<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 September 30, 1996
------------------------------------------
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ______________________ to _______________
Commission file number 0-25352
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Ampace Corporation
-----------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Delaware 36-3988574
- ----------------------------------------------------------------------------
(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 OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations 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) 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 nine 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 nine months and quarter ending
September 30, 1996 compared to the same periods during 1995, are in part due to
1995 including only seven month's operating activity of MDX, compared with nine
months in 1996 and in part to the completion of the Company's second
acquisition (Amanday Express, Inc. or Amanday) effective April 1, 1996, and
the acquisition of certain new business effective September 1, 1996.
In management's opinion, a detailed discussion of the Company's operating
results for the nine months ending September 30, 1996 compared to those of the
same period in 1995 is not meaningful because of the abbreviated operating
results during 1995 and certain acquisitions during 1996. Consequently,
discussion of the Company's operations is based upon the general comparative
differences between the nine months ended September 30, 1996 and September 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 nine months operations.
Proforma Nine Months Ended
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues (000) $24,561 $24,210
======= =======
Net Income (loss) (000) $ 389 $ (464)
======= =======
Income (loss) per share $ .13 $ (.15)
======= =======
</TABLE>
Comparing the Company's proforma results of operations for first nine months of
1996 versus the same period in 1995, revenues decreased approximately 1% from
$24.6 million to $24.2 million. This change resulted primarily from a
reduction of tractors and trailers in service during 1996 and a decrease in the
revenue per total mile driven. These changes were principally the result of a
reduction in business with two of the Company's major customers during the
second and third quarter of 1996.
Net income decreased from $389,000 for nine months ending September 30, 1995 to
a $464,000 loss for the same period during 1996. This decrease resulted
primarily from the additional expenses associated with the Company's on-going
acquisition efforts not present in the combined proforma results of MDX and
Amanday during 1995, higher fuel prices during 1996, and the reduction in key
customer revenues mentioned above.
<PAGE> 3
In late May 1996, due to rate rebidding, the Company lost a material portion of
its business with a key customer. The majority of this business was returned
to the Company at profitable rates in late September 1996. Additionally, the
Company's revenue was adversely affected by a decline in general business
levels of another key customer during 1996. The combined effect of these
reductions in revenue had an adverse affect on the Company's 1996 financial
results and is expected to affect future earnings for a portion of the quarter
ending December 31, 1996. In response to this situation the Company has
reduced its tractor and trailer count, cut certain fixed costs and increased
its investment in business development activities.
Operationally, most expenses were comparable for the nine months ending
September 30, 1995 and 1996 except those sensitive to asset utilization and
fuel prices. Lower asset utilization effectively increases all fixed costs and
creates excess capacity. Lower utilization also means fewer miles for drivers
and consequently higher costs associated with retaining and hiring them. Fuel
prices started to increase in late February 1996 and stayed at high levels
throughout the remainder of the period ending September 30, 1996. The Company
has successfully implemented a fuel surcharge but it does not fully recover the
cost of excess fuel prices. 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.
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 the Company's common stock and a note
payable to the seller in the amount of $100,000. This acquisition was recorded
effective April 1, 1996.
On September 1, 1996 the Company through a newly formed subsidiary, Ampace
Dedicated Services, Inc.(ADS), purchased new customer business principally
based in Florida from SMX Transport, Inc. for an initial payment of $75,000 and
additional contingent payments, depending upon business retention, totaling
$150,000 during the next six months. ADS will require additional working
capital during the start-up phase of its operations.
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. The Company borrowed $200,000 under the line during the quarter
ending September 1996. Management believes that existing cash, operational
cash flow and current credit facilities are sufficient to meet its need for
working capital, including the existing $617,000 deficit, 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.
