 $ 108,882,130
=============== ===============
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<S> PST VANS, INC.
STATEMENTS OF OPERATIONS
<C> <C> <C>
For the Years Ended December 31,
---------------------------------------------
1996 1995 1994
------------- ------------- -------------
REVENUE $147,418,904 $164,794,366 $136,540,945
COSTS AND EXPENSES: ------------- ------------- -------------
Salaries, wages and benefits 43,847,942 45,208,090 35,935,405
Purchased transportation 32,393,331 41,280,895 33,842,052
Fuel and fuel taxes 20,555,431 21,245,011 17,614,807
Revenue equipment lease expense 8,021,676 12,224,340 14,903,677
Maintenance 7,491,155 8,822,454 8,583,658
Insurance and claims 11,942,008 9,315,173 6,853,629
General supplies and expenses 5,558,052 5,995,821 4,363,839
Taxes and licenses 3,309,478 3,445,040 2,677,357
Communications and utilities 3,429,699 3,561,698 1,870,056
Depreciation and amortization 13,174,606 8,803,585 2,078,391
(Gain) loss on sale of equipment (1,613,842) (150,940) 301,813
Amortization of goodwill 271,963 271,963 271,963
------------- ------------- -------------
148,381,499 160,023,130 129,296,647
------------- ------------- -------------
OPERATING INCOME (LOSS) (962,595) 4,771,236 7,244,298
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (5,080,202) (4,283,463) (2,594,735)
Reorganization expense items (Note 2) --- --- (337,767)
Other, net 182,032 147,408 118,657
------------- ------------- -------------
(4,898,170) (4,136,055) (2,813,845)
Income (loss) before provision for
income taxes and extraordinary gain (5,860,765) 635,181 4,430,453
PROVISION FOR INCOME TAXES --- 251,532 120,029
------------- ------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN (5,860,765) 383,649 4,310,424
EXTRAORDINARY GAIN FROM DEBT
RESTRUCTURING (Note 1) --- --- 6,206,135
------------- ------------- -------------
NET INCOME (LOSS) $ (5,860,765) $ 383,649 $ 10,516,559
============= ============= =============
PRO FORMA NET INCOME (LOSS) PER
COMMON SHARE (Note 3)
Income (loss) before extraordinary gain $ (1.39) $ 0.10 $ 1.66
Extraordinary gain from debt restructuring --- --- 2.38
PRO FORMA NET INCOME (LOSS) PER ------------- ------------- -------------
COMMON SHARE $ (1.39) $ 0.10 $ 4.04
PRO FORMA WEIGHTED AVERAGE ------------- ------------- -------------
SHARES OUTSTANDING 4,212,211 3,949,526 2,600,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S> PST VANS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<C> <C> <C> <C> <C> <C> <C>
Total
Series C Class A Class B Additional Stockholders'
Preferred Common Common Common Paid-In Accumulated Equity
Stock Stock Stock Stock Capital Deficit (Deficit)
--------- ------- ------- ------ ------------ ------------- -------------
BALANCE,
December 31, 1993 $ 100 $ 547 $ 450 $ --- $20,213,860 $(33,030,659) $(12,815,702)
Elimination of Class
A & B common
stock in reorgani-
zation --- (547) (450) --- 997 --- ---
Conversion of Series
B preferred stock
into common stock --- --- --- 1,326 450,674 --- 452,000
Conversion of Series
C preferred stock
and allowed unsecured
claim of Bank of
New York into
common stock (100) --- --- 1,274 7,319,098 --- 7,320,271
Net income --- --- --- --- --- 10,516,559 10,516,559
--------- ------- ------- ------ ------------ ------------- -------------
BALANCE,
December 31, 1994 --- --- --- 2,600 27,984,629 (22,514,100) 5,473,129
Sale of 1,600,000 shares
of common stock in
connection with initial
public offering, net --- --- --- 1,600 21,633,753 --- 21,635,353
Issuance of 9,409 shares of
common stock as satis-
faction of $112,903
general unsecured claims --- --- --- 9 112,894 --- 112,903
Net income --- --- --- --- --- 383,649 383,649
--------- ------- ------- ------ ------------ ------------- -------------
BALANCE,
December 31, 1995 --- --- --- 4,209 49,731,276 (22,130,451) 27,605,034
Sale of 7,748 shares
of common stock to
employees --- --- --- 8 27,962 --- 27,970
Net loss --- --- --- --- --- (5,860,765) (5,860,765)
--------- ------- ------- ------ ------------ ------------- -------------
BALANCE,
December 31, 1996 $ --- $ --- $ --- $4,217 $49,759,238 $(27,991,216) $ 21,772,239
========= ======= ======= ====== ============ ============= =============
The accompanying notes are an integral part of these financial statements. PST VANS, INC.
</TABLE>
<PAGE><TABLE>
<S> STATEMENTS OF CASH FLOWS <C> <C> <C>
For the Years Ended December 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (5,860,765) $ 383,649 $ 10,516,559
------------- ------------- -------------
Adjustments to reconcile net (loss) income to net
cash provided by operating activities -
Depreciation and amortization 13,174,605 8,803,585 2,078,391
Provision for losses on accounts receivable 1,280,634 1,097,890 726,583
Amortization of goodwill 271,963 271,963 271,963
Extraordinary gain from debt restructuring --- --- (6,206,135)
Reorganization items --- --- 213,498
(Gain) loss on sale of equipment (1,613,842) (150,940) 301,813
(Increase) decrease in receivables 347,648 (1,722,103) (499,099)
(Increase) decrease in deposits 632,515 2,876,942 (693,756)
(Increase) decrease in prepaid expenses and other 830,326 (1,361,156) (1,158,289)
Increase in inventories and operating supplies (47,145) (77,773) (72,647)
(Increase) decrease in other assets, net 17,823 2 ,265,931 (2,218,356)
Increase (decrease) in accounts payable ( 368,849) (285,119) 1,531,175
Increase (decrease) in accrued claims payable 1,148,468 717,283 (819,556)
Increase (decrease) in accrued liabilities (786,981) (1,525,566) 423,293
------------- ------------- -------------
Total adjustments 14,887,165 10,910,937 (6,121,122)
------------- ------------- -------------
Net cash flows provided by operating activities 9,026,400 11,294,586 4,395,437
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 4,323,495 1,163,436 183,312
Acquisition of property and equipment (988,590) (9,480,079) (846,049)
------------- ------------- -------------
Net cash flows provided by (used in) investing activities 3,334,905 (8,316,643) (662,737)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capitalized lease obligations (10,774,663) (6,478,232) (1,113,758)
Principal payments on long-term obligations (1,766,232) (2,234,107) (2,233,607)
Proceeds from sale of common stock to employees 27,970 --- ---
Proceeds from sale of common stock, net --- 21,635,353 ---
Purchase of accounts receivable from factor --- (9,063,711) ---
Increase (decrease) in advances from factor --- (5,336,289) 626,791
Proceeds from long-term obligations --- 1,983,824 ---
Decrease in bank overdrafts --- --- (257,288)
------------- ------------- -------------
Net cash flows (used in) provided by financing activities (12,512,925) 506,838 (2,977,862)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (151,620) 3,484,781 754,838
CASH AT BEGINNING OF YEAR 4,249,981 765,200 10,362
------------- ------------- -------------
CASH AT END OF YEAR $ 4,098,361 $ 4,249,981 $ 765,200
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for -
Interest $ 5,115,442 $ 4,106,793 $ 2,511,574
Income taxes 90,659 1,691,615 245,578
Professional fees paid for services rendered in
connection with the reorganization --- --- 320,538
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through capitalized lease obligations --- 51,475,706 18,122,370
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Business and Reorganization Under Chapter 11
PST Vans, Inc. ("PST") is a nationwide common motor carrier with 48-state
general commodity and contract operating authorities. PST provides dry van
truckload services focused on serving three markets in the United States;
transcontinental, intrawest and midwest-southeast. PST transports a wide
variety of freight, much of which is time sensitive, including paper products,
retail products, non-perishable food products, tires and electronic equipment.
