SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission File No. 0-25506
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PST VANS, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0411704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No).
1901 West 2100 South
Salt Lake City, UT 84119
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: 801-975-2500
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
--- ---
The number of shares outstanding of Registrant's Common Stock, par value $0.001
per share, as of May 10, 1998, was 4,253,527 shares.
<PAGE>
PST VANS, INC.
INDEX
PART I, FINANCIAL INFORMATION
Page
Number
------
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) as of March 31, 1998
and December 31, 1997 1
Condensed Statements of Operations (unaudited) for the
Three Months Ended March 31, 1998 and 1997 2
Condensed Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 1998 and 1997 3
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II, OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 10
* No Information Submitted Under This Caption
<PAGE>
<TABLE>
PST VANS, INC.
CONDENSED BALANCE SHEETS
ASSETS
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,491,757 $ 1,129,121
Accounts receivable, net 16,234,347 17,087,038
Deposits 343,867 343,867
Inventories and operating supplies 562,869 726,853
Prepaid expenses and other 2,717,136 3,052,255
------------ ------------
Total current assets 21,349,976 22,339,134
------------ ------------
PROPERTY AND EQUIPMENT, net 53,430,878 48,265,627
------------ ------------
GOODWILL, net 8,272,196 8,340,187
------------ ------------
OTHER ASSETS, net 317,615 331,230
------------ ------------
$ 83,370,665 $ 79,276,178
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Line of credit $ 5,267,301 $ 4,762,493
Current portion of long-term obligations 4,938,373 3,037,018
Current portion of capitalized lease obligations 21,885,399 23,599,973
Accounts payable 4,287,229 7,108,043
Current portion of accrued claims payable 3,686,143 4,401,608
Accrued liabilities 2,380,757 2,859,968
------------ ------------
Total current liabilities 42,445,202 45,769,103
------------ ------------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion 1,019,123 1,257,429
------------ ------------
LONG-TERM OBLIGATIONS, net of current portion 7,605,590 3,985,909
------------ ------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion 14,531,197 10,752,720
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 4,254 4,240
Additional paid-in capital 49,847,278 49,812,539
Accumulated deficit (32,081,979) (32,305,762)
------------ ------------
Total stockholders' equity 17,769,553 17,511,017
------------ ------------
$ 83,370,665 $ 79,276,178
============ ============
</TABLE>
See accompanying notes to condensed financial statements
1
<PAGE>
PST VANS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
------------------
March 31,
---------
1998 1997
------------ ------------
REVENUES $ 35,706,408 $ 34,522,609
------------ ------------
COSTS AND EXPENSES:
Salaries, wages and benefits 10,062,033 10,865,745
Purchased transportation 8,488,483 6,832,845
Fuel and fuel taxes 4,576,587 5,373,628
Revenue equipment lease expense 934,591 1,842,548
Maintenance 2,553,827 1,826,916
Insurance and claims 2,166,619 2,871,458
General supplies and expenses 1,519,380 1,261,423
Taxes and licenses 710,701 719,259
Communications and utilities 491,871 895,038
Depreciation and amortization 2,846,738 3,032,285
Amortization of goodwill 67,991 67,991
(Gain) on disposition of assets (52,673) (54,187)
------------ ------------
34,366,148 35,534,949
------------ ------------
OPERATING INCOME (LOSS) 1,340,260 (1,012,340)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,134,145) (1,126,224)
Other, net 17,668 29,488
------------ ------------
(1,116,477) (1,096,736)
------------ ------------
INCOME (LOSS) BEFORE PROVISION (CREDIT) FOR
INCOME TAXES 223,783 (2,109,076)
PROVISION (CREDIT) FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) $ 223,783 $ (2,109,076)
============ ============
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ 0.05 $ (0.50)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING BASIC 4,252,772 4,226,544
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING DILUTED 4,340,143 4,226,544
============ ============
See accompanying notes to condensed financial statements
2
<PAGE>
<TABLE>
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
------------------
March 31,
---------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 223,783 $(2,109,076)
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities -
Depreciation and amortization 2,914,729 3,100,276
Provision for losses on accounts receivable (280,086) (2,915)
Gain on sale of property and equipment (52,673) (54,187)
Non cash expense related to issuance of common stock -- 4,124
