<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 1996
-------------
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0-25352
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Ampace Corporation
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(Exact name of Small Business Issuer as specified in its charter)
Delaware 36-3988574
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
130 Mabry Hood Road, Suite 220, Knoxville, TN 37922
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(Address of principal executive offices)
423 691-5799
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the last practicable date: 3,075,000
---------------------------
Traditional Small Business Disclosure Format (check one)
Yes No X
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<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
See Financial Statements attached hereto
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following Management's Discussion and Analysis of Operation contains
forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors.
RESULTS OF OPERATIONS
Ampace Corporation (the Company or Ampace) was incorporated in November 1994 to
create a national non-union full truckload transportation company. On February
24, 1995 the Company completed its first acquisition thereby commencing its
transport operations. The Company's operations for the six months ended June
30, 1995 reflect general and administrative activity of the Company for the
full period and the operations of the acquired company (Merchants Dutch
Express, Inc. or MDX) from the acquisition date forward. The significant
increases in the Company's revenues and expenses for the six months and quarter
ending June 30, 1996 compared to the same periods during 1995, are in part due
to 1995 including only four month's operating activity of MDX, compared with
six months in 1996 and in part to the completion of the Company's second
acquisition (Amanday Express, Inc. or Amanday) effective April 1, 1996.
In management's opinion, a detailed discussion of the Company's operating
results for the six months ending June 30, 1996 compared to those of the same
period in 1995 is not meaningful because of the abbreviated operating results
during 1995 and the 1996 second quarter acquisition. Consequently, discussion
of the Company's operations is based upon the general comparative differences
between the six months ended June 30, 1996 and June 30, 1995 and the following
proforma information prepared assuming (i) the initial capitalization of the
Company's 1,450,000 shares (ii) the offering of 1,350,000 shares of common
stock, and (iii) MDX and Amanday had been acquired on January 1, 1995 and
therefore contributed six months operations.
<TABLE>
<CAPTION>
Proforma Six Months Ended
June 30, 1995 June 30, 1996
------------- -------------
<S> <C> <C>
Revenues (000) $16,124 $16,503
====== =======
Net income (000) $ 559 $ (73)
====== =======
Income (loss) per share $ .18 $ (.02)
====== =======
</TABLE>
Comparing the Company's proforma results of operations for first six months of
1996 versus the same period in 1995, revenues increased approximately 2% from
$16.1 million to $16.5 million. This increase resulted primarily from
additional tractors and trailers in service during 1996 and a slight increase
in the revenue per total mile driven. These increases were partially offset by
a reduction in business with one of the Company's major customers during the
three months ending June 30, 1996.
Net income decreased from $559,000 for six months ending June 30, 1995 to a
$73,000 loss for the same period during 1996. This decrease resulted primarily
from the additional expenses associated with Ampace's on-going acquisition
efforts not present in the combined proforma results of MDX and Amanday during
1995, less freight demand and certain higher costs during 1996.
Operationally, expenses were comparable for the six months ending June 30, 1995
and 1996 except those relating to equipment ownership and fuel, and those
sensitive to asset utilization. During 1994 MDX
<PAGE> 3
started the conversion from mostly rental equipment to company owned
equipment. This process continued during 1995 and into 1996. This change
resulted in lower rent expense and higher depreciation, maintenance and
operating expenses in 1996 compared to 1995. During 1996, MDX experienced
lower equipment utilization due to slow freight demand. This lower utilization
effectively increased fixed costs during the periods. Fuel prices started to
increase in late February 1996 and stayed at high levels through out the
remainder of the period ending June 30, 1996. The result was higher fuel costs
as compared to the same period during 1995. Partially offsetting these
increases was a decrease in insurance costs which resulted from lower rates and
better claims experience.
In late May 1996, due to rate requirements, the Company lost a material portion
of its business with a major customer. This business is currently being
replaced with more profitable freight. The transition had an adverse affect on
the Company's June 1996 financial results and is expected to affect future
earnings for a portion of the quarter ending September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
On February 16, 1995 (the Effective Date), the Company completed an initial
public offering for the sale of 1,200,000 shares of common stock (the
Offering). The net proceeds from the Offering, received by the Company on
February 24, 1995, was approximately $6,680,000, net of Offering expenses of
approximately $1,720,000. On March 15, 1995, the underwriters exercised an
option to purchase an additional 150,000 shares of common stock under the same
terms as the Offering to cover over-allotments. The net proceeds from this
sale, received by the Company on March 15, 1995, was approximately $950,000 net
of Offering expenses of approximately $105,000. The Company has utilized
$3,500,000 and $1,000,000 of the net proceeds to acquire all the outstanding
stock of MDX and Amanday, respectfully. Additional proceeds from the Company's
offering in 1995 have been used for operational needs at MDX and to support
on-going acquisition efforts.