Historically, the accompanying financial statements have included the accounts
of Norton Enterprises, Inc. ("NEI"), a holding company, and its wholly owned
operating subsidiary, Great Western Leasing, Inc. ("GWL") and GWL's wholly
owned operating subsidiary, PST (collectively, the "Company"). As a result of
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"), NEI and GWL were merged into PST in March 1994. All
significant intercompany accounts and transactions prior to the reorganization
have been eliminated in consolidation.
On June 2, 1993, the Company filed a voluntary petition in the United States
Bankruptcy Court for the District of Utah (the "Bankruptcy Court") to reorganize
under Chapter 11 of the Bankruptcy Code. During the period from June 2, 1993
to March 7, 1994, the Company operated as a debtor-in-possession under the
supervision of the Bankruptcy Court.
On October 12, 1993, the Company filed with the Bankruptcy Court its Amended
Plan of Reorganization, as modified (the "Plan"). On February 22, 1994, the
Plan was confirmed and became effective March 7, 1994 (the "Effective Date").
The accompanying December 31, 1994 financial statements reflect the adjustments
necessitated by the confirmed plan.
In accordance with the American Institute of Certified Public Accountants
Statements of Position 90-7, "Financial Reporting by Entities in Reorganiza-
tion Under the Bankruptcy Code," the Company reported prepetition liabilities
on the basis of the expected settlement amounts. As of December 31, 1996 and
1995, approximately $334,000 and $609,000, respectively, of the estimated
liabilities subject to compromise remain outstanding and are included in long
term obligations. All other amounts subject to compromise have been converted
to equity, paid or forgiven.
Plan of Reorganization
The confirmed Plan provided for the following:
Priority Tax Claims: Priority tax claims are to be paid in full within six
years of the date of the assessment in equal monthly payments, except to the
extent that a holder of such claim has agreed to a different treatment of the
claim. The priority tax claims accrue interest at the applicable statutory
rate.
<PAGE>
Allowed Secured Claim of The Bank of New York: The allowed secured claim of
The Bank of New York in the amount of $8,500,000 was satisfied by the Company
transferring the balance of its $8,275,000 security deposit with Legion Insur-
ance to The Bank of New York on the Effective Date of the Plan. As a condition
of the transfer of the $8,275,000 from the Legion Insurance security deposit
to The Bank of New York , the Bank established a revolving facility for ir-
revocable standby letters of credit in favor of Legion Insurance in the amount
of $8,275,000. Additionally, The Bank of New York refinanced the remaining
secured claim of $225,000 under a new credit facility.
Allowed Unsecured Claim of The Bank of New York and Series C Preferred Stock-
holder of the Company: In complete satisfaction of the approximately $7,320,000
allowed unsecured claim of The Bank of New York and the Series C Preferred
Stock held by the Bank, the Company issued to The Bank of New York 1,274,000
shares of PST common stock.
Administrative Convenience Unsecured Claims: Administrative convenience
unsecured claims were unsecured claims of $7,500 or less, or claims of more
than $7,500 where unsecured creditors elected to reduce their claim to $7,500.
Administrative convenience unsecured claims received a cash payment within 90
days of the Effective Date in the amount of 25 percent of their allowed claim.
General Unsecured Claims: Claims of general unsecured creditors were to be
paid 25 percent of the allowed amount of their claims, over a period of five
years, with the interest thereon at five percent per annum. The Company's
extraordinary gain from debt restructuring during the year ended December 31,
1994 resulted from those amounts of administrative convenience and general
unsecured claims that were forgiven as a result of the Plan.
The Plan required the Company to pay the remaining portion of general unsecured
claims in the event of an initial public offering (IPO) within the five year
period subsequent to January 1, 1994. The Plan allowed for each unsecured
creditor to elect to: 1) receive cash equal to the amount of the unpaid balance
of its unsecured claim from the proceeds of the IPO, or 2) use the unpaid
balance of its unsecured claim to subscribe to stock to be issued pursuant to
the IPO, which stock was to be issued at a 20 percent discount from the initial
offering price. In connection with the IPO, the Company paid approximately
$1,150,000 to general unsecured creditors and issued 9,409 shares of common
stock to its Chief Executive Officer and significant stockholder.
Series B Preferred Stockholder of the Company: Pursuant to the Plan, all
outstanding shares of the Series B Preferred Stock were cancelled. The holder
of the Series B Preferred Stock received, in exchange for his equity interest,
1,326,000 shares of PST common stock.
Class A and B Common Stockholders of the Company: Pursuant to the Plan, all
outstanding shares of the Class A and B common stock of the Company were
cancelled.
(2) Reorganization Expense Items
Reorganization expense items are comprised of amounts that were realized or
accrued by the Company as a result of the reorganization. Such items consisted
of the following during the year ended December 31, 1994:
Provisions for rejected executory contracts $ 214,418
Professional fees 123,349
---------
$ 337,767
=========
<PAGE>
No reorganization expense items were realized or accrued during the years ended
December 31, 1996 or 1995.
(3) Summary of Significant Accounting Policies
Revenue Recognition
Revenue is recognized as services are performed. The Company allocates revenue
between reporting periods based on relative transit time in each reporting
period and recognizes direct expenses as incurred.
Receivables and Advances from Factor
Prior to the IPO, PST sold and factored a significant portion of its trade
accounts receivable with a finance company. The terms of the factoring agree-
ment allowed for the sale of accounts both with and without recourse depending
upon the customer. During the year ended December 31, 1994, and until March 31,
1995, substantially all of the Company's receivables were sold to the finance
company. The finance company also provided advances to the Company against
freight bills for which documentation was incomplete. As the Company supplied
all required documentation to the finance company, the completed freight bills
were sold.
Deposits and Other Assets, net
PST is required to keep certain amounts on deposit with various companies
related to insurance, fuel purchases and certain leasing agreements. The
Company had approximately $303,000 and $936,000 in deposits with insurance
carriers and $50,000 with lessors and fuel vendors at December 31, 1996 and
1995, respectively.
Inventories and Operating Supplies
Inventories consist primarily of tires, fuel and maintenance parts for revenue
equipment. Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market value.
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized based
on the straight-line method over their estimated useful economic lives, taking
into consideration salvage values for purchased property and residual values
for equipment held under capital leases. Leasehold improvements are amortized
over the terms of the respective leases or the estimated economic useful lives
of the assets, whichever is shorter.
Expenditures for routine maintenance and repairs are charged to operating
expense as incurred. Major overhauls and betterments are capitalized and
depreciated over their estimated economic useful lives. Tires purchased as
part of revenue equipment are capitalized as a cost of equipment. Replacement
tires are expensed when placed in service. Upon the disposal of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in the determination of income or loss.
<PAGE>
Property and equipment consists of the following:
Est. Useful
Lives (Years) 1996 1995
------------- ------------- -------------
Land $ 1,182,421 $ 1,182,421
Revenue equipment 2-10 73,453,974 79,390,239
Buildings and improvements 5-30 3,477,645 3,496,901
Furniture and fixtures 5-10 1,953,389 1,792,381
Other equipment 3-5 1,331,398 1,315,841
------------- -------------
81,398,827 87,177,783
Less Accumulated depreciation and amortization (23,282,064) (13,924,360)
------------- -------------
$58,116,763 $73,253,423
============= =============
Goodwill
Goodwill is being amortized on a straight line basis over forty years. The
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining balance may not be recoverable. When factors
indicate goodwill should be evaluated for possible impairment, the Company uses
an estimate of the discounted future cash flows over the life of the goodwill
and comparable market information in measuring whether the amount is
recoverable.
Income Taxes
The Company recognizes a liability or asset for the deferred tax consequences
of all temporary differences between the tax bases of assets or liabilities
and their reported amounts in the financial statements. These temporary
differences will result in taxable or deductible amounts in future years when
the reported amounts of the assets or liabilities are recovered or settled.
The deferred tax assets are reviewed for recoverability and valuation allowances
are provided as necessary.
Insurance Coverage and Accrued Claims Payable
The Company maintains insurance for losses related to public liability, property
damage, cargo and worker's compensation claims in amounts it considers
sufficient. Nevertheless, the Company could be adversely affected if it
incurred a liability as a result of claims in excess of its policy limits or
a significant volume of claims below its deductible limits. The Company
maintains loss prevention programs in an effort to minimize this risk.