Decrease in receivables 1,132,777 863,859
Decrease in deposits -- 25,902
Decrease in prepaid expenses and other 335,119 596,738
Decrease in inventories and operating supplies 163,984 67,782
Decrease in other assets, net 13,615 220,733
Increase in accounts payable 182,679 237,252
Increase (decrease) in accrued claims payable (953,771) 150,887
Increase (decrease) in accrued liabilities (479,211) 529,752
----------- -----------
Total adjustments 2,977,162 5,740,203
----------- -----------
Net cash flows provided by operating activities 3,200,945 3,631,127
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (2,422,116) (2,128,685)
Proceeds from sale of property and equipment 203,388 288,698
----------- -----------
Net cash flows used in investing
activities (2,218,728) (1,839,987)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line of credit , net 504,808 396,022
Proceeds from issuance of long-term debt 2,004,636 54,602
Principal payments on long-term debt (931,965) (1,060,240)
Principal payments on capitalized lease obligations (2,231,813) (2,803,775)
Proceeds from issuance of common stock, net 34,753 23,536
----------- -----------
Net cash flows used in
financing activities (619,581) (3,389,855)
----------- -----------
NET INCREASE (DECREASE) IN CASH 362,636 (1,598,715)
CASH AT BEGINNING OF PERIOD 1,129,121 4,098,361
----------- -----------
CASH AT END OF PERIOD $ 1,491,757 $ 2,499,646
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements
3
<PAGE>
<TABLE>
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
------------------
March 31,
---------
1998 1997
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for -
Interest $ 1,135,922 $ 1,162,766
Income taxes 17,840 --
</TABLE>
See accompanying notes to condensed financial statements
4
<PAGE>
PST VANS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. Financial Information:
The accompanying condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes the following disclosures
are adequate to make the information presented not misleading. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Results of
operations for interim periods are not necessarily indicative of results for a
full year. These condensed financial statements and notes thereto should be read
in conjunction with the Company's financial statements and notes thereto,
included in the Company's Form 10-K for the year ended December 31, 1997.
Note 2. Income Taxes:
Income taxes for the interim periods are based upon the Company's estimated
effective annual tax rates. The Company's effective tax rate (income tax expense
divided by income before income taxes) was zero for the three months ended March
31, 1998 as a result of the benefit of loss carry-forwards from prior years. The
effective tax rate was zero for the three months ended March 31, 1997, as a
result of the Company not recording any benefit on its pre-tax loss.
Note 3. Basic and Diluted Earnings Per Share:
The following table sets forth for the periods indicated the calculation of net
earnings per share included in the Company's Condensed Consolidated Statement of
Operations
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
Numerator:
Net Income (Loss) $ 223,783 $(2,109,076)
Denominator:
Denominator for basic earnings per
share -- weighted-average shares 4,252,772 4,226,544
Effect of dilutive securities:
Employee stock options 87,371 --
----------- -----------
Denominator for diluted earnings per
share - adjusted weighted-average
shares 4,340,143 4,226,544
=========== ===========
When the Company incurs a loss, common stock equivalents are not included in the
calculation of the weighted average number of shares outstanding as they would
be anti-dilutive.
5
<PAGE>
PST Vans, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Revenues increased by 3.4% to $35.7 million for the three months ended March 31,
1998 compared to $34.5 million for the three months ended March 31, 1997. This
revenue increase resulted primarily from a 7.7% improvement in equipment
utilization as measured in miles per truck per day, offset by a 5.1% decrease in
revenue equipment as the average number of tractors decreased to 1,111 for the
three months ended March 31, 1998 compared to 1,171 for the three months ended
March 31, 1997. Management believes that reducing revenue equipment in the
quarter ended March 31, 1998 was prudent because the Company experienced an
overcapacity of equipment during portions of 1997. Revenues for the three months
ended March 31, 1998 were also positively affected by a 1.3% increase in
earnings per mile. Management believes the increased utilization was a result of
greater demand for freight services created by a decrease in equipment
overcapacity in the transportation industry in the quarter ended March 31, 1998,
and the Company's ability to better manage revenue equipment with new
communication systems.