After the close of business on March 31, 1996 the Company through a newly
formed subsidiary, purchased all the stock of Amanday Express, Inc. ("Amanday")
for cash of $1,000,000, 275,000 shares of Ampace common stock and a note
payable to the seller in the amount of $100,000. This acquisition was recorded
effective April 1, 1996.
The Company obtained a $3 million line of credit late in 1995 which is secured
by its accounts receivable. The line of credit may be used for general
corporate purposes including acquisitions and is subject to certain financial
covenants. Management believes that existing cash, operational cash flow and
current credit facilities are sufficient to meet its need for working capital
and internal expansion plans for 1996. The Company is currently in discussion
with various financial institutions to secure additional capital for future
acquisitions.
<PAGE> 4
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Company filed on May 14, 1996 a report dated
May 9, 1996 on Form 8-K disclosing the completion of the
acquisition of all the common stock of Amanday Express, Inc.
(b) The Company filed on May 29, 1996 a report dated
May 28, 1996 on Form 8-K which included separate financial
statements along with proforma information for Amanday
Express, Inc.
<PAGE> 5
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Ampace Corporation
Date August 9, 1996 BY: /s/ Jay N. Taylor
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Jay N. Taylor, Chief Executive Officer
Date August 9, 1996 BY: /s/ Bruce W. Jones
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Bruce W. Jones, Chief Financial Officer
<PAGE> 6
Attachment- Item 1. Financial Statements
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1995 and June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
($000) December 31, June 30,
1995 1996
Assets ------------ --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,395 $ 689
Accounts receivable, net 3,226 3,721
Other current assets 1,027 726
-------- ---------
$ 5,648 $ 5,136
Total current assets -------- ---------
Property and equipment, net 11,423 12,666
Other assets 1,330 2,009
-------- ---------
18,401 19,811
======== =========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt and
capital lease obligations 4,018 4,696
Other current liabilities 1,149 1,468
-------- ---------
Total current liabilities 5,167 6,164
Long-term debt and capital lease obligations
excluding current installments 6,518 5,544
Other liabilities 378 924
-------- ---------
Total liabilities 12,063 12,632
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Stockholders' equity:
Common stock, $.0001 par value. Authorized
10,000,000 shares; issued and outstanding
2,800,000 shares at December 31, 1995 and
3,075,000 shares at June 30, 1996
Additional paid-in capital 6,576 7,476
Accumulated deficit (238) (297)
Total stockholders' equity 6,338 7,179
Commitments and contingencies
-------- ---------
18,401 19,811
See accompanying notes to condensed consolidated financial statements.
</TABLE>
Page 1
<PAGE> 7
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
($000 except EPS)
1995 1996
---------- ----------
<S> <C> <C>
Operating revenues $ 6,448 8,202
Salaries, wages and employee benefits 2,353 3,200
Other operating expenses including general
and administrative 3,658 4,766
---------- ----------
Total operating expenses 6,011 7,966
---------- ----------
Operating income 437 236
Other income (deductions):
Interest expense, net (197) (253)
---------- ----------
Income (loss) before taxes 240 (17)
Income taxes 80 (21)
========== ==========
Net income $160 4
Weighted average common shares outstanding 2,800,000 3,100,000
========== ==========
Income (loss) per share $ 0.06 .00
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
Page 3
<PAGE> 8
AMPACE CORPORATION & SUBSIDIARIES
Condensed Statements of Cash Flows
Six Months Ended June 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Operating activities:
Net income (loss) $ 233 (59)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,130 1,837
Changes in operating assets and liabilities:
Accounts receivable, net (407) (135)
Other assets (512) 643
Other liabilities (274) 108
------ ------
Net cash provided (used) by operating activ 170 2,394
------ ------
Investing activities:
Purchases of property and equipment (31) (65)
Acquisition of net assets of subsidiary, net of
cash acquired (3,031) (771)
------ ------
Net cash used by investing activities (3,062) (836)
------ ------
Financing activities:
Proceeds from sale of common stock, net of offering 7,658 0
Payment of non-compete agreement 0 (77)
Principal payments on long-term debt and capital leases (1,315) (2,187)
------ ------
Net cash provided by financing activites 6,343 (2,264)
------ ------
Net increase (decrease) in cash and cash equivalents 3,451 (706)
Cash and cash equivalents at beginning of period 69 1,395
------ -----
Cash and cash equivalents at end of period $3,520 689
====== =====
Supllementary disclosure of cash flow information:
Interest paid $369 457
====== ====
Income taxes paid $480 17
====== ====
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE> 9
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Statements of Operations
Six Months Ended June 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
($000 except EPS)
1995 1996
---------- ----------
<S> <C> <C>
Operating revenues $ 8,466 14,843
Salaries, wages and employee benefits 3,204 5,925
Other operating expenses including general
and administrative 4,641 8,589
---------- ----------
Total operating expenses 7,845 14,514
---------- ----------
Operating income 621 329
Other income (deductions):
Interest expense, net (273) (425)
---------- ----------
Income (loss) before taxes 348 (96)
Income taxes 116 (37)
---------- ----------
Net income 232 (59)
========== ==========
Weighted average common shares outstanding 2,350,532 2,950,000
========== ==========
Income (loss) per share $ 0.10 (0.02)
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE> 10
AMPACE CORPORATION & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual consolidated financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments necessary for fair presentation of
the periods presented have been reflected and are of a normal recurring
nature. These condensed consolidated financial statements should be read
in conjunction with the financial statements and the notes, as filed with
the Securities and Exchange Commission as part of the Company's
Registration Statement on Form SB-2, dated December 22, 1994 and as
amended on February 16, 1995, and the Company's 1995 Form 10-KSB.