The Company estimates and accrues a liability for its share of ultimate settle-
ments using all available information including the services of a third party
insurance risk claims administrator to assist in establishing reserve levels
for each occurrence based on the facts and circumstances of the occurrence
coupled with the Company's past history of such claims. The Company accrues
for worker's compensation and automobile liabilities when reported, typically
the same day as the occurrence. Additionally, the Company accrues an estimated
liability for incurred but not reported claims. Expense depends upon actual
loss experience and changes in estimates of settlement amounts for open claims
which have not been fully resolved. The Company provides for adverse loss
developments in the period when new information so dictates. The amounts the
Company will ultimately pay on its claims outstanding as of December 31, 1996
could differ materially in the near term from amounts accrued in the accompany-
ing December 31, 1996 balance sheet.
<PAGE>
Based upon historical and projected trends in claims payments, the Company has
classified the claims payable in current and long term components in the
accompanying balance sheet.
Statements of Cash Flows
Depreciation and amortization in the 1994 statement of cash flows include
amounts from the Company's lease and rental business (GWL) which was being
phased out in 1994. However, GWL's revenues and expenses (which were not
material in 1994) have been netted in the Statements of Operations in "Other,
net" for the year ended December 31, 1994.
Pro Forma Net Income Per Common Share
As part of the reorganization, all of the shares of any of the classes of stock
of the Company were cancelled and the shareholders' interest terminated.
During March 1994, PST issued 1,326,000 new common shares to a former common
and preferred stockholder of the Company and 1,274,000 new common shares to a
preferred stockholder and creditor. Accordingly, based on the above, the
historical presentation of net income per common share would not present a
meaningful comparison due to the change in common stock ownership. However,
pro forma net income per common share is reflected in the accompanying financial
statements in order to present net income per common share as if the reorgani-
zation of the capital structure had occurred on January 1, 1994. The weighted
average common shares for 1996 and 1995 reflect the effect of shares issued in
the Company's IPO and any dilutive common stock equivalents from the date of
issuance. In periods where losses are recorded, common stock equivalents would
decrease the loss per share and are therefore not added to weighted shares out-
standing.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recent Accounting Pronouncement
During 1996 the Company adopted SFAS N0.121, "Accounting for the Impairment of
Long Lived Assets and for Long Lived Assets to Be Disposed Of." The adoption
of SFAS No.121 did not have a material impact on the Company's financial
position or results of operations.
(4) Revolving Loan Agreements
The Bank of New York
On March 7, 1994, and in connection with the Plan of Reorganization discussed
in Notes 1 and 2, the Company signed a $9,500,000 Revolving Loan Agreement
(the "Agreement") with The Bank of New York. The Agreement contains a letter
of credit facility. The maximum principal amount of outstanding advances
under the Agreement cannot exceed the lesser of (1) $9,500,000 less the
aggregate amount outstanding with respect to letters of credit (whether drawn
or undrawn), or (2) $1,000,000. On March 21, 1997, the Agreement was amended
such that certain financial covenants were deleted. Additionally, the amend-
ment changed the expiration date to December 31, 1997, and requires that all
remaining letters of credit be terminated according to a stipulated schedule,
<PAGE>
but no later than the expiration of the Agreement. As of December 31, 1996,
letters of credit totaling $8,750,109 were outstanding under the Agreement.
As outstanding letters of credit issued under this credit facility expire, the
maximum commitment available under this credit facility will be reduced by the
amount of the expiring letters of credit. The amended Agreement requires the
Company to maintain specified levels of tangible net worth through the expira-
tion of the Agreement.
Congress Financial Corporation (Northwest)
On August 6, 1996, the Company signed a $7,000,000 Loan and Security Agreement
(the "Congress Agreement") with Congress Financial Corporation (Northwest).
The Congress Agreement contains a letter of credit facility supporting letters
of credit up to $5,000,000 and a revolving loan facility that is secured by
eligible accounts receivable. The letter of credit facility requires the
Company to maintain a pledged certificate of deposit of $1,000,000 for letters
of credit outstanding up to $3,500,000, unless the Company allows its cash
receipts to flow through a bank account designated by the Congress Agreement.
The Congress Agreement expires August 6, 1998. As of December 31, 1996, letters
of credit totaling $3,216,000 were outstanding under the Congress Agreement.
Additionally, the Congress Agreement restricts the payment of dividends.
<TABLE>
(5) Long-Term Obligations
Long-term obligations consisted of the following: <C> <C>
<S> December 31,
----------------------------
1996 1995
------------- -------------
Notes payable to finance companies, interest at rates ranging from 8
to 8.05 percent, payable in monthly installments ranging from $5,143
to $25,609 through December 2003, secured by revenue equipment $ 1,844,230 $ 2,962,322
Payables to pre-petition priority tax creditors after the reorganization,
interest at applicable statutory rates, due in monthly principal
installments of $6,435 through 2000 258,910 334,111
Mortgage payable to a bank, interest at 9.09 percent, payable in
monthly installments of $8,432 through January 1997, balloon
payment of $817,000 due in January 1997, secured by real
property, guaranteed by a former stockholder 829,073 853,661
Note payable to a corporation, interest at prime plus 2 percent (10.25
Percent at December 31, 1996) payable in monthly installments of
$9,629 through April 1997, secured by real property 37,648 142,691
Other 404,934 848,242
------------- -------------
3,374,795 5,141,027
Less Current portio (1,388,581) (1,109,337)
------------- -------------
$ 1,986,214 $ 4,031,690
============= =============
</TABLE>
<PAGE>
As of December 31, 1996, maturities of long-term obligations are as follows:
Year Ending December 31:
- -----------------------
1997 . . . . . . . . . . . . . $1,388,581
1998 . . . . . . . . . . . . . 465,796
1999 . . . . . . . . . . . . . 239,677
2000 . . . . . . . . . . . . . 202,962
2001 . . . . . . . . . . . . . 202,368
Thereafter . . . . . . . . . . 875,411
----------
$3,374,795
==========
(6) Income Taxes
The components of deferred taxes are as follows:
December 31,
--------------------------
1996 1995
--------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 319,359 $ 310,287
Accrued claims payable 1,889,956 1,941,521
General business credit carry forward 574,147 172,464
Workers compensation accrual 204,359 291,738
Alternative minimum tax credit carry forward 456,984 221,072
Depreciation and leases 422,001 191,924
Net operating loss carry forward 654,967 ---
Other 291,808 201,943
------------ ------------
Total deferred tax assets 4,813,581 3,330,949
Valuation allowance (4,689,624) (2,530,452)
------------ ------------
Deferred tax assets, net of valuation allowance $ 123,957 $ 800,497
============ ============
Management believes that, based upon the lack of cumulative profits in the
previous two years, sufficient uncertainty exists regarding the realizability of
the deferred tax asset such that a valuation allowance has been recorded.
Accordingly, the deferred tax assets have been reduced by an approximately
$4,690,000 valuation allowance at December 31, 1996. Realization of the net
deferred tax asset is dependent on generating sufficient taxable income in
future years to support the ability to use these deductions. Although the
realization of the net deferred tax assets are not assured, management believes
that it is more likely than not that all of the net deferred tax assets will
be realized. The amount of the net deferred tax assets considered realizable,
however, could be reduced in the near term based upon changing conditions.
<PAGE>
The provision (benefit) for income taxes for the years ended December 31, 1996,
1995, and 1994 consisted of the following:
1996 1995 1994
Current: ----------- ------------ ------------
Federal $ (590,588) $ 379,203 $ 566,625
State (86,582) 110,182 116,048
----------- ------------ ------------
(677,170) 489,385 682,673
----------- ------------ ------------
Deferred:
Federal (1,292,515) (43,609) 3,152,506
State (189,487) (12,671) 645,651
Change in valuation allowance 2,159,172 (181,573) (4,360,801)
----------- ------------ ------------
$ 677,170 $ (237,853) $ (562,644)
----------- ------------ ------------
$ --- $ 251,532 $ 120,029
=========== ============ ============
The Company's effective income tax rate for the years ended December 31, 1996,
1995, and 1994 was different from the statutory federal income tax rate for
the following reasons:
1996 1995 1994
---------- ---------- ----------
Statutory federal income tax rate (35.0)% 35.0 % 35.0 %
State income taxes, net of federal benefit (4.6) 4.6 4.6
Nondeductible items:
Driver per diems 1.8 --- 0.7
Amortization of goodwill 0.9 17.0 4.0
Other --- 11.6 0.8
Change in valuation allowance 36.8 (28.6) (41.0)
---------- ---------- ----------
Effective income tax rate --- % 39.6 % 1.1 %
========== ========== ==========
The Company has general business credit and alternative minimum tax credit carry
forwards at December 31, 1996, of $574,147 and $456,984, respectively. For
income tax purposes, the Company had approximately $1,650,000 of net operating
loss carryforward at December 31, 1996. The net operating loss carry forward
expires in 2011.