Operating costs and expenses were 96.2% of revenues for the three months ended
March 31, 1998, compared to 102.9% of revenues for the three months ended March
31, 1997. Operating costs and expenses in the first quarter of 1998, as a
percent of revenue, were positively effected primarily by increased revenue
equipment utilization, a reduction in communication and utilities expense as a
result of discontinued use of a cellular mobile communications system, decreased
fuel and fuel tax expense, reduced revenue equipment costs as a result of
refinancing certain equipment, and decreased insurance and claims expense.
Operating costs and expenses, as a percent of revenue were adversely affected
primarily by increased maintenance expenses related to an increased average age
of the Company's fleet of equipment.
Salaries, wages and benefits decreased to 28.2 % of revenues for the three
months ended March 31, 1998 as compared to 31.5% of revenues for the three
months ended March 31, 1997, due primarily to a decrease in the percent of total
miles driven by Company drivers compared to independent contractors during the
two periods. Purchased transportation expense increased to 23.8% of revenues for
the three months ended March 31, 1998 as compared to 19.8% of revenues for the
three months ended March 31, 1997, for the same reason. 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
decreased to 12.8% of revenues for the three months ended March 31, 1998,
compared to 15.6% of revenues for the three months ended March 31, 1997, as a
result of a higher percentage of miles driven by independent contractors and
decreased fuel prices. In order to reduce the Company's vulnerability to rapid
increases in the price of fuel, the Company has historically entered into
purchase contracts with fuel suppliers from time to time for a portion of its
estimated fuel requirements at guaranteed prices (see liquidity and capital
resources). The Company has also implemented fuel surcharges to many of its
customers. Management anticipates that the purchase contracts and fuel
surcharges will lessen the impact of any increase in the cost of fuel.
Supplies and maintenance expense increase to 7.2% of revenues for the first
quarter of 1998 as compared to 5.3% of revenues for the first quarter of 1997,
primarily due to costs related to an older fleet of equipment. The average age
of the Company's tractors at March 31, 1998 was 2.70 years as compared to 1.97
years at March 31, 1997.
Revenue equipment lease expense decreased to 2.6% of revenues for the three
months ended March 31, 1998 from 5.3% of revenues for the three months ended
March 31, 1997, primarily due to the retirement of 196 leased tractors during
December 1997, January 1998 and February 1998.
6
<PAGE>
Insurance and claims decreased to 6.1% of revenues for the three months ended
March 31, 1998 from 8.3% of revenues for the three months ended March 31, 1997,
as a result of a 50% decrease in the number of claims during the three months
ended March 31, 1998 compared to the three months ended March 31, 1997, and a
decrease in the first quarter of 1998 in the amount of adjustments to claims
from prior periods. The Company implemented several changes to its insurance
program in the third and fourth quarters of 1997 that have reduced overall
insurance costs. These changes include significantly lower deductibles on
liability and workers' compensation coverage, and low deductible physical damage
coverage on Company-owned tractors. Management continues to review each accident
to determine what actions may be taken to reduce future claims costs.
As a consequence of the items discussed above, the Company realized income
before provision for income taxes for the three months ended March 31, 1998 of
$223,783 compared to a loss before provision for income taxes of $2,109,076 for
the three months ended March 31, 1997.
The Company's effective tax rate (income tax expense divided by income before
income taxes) was zero for the three months ended March 31, 1998 as a result of
the benefit of loss carry-forwards from prior years. The effective tax rate was
zero for the three months ended March 31, 1997, as a result of the Company not
recording any benefit on its pre-tax loss.
Liquidity and Capital Resources
The Company's sources of liquidity have been funds provided by operations,
leases on revenue equipment and revolving lines of credit.
The Company has a $11.5 million working capital line of credit with Congress
Financial Corporation (Northwest) which expires August 1999. 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 March 31,
1998 the Company has utilized $10.8 million of this line of credit, $5.6 million
for insurance related letters of credit, and $5.2 million of short term cash
borrowings. The Congress Agreement restricts the payment of dividends.