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
<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 November 8, 1996 BY: s/ Jay N. Taylor
---------------- ----------------------------------
Jay N. Taylor, Chief Executive
Officer
Date November 8, 1996 BY: s/ Bruce W. Jones
---------------- ----------------------------------
Bruce W. Jones, Chief Financial
Officer
<PAGE> 6
ATTACHMENT- ITEM 1. FINANCIAL STATEMENTS
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1995 and September 30, 1996
(Unaudited)
($000)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ ------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,395 690
Accounts receivable, net 3,226 3,400
Other current assets 1,027 1,273
------- -------
Total current assets 5,648 5,363
------- -------
Property and equipment, net 11,423 13,483
Other assets 1,330 2,049
------- -------
$18,401 20,895
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and
capital lease obligations 4,018 4,472
Other current liabilities 1,149 1,508
------- -------
Total current liabilities 5,167 5,980
Long-term debt and capital lease obligations
excluding current installments 6,518 7,201
Other liabilities 378 924
------- -------
Total liabilities 12,063 14,105
======= =======
Stockholders' equity:
Common stock, $.0001 par value. Authorized
10,000,000 shares; issued and outstanding
2,800,000 and 3,075,000 shares at December 31,
1995 and September 30, 1996 respectively - -
Additional paid-in capital 6,576 7,476
Accumulated deficit (238) (686)
------- -------
Total stockholders' equity 6,338 6,790
Commitments and contingencies ------- -------
$18,401 20,895
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 1995 and 1996
(Unaudited)
($000 except EPS)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Operating revenues $ 6,537 7,708
Salaries, wages and employee benefits 2,656 3,184
Other operating expenses including general
and administrative 3,998 4,897
---------- ----------
Total operating expenses 6,654 8,081
---------- ----------
Operating income (117) (373)
Other income (deductions):
Interest expense, net (211) (241)
---------- ----------
Income (loss) before taxes (328) (614)
Income taxes (142) (225)
---------- ----------
Net income (186) (389)
========== ==========
Weighted average common shares outstanding 2,800,000 3,100,000
========== ==========
Income (loss) per share $ (0.07) $ (0.13)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 8
AMPACE CORPORATION & SUBSIDIARIES
Condensed Consolidated Statements of Operations
Nine Months Ended September 30, 1995 and 1996
(Unaudited)
($000 except EPS)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Operating revenues $ 15,003 $ 22,551
Salaries, wages and employee benefits 5,860 9,109
Other operating expenses including general
and administrative 8,639 13,486
---------- ----------
Total operating expenses 14,499 22,595
---------- ----------
Operating income 504 (44)
Other income (deductions):
Interest expense, net (483) (669)
---------- ----------
Income (loss) before taxes 21 (713)
Income taxes (26) (263)
---------- ----------
Net income 47 (450)
========== ==========
Weighted average common shares outstanding 2,517,582 3,000,365
========== ==========
Income (loss) per share $ 0.02 $ (0.15)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 9
AMPACE CORPORATION & SUBSIDIARIES
Condensed Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1996
(Unaudited)
($000)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Operating activities:
Net income (loss) $ 47 $ (450)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (net of equipment gain) 2,002 3,005
Changes in operating assets and liabilities:
Accounts receivable, net (593) 184
Other current assets (685) 425
Other current liabilities (170) 204
------ ------
Net cash provided (used) by operating activities 601 3,368
------ ------
Investing activities:
Purchases of property and equipment (43) (2,018)
Acquisition of net assets of subsidiary, net of cash acquired (3,031) (846)
Proceeds from sale of equipment - 91
------ ------
Net cash used by investing activities (3,074) (2,864)
------ ------
Financing activities:
Proceeds from sale of common stock, net of costs 7,623 -
Proceeds from Debt - 2,665
Payment of non-compete agreement - (77)
Purchase of treasury stock (1,130)
Principal payments on long-term debt and capital leases (2,018) (3,797)
------ ------
Net cash provided by financing activities 4,475 (1,209)
------ ------
Net increase in cash and cash equivalents 2,002 (705)
Cash and cash equivalents at beginning of period 69 1,395
------ ------
Cash and cash equivalents at end of period $2,071 $ 690
====== ======
Supplementary disclosure of cash flow information:
Interest paid $ 610 $ 685
====== ======
Income taxes paid $ 480 $ 54
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<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 shares of
the Company's 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. The acquisition was
accounted for under the purchase method of accounting for business
combinations. Amanday's operations are included with those of the Company
effective April 1, 1996.
(4) Formation of Ampace Dedicated Services, Inc.
On September 1, 1996 the Company through a newly formed subsidiary,
Ampace Dedicated Services, Inc. (ADS), formally initiated its dedicated
trucking operations by purchasing new customer business principally based
in Florida. The business was purchased from SMX Transport, Inc. for an
initial payment of $75,000 and additional contingent payments, depending
upon business retention, totaling $150,000 during the next six months.
(5) 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
<PAGE> 11
(5) Proforma Information (continued)
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.
<TABLE>
<CAPTION>
Proforma Nine Months Ended
September 30, 1995 September 30, 1996
<S> <C> <C>
Revenues (000) $24,561 $24,210
======= =======
Net income (loss) (000) $ 389 $ (464)
====== ========
Income (loss) per share $ .13 $ (.15)
====== ========
</TABLE>
<TABLE>
<CAPTION>
Proforma Three Months Ended
September 30, 1995 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues (000) $8,436 $7,708
====== ======
Net income (000) $ (169) $ (389)
====== ======
Income (loss) per share $ (.05) $ (.13)
</TABLE> ====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 690,000
<SECURITIES> 0
<RECEIVABLES> 3,400,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,363,000
<PP&E> 13,483,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,895,000
<CURRENT-LIABILITIES> 5,980,000
<BONDS> 7,201,000
0
0
<COMMON> 7,476,000
<OTHER-SE> (686,000)
<TOTAL-LIABILITY-AND-EQUITY> 20,895,000
<SALES> 7,708,000
<TOTAL-REVENUES> 7,708,000
<CGS> 0
<TOTAL-COSTS> 8,081,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,000
<INCOME-PRETAX> (614,000)
<INCOME-TAX> (225,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (389,000)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> 0
</TABLE>