(7) Commitments and Contingencies
Capitalized Lease Obligation
Certain revenue equipment is leased under capital lease agreements. The follow-
ing is a summary of assets held under capital lease agreements:
December 31,
----------------------------
1996 1995
------------- -------------
Revenue equipment $ 67,438,725 $ 67,726,463
Other 1,325,504 1,309,950
------------- -------------
68,764,229 69,036,413
Less Accumulated amortization (18,910,825) (7,640,655)
------------- -------------
$ 49,853,404 $ 61,395,758
============= =============
The following is a schedule by year of future minimum lease payments under
the capital leases together with the value of the net minimum lease payments
at December 31, 1996:
<PAGE>
Year Ending December 31:
- -----------------------
1997 . . . . . . . . . . . . . . . . . . . . . $ 22,440,271
1998 . . . . . . . . . . . . . . . . . . . . . 24,427,561
1999 . . . . . . . . . . . . . . . . . . . . . 2,843,294
2000 . . . . . . . . . . . . . . . . . . . . . 2,637,513
2001 . . . . . . . . . . . . . . . . . . . . . 2,637,513
Thereafter . . . . . . . . . . . . . . . . . . 5,005,095
-------------
Total net minimum lease payments . . . . . . . 59,991,247
Less Amount representing interest. . . . . . . (8,374,638)
-------------
Present value of net premium lease payments. . 51,616,609
Less Current portion . . . . . . . . . . . . . (18,708,614)
-------------
$ 32,907,995
=============
Operating Leases
The Company is committed under noncancellable operating leases involving revenue
equipment and facilities. Rent expense for all operating leases was approxi-
mately $8,022,000, $12,224,000 and $14,904,000 for the years ended December 31,
1996, 1995, and 1994, respectively. The following is a schedule of future
lease commitments under noncancellable operating leases at December 31, 1996:
Year Ending December 31:
- -----------------------
1997 . . . . . . . . . . . . . . . . $ 7,330,628
1998 . . . . . . . . . . . . . . . . 2,737,271
1999 . . . . . . . . . . . . . . . . 1,663,968
2000 . . . . . . . . . . . . . . . . 641,071
2001 . . . . . . . . . . . . . . . . 334,360
------------
$ 12,707,298
============
The Company's operating lease payments are made in arrears. At December 31,
1996 and 1995, the Company classified approximately $461,000 and $511,000 of
accrued operating lease payments in "Accrued Liabilities" in the accompanying
balance sheets.
Letters of Credit
The Company had outstanding letters of credit related to insurance coverage
and certain lease agreements totaling approximately $11,966,000 at December 31,
1996. These letters of credit mature at various times through August 6, 1998.
Fuel Purchase Commitments
As of December 31, 1996, the Company had entered into various fuel purchase
contracts totaling approximately $1,650,000. These contracts expire at various
times through June 30, 1997. This arrangement is intended to reduce the
Company's vulnerability to rapid increases in the price of fuel. In the event
fuel prices decline, the Company will not benefit from such reduced pricing to
the extent of its commitment to purchase fuel under these contracts. If fuel
prices decline materially below contracted prices, the Company records the
loss in the period of decline. As of December 31, 1996, contracted fuel prices
were lower than market fuel prices.
<PAGE>
Registration Rights
Pursuant to a Registration Rights Agreement entered into in connection with
the Plan, the Company's two largest stockholders each have the right, subject
to certain terms and conditions, to require the Company to register their shares
under the Securities Act of 1933 for offer to sell to the public (including by
way of an underwritten offering). These stockholders each also have the right
to join in any registration of securities of the Company (subject to certain
exceptions). The Company is obligated to pay all expenses (except the stock-
holders legal counsel, underwriting discounts, commissions, and transfer taxes,
if any) related to successful offerings requested by a stockholder under this
agreement.
Other
The Company is the subject of various legal actions which it considers routine
to its transportation business activities. Management believes, after
discussion with legal counsel, that the ultimate liability of the Company under
these actions will not materially affect the accompanying financial statements.
The Company is subject to various restrictive covenants related to certain
outstanding debt and lease agreements. Certain lenders have reserved the right
to demand payment if, for any reason, they deem themselves insecure. Manage-
ment does not believe that these obligations will be called in advance of
their scheduled maturities. If they were to be called, management believes
that these amounts could be refinanced with other commercial lenders without
adversely impacting the Company's results of operations or liquidity.
(8) Stockholders' Equity
Initial Public Offering of Common Stock
In connection with its initial public offering, the Company sold 1,600,000
shares of common stock. The proceeds received from the offering, net of
underwriting commissions and offering costs, totaled approximately $21,635,000.
Employee Stock Purchase Plan
During December 1995, the Company implemented an Employee Stock Purchase Plan
("ESPP") entitling eligible employees of the Company to purchase 80,000 shares
of the Company's common stock through payroll deductions in an amount not to
exceed 15 percent of an employee's base pay. The purchase price of the common
stock is the lesser of 85 percent of the market value of the common stock at
the beginning or end of each of the one year offering periods. Employees can
terminate their participation in an offering under the ESPP at any time prior
to the end of the offering period. The ESPP allows for up to 26,666 shares of
common stock (plus unissued shares from prior years) to be offered in each of
the years ending December 31, 1996, 1997 and 1998. During the year ended
December 31, 1996, employees purchased 7,748 shares of common stock under the
ESPP.
Stock Incentive Plan
During December 1994, the Company adopted the PST Vans, Inc., Stock Incentive
Plan ("SIP") with 170,000 shares of common stock reserved for issuance there-
under. The number of shares reserved under the plan was subsequently revised
to 370,000 during 1996. The Compensation Committee of the Board of Directors
administers the SIP and has the discretion to determine the employees and
officers who receive awards (incentive stock options, non-qualified stock
options, stock appreciation rights or phantom stock awards) to be granted and
the term, vesting and exercise prices.
<PAGE>
The Company accounts for this plan under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for the SIP been
determined consistent with FASB Statement No. 123, however, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts:
1996 1995
------------ -------------
Net Income As reported $(5,860,765) $ 383,649
Pro forma (6,009,888) (286,372)
Primary EPS As reported $(1.39) $(0.10)
Pro forma .(1.43) (0.09)
A summary of the Company's SIP at December 31, 1995 and December 31, 1996 and
changes during the years then ended is presented in the table and narrative
below.
<TABLE> <C> <C>
<S> 1996 1995
------------------ -------------------
Wtd.Avg. Wtd.Avg.
Exercise Exercise
Shares Price Shares Price
------------------ -------------------
Outstanding at beginning of year 161,000 $6.19 --- $ ---
Granted 14,000 3.63 161,000 6.19
Forfeited (64,000) 6.16 --- ---
-------- --------
Outstanding at end of year 111,000 5.89 161,000 6.19
======== ========
Exercisable at end of year 33,950 6.06 21,783 6.08
======== ========
Weighted average fair value of options granted $4.43 $4.69
</TABLE>
The 111,000 outstanding shares at the end of 1996 have exercise prices ranging
between $3.38 and $7.38 per share, with a weighted average exercise price of
$5.89. The grants have a prorata vesting period of five years from the grant
date and an expiration date of ten years from grant date. At December 31,
1996, 33,950 options are exercisable at a weighted average exercise price of
$6.06.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995 respectively: risk-free interest
rates of 6.82% in 1996 and 6.53% in 1995; 0% expected dividend yields for 1996
and 1995; expected lives of 8.5 years for 1996 and 1995; expected volatility
of 56.02% in 1996 and 55.70% in 1995.