The Company also has a credit facility with the Bank of New York for issuance of
letters of credit up to $4.8 million which expires May 15, 1998. As of March 31,
1998, the Company had used all of this facility for letters ofcredit in favor of
the Company's insurance carrier. As outstanding letters of credit issued under
this credit facility are not renewed, the maximum commitment available under
this credit facility will be reduced by the amount of the expiring letters of
credit. 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.
Net cash provided by operating activities totaled approximately $3.2 million for
the three months ended March 31, 1998. Net cash used for investing activities
(primarily purchasing of equipment) amounted to $2.2 million for the three
months ended March 31, 1998. Net cash used in financing activities was $620,000
for the three months ended March 31, 199, primarily for principal payments on
debt and capitalized lease obligations.
7
<PAGE>
The Company expects capital expenditures for the remainder of 1998 to be
approximately $8 million, primarily for additional trailers. For the first three
months of 1998, the Company acquired $2.4 million of equipment, primarily
additions to an on-board communications system. 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 through 1998. 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. 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.
Fuel is one of the Company's most substantial operating expenses. In order to
reduce the Company's vulnerability to rapid increased 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 March
31, 1998 the Company had entered into various agreements with fuel suppliers to
purchase approximately 12% of its estimated fuel needs through December 31, 1998
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.
In February 1998, the Company entered into a five-year agreement with The Sabre
Group to out-source the majority of its information technology functions,
including computer and telephone systems. In connection with the agreement, the
Company will be transitioning to new hardware and software for its financial,
accounting, operations and other management information systems during the
second quarter of 1998. The successful implementation of these new systems is
crucial to the efficient operation of the Company's business. There can be no
assurance that the Company will implement its new systems in an efficient and
timely manner or that the new systems will be adequate to support the Company's
operations. Problems with installation or initial operation of the new systems
could cause substantial difficulties in operations planning, financial reporting
and management and thus could have a material adverse effect on the Company's
business, financial condition and results of operation.
The Company is in the process of identifying anticipated costs, problems and
uncertainties associated with making the Company's software applications Year
2000 compliant. The Sabre Group has certified that the software they will be
providing to the Company is Year 2000 ready. The Company expects to resolve Year
2000 issues with other internal-use software through planned replacement or
upgrades. Although management does not anticipate Year 2000 issues to have a
material affect on its business or future results of operations, there can be no
assurance that there will not be interruptions of operations or other
limitations of system functionality or that the Company will not incur
significant costs to avoid such interruptions or limitations.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern as
customers reduce shipments during and shortly 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 operations. The
effect of inflation has been minimal over the past three years.
This quarterly report on Form 10Q may be deemed to contain certain
forward-looking statements. These statements are subject to known and unknown
risks and uncertainties, including decreased demand for freight, slower than
anticipated economic conditions, availability of required credit facilities,
shortages of drivers and such other risks as are identified and discussed herein
and in the Company's filings with 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.
8
<PAGE>
PART II, OTHER INFORMATION
INDEX
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit No. Description
-----------------------------------------------------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
10
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 15, 1998 By: /s/ Kenneth R. Norton
--------------------------
Kenneth R. Norton
Chief Executive Officer
Date: May 15, 1998 By: /s/ Neil R. Vos
-------------------
Neil R. Vos
Chief Financial Officer and
Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1491757
<SECURITIES> 0
<RECEIVABLES> 16234347
<ALLOWANCES> 0
<INVENTORY> 562869
<CURRENT-ASSETS> 21349976
<PP&E> 53430878
<DEPRECIATION> 0
<TOTAL-ASSETS> 83370665
<CURRENT-LIABILITIES> 42445202
<BONDS> 0
0
0
<COMMON> 4254
<OTHER-SE> 17765299
<TOTAL-LIABILITY-AND-EQUITY> 83370665
<SALES> 35706408
<TOTAL-REVENUES> 35706408
<CGS> 0
<TOTAL-COSTS> 34366148
<OTHER-EXPENSES> (17668)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1134145
<INCOME-PRETAX> 223783
<INCOME-TAX> 0
<INCOME-CONTINUING> 223783
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223783
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