Results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.
(2) Initial Public Offering and Acquisition
On February 16, 1995 (the Effective Date), the Company completed an
initial public offering for the sale of 1,200,000 shares of common stock
(the Offering). The net proceeds from the Offering, received by the
Company on February 24, 1995, was approximately $6,680,000 net of
Offering expenses of approximately $1,720,000. On March 15, 1995, the
underwriters exercised an option to purchase an additional 150,000 shares
of common stock under the same terms as the Offering to cover
over-allotments. The net proceeds from this sale, received by the
Company on March 15, 1995, was approximately $950,000 net of Offering
expenses of approximately $105,000.
Concurrent with the closing of the Offering, the Company purchased for
$3,500,000 all of the capital stock of Merchant's Dutch Express, Inc.
("MDX"). The transaction was accounted for under the purchase method of
accounting for business combinations. MDX's results of operations have
been consolidated into the Company's results of operations from the
acquisition date forward.
(3) Acquisition of Amanday Express, Inc.
After close of business on March 31, 1996, the Company through a newly
formed subsidiary, purchased for cash of $1,000,000, 275,000 share of
Ampace common stock and a note payable to the seller for $100,000, all
the common stock of Amanday Express, Inc. ("Amanday"). Amanday is a
truckload carrier based in Asheboro, North Carolina. Separate financial
statements along with proforma information for Amanday were filed in a
Form 8-K on May 29, 1996. The acquisition was accounted for under the
purchase method of accounting for business combinations. Amanday's
operations are included with those of Ampace effective April 1, 1996.
(4) Proforma Information
The following proforma information gives effect to (i) the initial
capitalization of the Company's 1,450,000 shares (ii) the offering of
1,350,000 shares of common stock, and (iii) the acquisitions referred to
in Footnotes (2) and (3), as if the transactions had occurred on January
1, 1995. The proforma adjustments reflect the interest earned on the
Offering proceeds not applied to the acquisition, the increase in
depreciation charges from a step-up in the fair market value of net
assets acquired, a decrease in interest charges from a revaluation of
capital leases acquired and the application of the Company's effective
tax rate.
<PAGE> 11
(4) Proforma Information (continued)
<TABLE>
<CAPTION>
Proforma Six Months Ended
June 30, 1995 June 30, 1996
------------- -------------
<S> <C> <C>
Revenues (000) $ 16,124 $ 16,503
========= ==========
Net income (000) $ 559 $ (73)
========= ==========
Income (loss) per share $ .18 $ (.02)
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Proforma Three Months Ended
June 30, 1995 June 30, 1996
------------- -------------
<S> <C> <C>
Revenues (000) $ 8,518 $ 8,202
========== ==========
Net income (000) $ 235 $ 4
========== ==========
Income (loss) per share $ .08 $ .00
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 689
<SECURITIES> 0
<RECEIVABLES> 3,721
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,136
<PP&E> 12,666
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,811
<CURRENT-LIABILITIES> 6,164
<BONDS> 5,544
<COMMON> 0
0
0
<OTHER-SE> 7,179
<TOTAL-LIABILITY-AND-EQUITY> 19,811
<SALES> 0
<TOTAL-REVENUES> 14,843
<CGS> 0
<TOTAL-COSTS> 14,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 425
<INCOME-PRETAX> (96)
<INCOME-TAX> (37)
<INCOME-CONTINUING> (59)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