(9) Related Party Transactions
In March 1995, the Company issued 8,473 shares of common stock in satisfaction
of outstanding indebtedness in the amount of $101,680 to its Chief Executive
Officer and significant stockholder. This individual was an unsecured creditor
under the Plan and elected to take shares of common stock as payment of such
indebtedness as provided for under the Plan.
<PAGE>
(10) Profit Sharing Plan
The Company adopted a Profit Sharing Plan (the "PSP") for the benefit of their
employees. Under the PSP, all employees who have reached the age 20-1/2 and who
have completed at least six months of service with the Company are eligible to
participate. The PSP allows participants to make contributions to the PSP
from their compensation. The Company, at its option, may make additional
contributions to the PSP on behalf of the participants. Under the PSP,
participants are fully vested in their own contributions. Participants become
100 percent vested in any contributions made by the Company after seven years
of service or upon reaching age 65. At December 31, 1994, the Company accrued
$60,000 for contribution to the PSP, which was paid in 1995. The Company did
not make or accrue any other contributions to the PSP during 1996, 1995 or 1994.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by
the undersigned thereto duly authorized.
PST Vans, Inc.
Date: March 31, 1997
By: /s/ Kenneth R. Norton
-----------------------
Kenneth R. Norton
Chief Executive Officer
Date: March 31, 1997
By: /s/ Neil R. Vos
-----------------------
Neil R. Vos
Chief Financial Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PST Vans, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements for each of the three years in the period ended
December 31, 1996 of PST Vans, Inc. (a Utah corporation) included in this
Annual Report on Form 10-K, and have issued our report thereon dated January
31, 1997. Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule II is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit 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
Salt Lake City, Utah
January 31, 1997
<PAGE>
<TABLE>
<S> PST VANS, INC.
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
<C> <C> <C> <C> <C>
Additions
------------------------
Balance at Charged to Charged Balance
Beginning Costs and to other At End
Description of Period Expenses Accounts(1) Deductions(2) Of Period
----------- ---------- ---------- ----------- ------------- ---------
For the year ended December 31, 1996:
Allowance for doubtful accounts $ 784 $ 1,427 $ --- $ (1,405) $ 806
========== ========== =========== ============= =========
For the year ended December 31, 1995:
Allowance for doubtful accounts $ 1,579 $ 1,098 $ --- $ (1,893) $ 784
========== ========== =========== ============= =========
For the year ended December 31, 1994:
Allowance for doubtful accounts $ 1,799 $ 727 $ --- $ (947) $ 1,579
========== ========== =========== ============= =========
- -------------------------------------
(1) Recoveries on accounts written off.
(2) Accounts written off.
</TABLE>
SIXTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
This Sixth Amendment to Revolving Loan Agreement is entered
into as of the 6th day of August, 1996 between PST Vans, Inc., a
Utah corporation (the "Borrower") and The Bank of New York (the
"Bank").
RECITALS:
A. Borrower and Bank entered into a Revolving Loan Agreement
with Letter of Credit Facility (the "Loan Agreement") dated March
7, 1994. In connection with this Loan Agreement, Borrower made,
executed and delivered to Bank a Revolving Promissory Note, dated
March 7, 1994 in the principal amount of $9,500,000 (the "Note").
Also in connection with the Loan Agreement, and as security for
payment of Borrower's obligations under the Note and Loan
Agreement, Borrower executed a Security Agreement (the "Security
Agreement") dated March 7, 1994, wherein Borrower granted to Bank
a security interest in the Collateral, as defined in the Security
Agreement. The Note, Loan Agreement, Security Agreement and all
other documents executed by Borrower and Bank in connection with
the Loan Agreement are hereafter sometimes referred to collectively
as the "Loan Documents".
B. Borrower is in the process of obtaining additional
financing from Congress Financial Corporation ("Congress") in the
form of a secured loan in an amount not to exceed $7,000,000.00
(the "Congress Loan").
C. Borrower has requested that Bank modify the terms of the
Loan Documents in order to enable Borrower to obtain the Congress
Loan.
D. Bank is willing to modify the terms of the Loan Documents
on the terms and conditions stated herein.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:
1. Affirmation of Security Interest. Borrower reaffirms and
acknowledges the security interest granted to Bank in the Security
Agreement in which Borrower grants to Bank a security interest in
the "Collateral" defined as all of the following, whether now owned
or hereafter acquired by Borrower:
i. All present and future contracts, contract
rights, accounts, accounts receivable and other rights to
payment for goods sold or leased or for services
rendered, whether now existing or hereafter arising and
wherever arising, and whether or not they have been
earned by performance, and all accessions and additions
thereto, substitutions and replacements therefor, and the
products and proceeds thereof;
ii. All equipment, including without limitation,
all machinery, all manufacturing, distribution, selling,
data processing and office equipment, all furniture,
<PAGE>
furnishings, appliances, fixtures and trade fixtures,
tools, vehicles (excluding rolling stock in which title
is represented by a certificate of title), and all other
goods of every type and description, in each instance
whether now owned or hereafter acquired and wherever
located, and all additions and accessions thereto,
substitutions and replacements therefor, and the products
and proceeds thereof;
iii. All chattel paper and all payments thereunder
and instruments and other property (other than real
property) from time to time delivered in respect thereof
or in exchange therefor, and all instruments, bills of
lading, warehouse receipts and other documents of title
and documents, in each instance whether now owned or
hereafter acquired, and all additions and accessions
thereto, substitutions and replacements therefor, and the
products and proceeds thereof;
iv. All rights, interests, choses in action, causes
of actions, claims, deposits, deposit accounts, security
deposits, insurance deposits, general intangibles and all
other intangible property of every kind and nature,
whether now owned or hereafter acquired, whenever and
wherever arising, and all additions and accessions
thereto, substitutions and replacements therefor, and the
products and proceeds thereof; and
v. All property (other than real property) or
interests in property (other than real property) now
owned or hereafter acquired which now may be owned or
hereafter may come into the possession, custody or
control of the Bank or any agent or affiliate of the Bank
in any way or for any purpose (whether for safekeeping,
deposit, custody, pledge, transmission, collection or
otherwise), and all rights and interests, now existing or
hereafter arising and however and wherever arising, in
respect of any and all (i) notes, drafts, letters of
credit, stocks, bonds, and debt and equity securities,
whether or not certificated, and warrants, options, puts
and calls and other rights to acquire or otherwise
relating to the same; (ii) money; (iii) proceeds of
loans, including, without limitation, any loans made by
the Bank; and (iv) insurance proceeds and books and
records relating to the foregoing, and all additions and
accessions thereto, substitutions and replacements
therefor, and the products and proceeds thereof.
2. Silent Second on Accounts. Notwithstanding anything to
the contrary in the Security Agreement, Bank agrees that, in
relation to the portion of the Collateral, Bank's security interest
is subordinate to and subject to a security interest granted or to
be granted by Borrower in favor of Congress in connection with the
Congress Loan as set forth in the Intercreditor and Subordination
Agreement between Congress and Bank, a copy of which is attached
hereto and incorporated herein as Exhibit "A". The scope and
extent of the subordination is described in the attached
Intercreditor and Subordination Agreement with the exact
description of the affected Collateral set forth in Exhibit "B" to
said Agreement. Bank further agrees, as an accommodation to
<PAGE>
Borrower, that Bank will take no action to collect Accounts or
otherwise enforce its remedies as against Accounts so long as any
indebtedness owed by Borrower to Congress under the Congress Loan
(and secured by a security interest in the Accounts) is
outstanding. Nothing in this paragraph 2 shall prevent Bank from
taking whatever steps are deemed necessary by Bank to perfect its
security interest in Accounts (including the filing of any UCC
financing statements and continuation statements) and further
nothing in this paragraph 2 modifies or eliminates Borrower's
obligation to provide Bank a perfected security interest in the
Accounts.
3. Incorporation by Reference. The entire Loan Agreement
and any prior written amendments (the "Prior Amendment") are hereby
incorporated by this reference into this Amendment as if those
agreements were fully set out in the text of this Amendment,
subject however, to the modifications and amendments which are
herein set forth. Accordingly, all defined terms found in the Loan
Agreement and the Prior Amendment shall have the same meaning
herein (including in the recitals above), except to the extent that
amendments to such definitions are made in this Amendment.
4. Borrower Acknowledgments and Waivers. Borrower hereby
represents, warrants, acknowledges and agrees that, as of the date
hereof: (a) Borrower has no offsets, counterclaims or other claims
of damage or liability against Bank or defenses to payments due
under the Obligations, Borrower, in all events, hereby knowingly
and intentionally waiving, relinquishing and releasing the right to
assert or claim any of the foregoing; (b) Bank is not nor has it
been in breach or default of any of the duties or obligations of
Bank under any of the Loan Documentation, and Borrower fully and
knowingly hereby waives, releases and relinquishes the right to
make any claim for the same; (c) the execution and performance of
this Amendment have been duly authorized pursuant to all necessary
corporate authority; and (d) the recitals set forth above in this
Amendment are true. Borrower further reaffirms its obligations
hereunder and all of the Obligations, as modified hereby. Except
as specifically and expressly provided in writing signed by the
Bank, neither this Amendment nor any action taken in accordance
herewith shall constitute a release or waiver of any obligation or
liability of Borrower under the Loan Documentation, including the
Loan Agreement or the Note.
5. Integration. The incorporation herein of the Loan
Agreement and the Prior Amendment accomplishes a full integration
of the agreements of the Borrower and Bank and the Loan Agreement
shall now be the integrated and coordinated compilation of the
original Loan Agreement, the Prior Amendment and this Amendment and
is the final and definitive written expression and agreement of the
parties with respect to the subject matter thereof. All prior
writings and notes are superseded by this integrated agreement,
provided that nothing herein is meant to abrogate, except to the
extent specifically modified or amended hereby, the Note, the Loan
Agreement, or any of the other Loan Documentation. No prior oral
understanding or agreement contradictory to the terms of this
Amendment and the integrated Loan Agreement survives the execution
hereof.
<PAGE>
6. Further Assurances. Borrower agrees to take or cause to
be taken all such other actions as shall be reasonably required by
Bank in connection with and in perfection or continuation of the
rights of the Bank with respect to the Obligations. Borrower shall
also execute or cause to be executed such other documents, papers,
instruments and agreements which are deemed, in the reasonable
judgment of the Bank, to be necessary to complete, perfect or
otherwise finalize the agreements and arrangements contemplated by
this Amendment.
7. Counterparts. This Sixth Amendment to Revolving Loan
Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together
shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have caused this Sixth
Amendment to be executed as of the date first written above.
BORROWER: THE BANK:
PST VANS, INC. THE BANK OF NEW YORK
By: By:
Its: Its:
<PAGE>
SEVENTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
This Seventh Amendment to Revolving Loan Agreement (the
"Amendment") is entered into as of the 30th day of September, 1996,
between PST Vans, Inc., a Utah corporation (the "Borrower") and The
Bank of New York (the "Bank").
RECITALS:
A. Borrower and Bank entered into a Revolving Loan Agreement
with Letter of Credit Facility (the "Loan Agreement") dated
March 7, 1994 (as amended). In connection with the Loan Agreement,
Borrower made, executed and delivered to Bank a Revolving
Promissory Note, dated March 7, 1994, in the principal amount of
$9,500,000 (the "Note"). Also in connection with the Loan
Agreement, and as security for payment of Borrower's obligations
under the Note and Loan Agreement, Borrower executed a Security
Agreement (the "Security Agreement") dated March 7, 1994, wherein
Borrower granted to Bank a security interest in the Collateral, as
defined in the Security Agreement. The Note, Loan Agreement,
Security Agreement and all other documents executed by Borrower and
Bank in connection with the Loan Agreement are hereafter sometimes
referred to collectively as the "Loan Documents".
B. Borrower has requested that Bank modify the terms of the
Loan Agreement with respect to certain financial covenants and that
other changes to the Loan Agreement be made.
C. Bank is willing to modify the terms of the Loan Documents
on the terms and conditions stated herein.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:
1. Debt Service Coverage Ratio. Section 5.8(b) of the Loan
Agreement is amended to provide that the debt service coverage
ratio for the quarter ending September 30, 1996, shall be at least
.69 to 1.00, and for the quarter ending December 31, 1996, shall be
at least .80 to 1.00. All other quarterly calculations shall be
governed by the minimum ratio of 1.30 to 1.00 as stated in the Loan
Agreement.
2. Fixed Charge Coverage Ratio. Section 5.8(c) of the Loan
Agreement is amended to provide that the fixed charge coverage
ratio for the quarter ending September 30, 1996, shall be at least
.81 to 1.00, and for the quarter ending December 31, 1996, shall be
at least .86 to 1.00. All other quarterly calculations shall be
governed by the minimum ratio of 1.30 to 1.00 as stated in the Loan
Agreement.
3. Payment of Excess Letter of Credit Draws. With respect
to the Bank's security interest in the right and claim of Borrower
to have draws under a Letter of Credit that exceed the amounts that
are otherwise due to beneficiary returned to Borrower (as provided
in Section 4 of the Fifth Amendment to Revolving Loan Agreement
entered into as of the 29th of March, 1996), by not later than
<PAGE>
October 15, 1996, Borrower shall transmit irrevocable instructions
to each beneficiary of the Standby Letters of Credit to pay any
such excess to Bank directly rather than to Borrower and provide
Bank evidence of such transmittal. The irrevocable instructions
shall be in the general form of Exhibit "A" attached hereto and
incorporated herein. Nothing in this section shall be deemed to be
an acknowledgment by Borrower or the Bank that any beneficiary is
entitled to draw on a Letter of Credit an amount that is greater
than the amount that is owed at the time to the beneficiary.
4. Reduction in Letter of Credit Facility. By not later
than October 15, 1996, Borrower shall reduce permanently and shall
provide to Bank evidence thereof, the Letter of Credit Facility by
a minimum amount of $600,000.00.
5. No Obligation to Enter into Additional Amendments.
Borrower agrees and acknowledges that this Seventh Amendment,
together with all prior Amendments entered into between Borrower
and Bank, shall create no further obligations on Bank to enter into
any additional amendments in the future.
6. Affirmation of Security Interest. Borrower reaffirms and
acknowledges the security interests heretofore granted to Bank in
the Security Agreement and any prior Amendments to the Revolving
Loan Agreement.
7. Incorporation by Reference. The entire Loan Agreement
and any prior written amendments (the "Prior Amendment") are hereby
incorporated by this reference into this Amendment as if those
agreements were fully set out in the text of this Amendment,
subject however, to the modifications and amendments which are
herein set forth. Accordingly, all defined terms found in the Loan
Agreement and the Prior Amendment shall have the same meaning
herein (including in the recitals above), except to the extent that
amendments to such definitions are made in this Amendment.
8. Borrower Acknowledgments and Waivers. Borrower hereby
represents, warrants, acknowledges and agrees that, as of the date
hereof: (a) Borrower has no offsets, counterclaims or other claims
of damage or liability against Bank or defenses to payments due
under the Obligations, and Borrower, in all events, hereby
knowingly and intentionally waives, relinquishes and releases the
right to assert or claim any of the foregoing; (b) Bank is not nor
has it been in breach or default of any of the duties or
obligations of Bank under any of the Loan Documentation, and
Borrower fully and knowingly hereby waives, releases and
relinquishes the right to make any claim for the same; (c) the
execution and performance of this Amendment have been duly
authorized pursuant to all necessary corporate authority; and (d)
the recitals set forth above in this Amendment are true. Borrower
further reaffirms its obligations hereunder and all of the
Obligations, as modified hereby. Except as specifically and
expressly provided in writing signed by the Bank, neither this
Amendment nor any action taken in accordance herewith shall
constitute a release or waiver of any obligation or liability of
Borrower under the Loan Documentation, including the Loan Agreement
or the Note.
<PAGE>
9. Integration. The incorporation herein of the Loan
Agreement and the Prior Amendment accomplishes a full integration
of the agreements of the Borrower and Bank and the Loan Agreement
shall now be the integrated and coordinated compilation of the
original Loan Agreement, the Prior Amendment and this Amendment and
is the final and definitive written expression and agreement of the
parties with respect to the subject matter thereof. All prior
writings and notes are superseded by this integrated agreement,
provided that nothing herein is meant to abrogate, except to the
extent specifically modified or amended hereby, the Note, the Loan
Agreement, or any of the other Loan Documentation. No prior oral
understanding or agreement contradictory to the terms of this
Amendment and the integrated Loan Agreement survives the execution
hereof.
10. Further Assurances. Borrower agrees to take or cause to
be taken all such other actions as shall be reasonably required by
Bank in connection with and in perfection or continuation of the
rights of the Bank with respect to the Obligations. Borrower shall
also execute or cause to be executed such other documents, papers,
instruments and agreements which are deemed, in the reasonable
judgment of the Bank, to be necessary to complete, perfect or
otherwise finalize the agreements and arrangements contemplated by
this Amendment.
11. Counterparts. This Seventh Amendment to Revolving Loan
Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together
shall constitute one and the same agreement.
SEVENTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
IN WITNESS WHEREOF the parties hereto have caused this Seventh
Amendment to be executed as of the date first written above.
BORROWER: THE BANK:
PST VANS, INC. THE BANK OF NEW YORK
By: By:
Its: Its:
<PAGE>
EIGHTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
This Eighth Amendment to Revolving Loan Agreement (the
"Amendment") is entered into as of the 27th day of December, 1996,
between PST Vans, Inc., a Utah corporation (the "Borrower") and The
Bank of New York (the "Bank").
RECITALS:
A. Borrower and Bank entered into a Revolving Loan Agreement
with Letter of Credit Facility (the "Loan Agreement") dated
March 7, 1994 (as amended). In connection with the Loan Agreement,
Borrower made, executed and delivered to Bank a Revolving
Promissory Note, dated March 7, 1994, in the principal amount of
$9,500,000 (the "Note"). Also in connection with the Loan
Agreement, and as security for payment of Borrower's obligations
under the Note and Loan Agreement, Borrower executed a Security
Agreement (the "Security Agreement") dated March 7, 1994, wherein
Borrower granted to Bank a security interest in the Collateral, as
defined in the Security Agreement. The Note, Loan Agreement,
Security Agreement and all other documents executed by Borrower and
Bank in connection with the Loan Agreement are hereafter sometimes
referred to collectively as the "Loan Documents".
B. Borrower has requested that Bank modify the terms of the
Loan Agreement with respect to certain financial covenants and that
other changes to the Loan Agreement be made.
C. Since July 1, 1996, Bank has incurred legal expenses and
costs in the amount of $5,011.06 in connection with (i) negotiating
and documenting an extension agreement with Zion's Bank relating to
Borrower's accounts receivable financing, (ii) negotiating and
documenting a subordination agreement with Congress Financial
relating to Borrower's replacement accounts receivable financing,
and (iii) negotiating and documenting the Seventh Amendment to the
Loan Agreement. In addition, Bank is incurring legal expenses and
costs in the amount of $450.00 in connection with this Eighth
Amendment. In summary Bank has incurred or will incur legal
expenses and costs totalling $5,461.06 relating to the Loan
Agreement. Bank has paid $604.00 of the fees and costs incurred,
leaving an unpaid balance due to Bank's counsel of $4,857.06.
D. Bank is willing to modify the terms of the Loan Documents
on the terms and conditions stated herein.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:
1. Debt Service Coverage Ratio. Section 5.8(b) of the Loan
Agreement is amended to provide that the debt service coverage
ratio for the quarter ending December 31, 1996, shall be at least
.60 to 1.00. All other quarterly calculations shall be governed by
the minimum ratio of 1.30 to 1.00 as stated in the Loan Agreement.
<PAGE>
2. Fixed Charge Coverage Ratio. Section 5.8(c) of the Loan
Agreement is amended to provide that the fixed charge coverage
ratio for the quarter ending December 31, 1996 shall be at least
.71 to 1.00. All other quarterly calculations shall be governed by
the minimum ratio of 1.30 to 1.00 as stated in the Loan Agreement.
3. Reduction in Letter of Credit Facility. By not later
than January 31, 1997, Borrower shall reduce permanently and shall
provide to Bank evidence thereof, the Letter of Credit Facility by
a minimum amount of $1,500,000.00.
4. Contemporaneously with the delivery of this Eighth
Amendment, Borrower shall deliver to Ray, Quinney & Nebeker two (2)
payments in the form of checks or drafts, the first made payable to
Ray, Quinney & Nebeker in the amount of $4,857.06 and the second
made payable to The Bank of New York in the amount of $604.00.
5. No Obligation to Enter into Additional Amendments.
Borrower agrees and acknowledges that this Eighth Amendment,
together with all prior Amendments entered into between Borrower
and Bank, shall create no further obligations on Bank to enter into
any additional amendments in the future.
6. Affirmation of Security Interest. Borrower reaffirms and
acknowledges the security interests heretofore granted to Bank in
the Security Agreement and any prior Amendments to the Revolving
Loan Agreement.
7. Incorporation by Reference. The entire Loan Agreement
and any prior written amendments (the "Prior Amendment") are hereby
incorporated by this reference into this Amendment as if those
agreements were fully set out in the text of this Amendment,
subject however, to the modifications and amendments which are
herein set forth. Accordingly, all defined terms found in the Loan
Agreement and the Prior Amendment shall have the same meaning
herein (including in the recitals above), except to the extent that
amendments to such definitions are made in this Amendment.
8. Borrower Acknowledgments and Waivers. Borrower hereby
represents, warrants, acknowledges and agrees that, as of the date
hereof: (a) Borrower has no offsets, counterclaims or other claims
of damage or liability against Bank or defenses to payments due
under the Obligations, and Borrower, in all events, hereby
knowingly and intentionally waives, relinquishes and releases the
right to assert or claim any of the foregoing; (b) Bank is not nor
has it been in breach or default of any of the duties or
obligations of Bank under any of the Loan Documentation, and
Borrower fully and knowingly hereby waives, releases and
relinquishes the right to make any claim for the same; (c) the
execution and performance of this Amendment have been duly
authorized pursuant to all necessary corporate authority; and (d)
the recitals set forth above in this Amendment are true. Borrower
further reaffirms its obligations hereunder and all of the
Obligations, as modified hereby. Except as specifically and
expressly provided in writing signed by the Bank, neither this
Amendment nor any action taken in accordance herewith shall
constitute a release or waiver of any obligation or liability of
Borrower under the Loan Documentation, including the Loan Agreement
or the Note.
<PAGE>
9. Integration. The incorporation herein of the Loan
Agreement and the Prior Amendment accomplishes a full integration
of the agreements of the Borrower and Bank and the Loan Agreement
shall now be the integrated and coordinated compilation of the
original Loan Agreement, the Prior Amendment and this Amendment and
is the final and definitive written expression and agreement of the
parties with respect to the subject matter thereof. All prior
writings and notes are superseded by this integrated agreement,
provided that nothing herein is meant to abrogate, except to the
extent specifically modified or amended hereby, the Note, the Loan
Agreement, or any of the other Loan Documentation. No prior oral
understanding or agreement contradictory to the terms of this
Amendment and the integrated Loan Agreement survives the execution
hereof.
10. Further Assurances. Borrower agrees to take or cause to
be taken all such other actions as shall be reasonably required by
Bank in connection with and in perfection or continuation of the
rights of the Bank with respect to the Obligations. Borrower shall
also execute or cause to be executed such other documents, papers,
instruments and agreements which are deemed, in the reasonable
judgment of the Bank, to be necessary to complete, perfect or
otherwise finalize the agreements and arrangements contemplated by
this Amendment.
11. Counterparts. This Eighth Amendment to Revolving Loan
Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together
shall constitute one and the same agreement.
EIGHTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
IN WITNESS WHEREOF the parties hereto have caused this Eighth
Amendment to be executed as of the date first written above.
BORROWER: THE BANK:
PST VANS, INC. THE BANK OF NEW YORK
By: By:
Its: Its:
<PAGE>
NINTH AMENDMENT TO REVOLVING
LOAN AGREEMENT
This Ninth Amendment to Revolving Loan Agreement (the
"Amendment") is entered into as of the 21st day of March, 1997,
between PST Vans, Inc., a Utah corporation (the "Borrower") and The
Bank of New York (the "Bank").
RECITALS:
A. Borrower and Bank entered into a Revolving Loan Agreement
with Letter of Credit Facility (the "Loan Agreement") dated
March 7, 1994 (as amended). In connection with the Loan Agreement,
Borrower made, executed and delivered to Bank a Revolving
Promissory Note, dated March 7, 1994, in the principal amount of
$9,500,000 (the "Note"). Also in connection with the Loan
Agreement, and as security for payment of Borrower's obligations
under the Note and Loan Agreement, Borrower executed a Security
Agreement (the "Security Agreement") dated March 7, 1994, wherein
Borrower granted to Bank a security interest in the Collateral, as
defined in the Security Agreement. The Note, Loan Agreement,
Security Agreement and all other documents executed by Borrower and
Bank in connection with the Loan Agreement are hereafter sometimes
referred to collectively as the "Loan Documents".
B. Borrower has requested that Bank modify the terms of the
Loan Agreement with respect to certain financial covenants and that
other changes to the Loan Agreement be made.
C. Since January 1, 1997, Bank has incurred and is incurring
legal expenses and costs in the amount of $1,500 in connection with
negotiating and documenting this Ninth Amendment.
D. Bank is willing to modify the terms of the Loan Documents
on the terms and conditions stated herein.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:
1. By not later than July 31, 1997, Borrower shall reduce
permanently and shall provide to Bank evidence thereof, the Letter
of Credit Facility by a minimum amount of $1,000,000.
2. By not later than September 30, 1997, Borrower shall
reduce permanently and shall provide to Bank evidence thereof, the
Letter of Credit Facility by an additional minimum amount of
$2,000,000.
3. The Termination Date under the Loan Agreement shall be
December 31, 1997 (unless termination occurs under Section 8.2 of
the Agreement), and all remaining letters of credit must be
terminated no later than that date. If on the Termination Date,
there are undrawn letters of credit that remain outstanding,
Borrower must (i) deposit in an account with the Bank (with
Borrower having no right to withdraw the funds), an amount at least
equal to one hundred and five percent (105%) of the amount of all
such outstanding letters of credit, which account shall be held
<PAGE>
exclusively as security for the reimbursement obligations
associated with those letters of credit, or (ii) deliver an
unconditional letter or letters of credit, each in a form
acceptable to the Bank and each issued by an institution acceptable
to the Bank that total one hundred and five percent (105%) of the
amount of all the outstanding letters of credit issued by the Bank
for the account of Borrower, which shall serve to ensure payment of
the reimbursement obligations of Borrower to the Bank.
4. In addition to other charges, fees and payments payable under the
Loan Agreement, Borrower shall pay to the Bank a one percent (1%) annual fee
through March 31, 1997; and one and one-half percent (1.5%) annual fee from
April 1, 1997 through June 30, 1997; and thereafter a two percent (2%) annual
fee on the undrawn portion of the letters of credit, payable in advance on a
calendar quarterly basis on the first day of each such quarter.
5. Section 5.8(a) of the Loan Agreement is modified to
provide that Borrower shall maintain its Tangible Net Worth at the
following minimum levels for the time period stated:
Time Period Tangible Net Worth
1/31/97 to 3/31/97 $10,700,000
4/1/97 to 6/30/97 $10,225,000
7/1/97 to 12/31/97 $9,750,000
"Tangible Net Worth" is defined as the amount by which the par
value (or value stated on the books of Borrower) of all classes of
the capital stock of Borrower plus (or minus in the case of
deficit) the amount of surplus, whether capital or earned, of the
Borrower for goodwill, licenses, patents, trademarks, treasury
stock, unamortized debt discount and expense, leasehold
improvements and other intangibles for cost of investments in
excess of net assets at the time of acquisition by Borrower, and
for any write-up in the book value of any assets of the Borrower
resulting from the subsequent revaluation thereof, each determined
by reference to Borrower's financial statements to be provided to
the Bank under the Loan Agreement.
6. The financial covenants set forth in Sections 5.8(b) and
(c) of the Loan Agreement are deleted.
7. Transactions with Affiliates. Borrower shall not enter
into any contractual agreement with any affiliate, to be defined to
include a parent, subsidiary, shareholder holding at least five
percent (5%) of Borrower's outstanding stock, director or officer,
without the prior written consent of the Bank.
8. Payment of Attorneys' Fees and Costs. Contemporaneously
with the delivery of this Ninth Amendment, Borrower shall deliver
to Ray, Quinney & Nebeker a payment in the form of a check or draft
made payable to Ray, Quinney & Nebeker in the amount of $1,500.
9. No Obligation to Enter into Additional Amendments.
Borrower agrees and acknowledges that this Ninth Amendment,
together with all prior Amendments entered into between Borrower
and Bank, shall create no further obligations on Bank to enter into
any additional amendments in the future.
<PAGE>
10. Affirmation of Security Interest. Borrower reaffirms and
acknowledges the security interests heretofore granted to Bank in
the Security Agreement and any prior Amendments to the Revolving
Loan Agreement.
11. Incorporation by Reference. The entire Loan Agreement
and any prior written amendments (the "Prior Amendment") are hereby
incorporated by this reference into this Amendment as if those
agreements were fully set out in the text of this Amendment,
subject however, to the modifications and amendments which are
herein set forth. Accordingly, all defined terms found in the Loan
Agreement and the Prior Amendment shall have the same meaning
herein (including in the recitals above), except to the extent that
amendments to such definitions are made in this Amendment.
12. Borrower Acknowledgments and Waivers. Borrower hereby
represents, warrants, acknowledges and agrees that, as of the date
hereof: (a) Borrower has no offsets, counterclaims or other claims
of damage or liability against Bank or defenses to payments due
under the Obligations, and Borrower, in all events, hereby
knowingly and intentionally waives, relinquishes and releases the
right to assert or claim any of the foregoing; (b) Bank is not nor
has it been in breach or default of any of the duties or
obligations of Bank under any of the Loan Documentation, and
Borrower fully and knowingly hereby waives, releases and
relinquishes the right to make any claim for the same; (c) the
execution and performance of this Amendment have been duly
authorized pursuant to all necessary corporate authority; and (d)
the recitals set forth above in this Amendment are true. Borrower
further reaffirms its obligations hereunder and all of the
Obligations, as modified hereby. Except as specifically and
expressly provided in writing signed by the Bank, neither this
Amendment nor any action taken in accordance herewith shall
constitute a release or waiver of any obligation or liability of
Borrower under the Loan Documentation, including the Loan Agreement
or the Note.
13. Integration. The incorporation herein of the Loan
Agreement and the Prior Amendment accomplishes a full integration
of the agreements of the Borrower and Bank and the Loan Agreement
shall now be the integrated and coordinated compilation of the
original Loan Agreement, the Prior Amendment and this Amendment and
is the final and definitive written expression and agreement of the
parties with respect to the subject matter thereof. All prior
writings and notes are superseded by this integrated agreement,
provided that nothing herein is meant to abrogate, except to the
extent specifically modified or amended hereby, the Note, the Loan
Agreement, or any of the other Loan Documentation. No prior oral
understanding or agreement contradictory to the terms of this
Amendment and the integrated Loan Agreement survives the execution
hereof.
<PAGE>
14. Further Assurances. Borrower agrees to take or cause to
be taken all such other actions as shall be reasonably required by
Bank in connection with and in perfection or continuation of the
rights of the Bank with respect to the Obligations. Borrower shall
also execute or cause to be executed such other documents, papers,
instruments and agreements which are deemed, in the reasonable
judgment of the Bank, to be necessary to complete, perfect or
otherwise finalize the agreements and arrangements contemplated by
this Amendment.
15. Counterparts. This Ninth Amendment to Revolving Loan
Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together
shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have caused this Ninth
Amendment to be executed as of the date first written above.
BORROWER: THE BANK:
PST VANS, INC. THE BANK OF NEW YORK
By: By:
Its: Its:
CONSENT TO INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8, File Nos. 33-98960 and 333-12489.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
April 9, 1997
<PAGE>
