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UNITED STATES 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 March 31, 1997
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[ ] 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
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Transitional Small Business Disclosure Format (check one)
Yes No X
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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 should be read in conjunction with the
attached interim consolidated financial statements and notes thereto and with
the Company's audited consolidated financial statements and notes thereto for
the calendar year ended December 31, 1996. It also contains forward-looking
statements which involve risks and uncertainties, including (without limitation)
increases in fuel costs, unavailability of acceptable target companies for
acquisitions, unavailability of acquisition financing and working capital,
inability to successfully integrate acquired entities into the business of the
Company, increases in interests rates, unavailability of qualified drivers,
competition from other companies and unpredictability of customers' business
cycles and shipping demands and certain other risks and uncertainties detailed
from time to time in the Company's periodic reports filed with the Securities
and Exchange Commission. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of these
factors.
RESULTS OF OPERATIONS
During the first quarter of 1997, the Company combined several of its
existing operations, including Amanday Express into Ampace Dedicated Services,
Inc., (ADS), a subsidiary established in September 1996 coincidental with the
acquisition of certain intangible assets of SMX Transport, Inc. This
consolidation left two operating subsidiaries of Ampace, ADS and Merchants Dutch
Express, Inc. (MDX). The purpose of the consolidation was to segment the
Company's dedicated and short haul operations from its long haul operations at
MDX and to improve operating efficiency. One of the Company's main priorities
for 1997 is to grow ADS through the acquisitions of small regional carriers and
internal business development.
To facilitate the development of new customers, the Company formalized
its business development activities during the first quarter of 1997 under the
direction of one of its co-founders. Several business development professionals
were hired during the quarter and a Vice President of Business Development
joined the Company in April 1997. The Company continues to investigate
opportunities for additional acquisitions in its industry.
The following table sets forth the change in amounts and percentage
change between the first quarter of 1997 and the comparable period in 1996 of
certain revenue and expense items.
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<PAGE> 3
Three Months Ended March 31, 1997 vs. 1996
(in thousands)
<TABLE>
<CAPTION>
Increase
(Decrease) %
in amounts Change
---------- ----------
<S> <C> <C>
Operating revenues $ 1,045 16%
Operating expenses:
Salaries, wages and benefits 352 13%
Purchased transportation 695 100%
Fuel 100 8%
Depreciation and amortization 118 14%
Rent (265) (44)%
Operating supplies and expenses 104 21%
Insurance and claims 9 3%
Operating taxes and licenses 78 108%
General and administrative expenses (225) (136)%
Communications and utilities 37 41%
------- ---
Total operating expenses 1,004 15%
------- ---
Operating income $ 41 42%
======= ===
</TABLE>
OPERATING REVENUES
Operating revenues for the first quarter of 1997 increased
approximately $1.0 million or 15.7 percent to $7.7 million from $6.6 million in
the first quarter of 1996. The significant increase in operating revenues was
due primarily to the additional revenue generated by Amanday Express, Inc.,
(Amanday), which the Company acquired effective April 1, 1996, and certain
assets of SMX Transport, Inc., (SMX), which the Company acquired effective
September 1, 1996.
OPERATING EXPENSES
Total operating expense for the first quarter of 1997 increased
approximately $1.0 million, or 15.3 percent over the comparable period of 1996.
This increase was principally the result of the Company's two acquisitions.
Operating income increased $41,292 to $140,292. This was offset by additional
interest expense of $184,120, incurred primarily in connection with the
acquisitions. Accordingly the net loss for the first quarter of 1997 increased
$136,000 from $57,000 for the same period of 1996.
Salaries, fuel, depreciation and operating supplies expenses increased
consistently with the increase in revenues. Purchased transportation increased
100 percent during the first quarter of 1997. This increase was the result of
the acquired companies use of owner operations. Equipment rentals decreased
approximately 44 percent primarily due to a reduction in the number of rental
trailers at MDX. Operating taxes increased 108 percent in the first quarter of
1997 due to annualizing the license accrual of MDX. General and administrative
expenses decreased due to a reduction in relative staffing and a one time sales
tax refund received during the first quarter of 1997. Communication and
utilities expenses increased 41 percent as a result of the additional
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<PAGE> 4
revenue and remote communication costs associated with centralized processing in
Knoxville, Tennessee for ADS.
LIQUIDITY AND CAPITAL RESOURCES
Since its initial public stock offering in February 1995, the Company
has used the proceeds from the offering to fund acquisitions and support
business development activities. Working capital requirements have been funded
with cash generated from operations and a line of credit secured by the
Company's trade receivables.
The Company has utilized $3,500,000, $1,000,000 and $225,000 of the net
proceeds to acquire all the outstanding stock of MDX and Amanday, and certain
intangible assets from SMX respectfully. The Company has also been required to
use cash flow from operations and its credit line to support working capital
associated with the increase in revenues. The negative working capital at
December 31, 1996 and March 31, 1997 reflect the liability of the guaranteed
residuals of maturing capitalized leases without the corresponding offset of the
asset values.
Net additions to property and equipment during the first quarter of
1997 totaled $.4 million compared to $.1 million in 1996. Substantially all of
the capital expenditures for the first quarter of 1997 were paid in cash.
Revenue equipment purchases were subsequently refinanced during the second
quarter of 1997. The Company's acquisitions are currently being financed with
various forms of debt. Accordingly, the two acquisitions completed during 1996
caused the Company's net debt to increase by approximately $1.4 million.
ADS will require additional working capital during the start-up phase
of its operations as additional operating centers are established. Acquisitions
anticipated to be consummated during 1997 will be financed by equipment lenders,
seller financing and the Company's existing line of credit. Management believes
that operational cash flow, current credit facilities and acquisition related
financing alternatives are sufficient to meet its need for working capital,
including the existing working capital deficit, and expansion plans for 1997.
The Company is currently in discussion with various financial institutions to
secure additional capital for future acquisitions and restructuring existing
debt facilities, although no assurances can be given that such additional
capital can be obtained or obtained on terms favorable to the Company.
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<PAGE> 5
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibit No. Description
27 Financial Data Schedule (For SEC use only)
b) Reports on Form 8-K
- None
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<PAGE> 6
Attachment-Item 1. Financial Statements
AMPACE CORPORATION & SUBSIDIARY
Condensed Consolidated Balance Sheets
December 31, 1996 and March 31, 1997
(Unaudited)
($000)
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
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ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 534 $ -
Accounts Receivable, net 3,308 3,954
Other current assets 1,073 629
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Total Current assets 4,915 4,583
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Property and equipment, net 12,520 12,114
Other assets 2,260 2,260
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$ 19,695 $ 18,957
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and
capital lease obligations 5,002 4,788
Other current liabilities 1,944 2,033
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Total current liabilities 6,946 6,821
Long-term debt and capital lease obligations
excluding current installments 6,387 5,912
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Total liabilities 13,333 12,733
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Stockholders' equity:
Common stock, $.0001 par value. Authorized
10,000,000 shares at December 31,1996 and
March 31, 1997
Additional paid in capital 7,476 7,476
Accumulated deficit (1,114) (1,252)
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Total stockholders' equity 6,362 6,224
Commitments and contingencies
$ 19,695 $ 18,957
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 7
AMPACE CORPORATION &
SUBSIDIARY
Condensed Consolidated Statements of Operations
Three Months Ended March 31,
1996 and 1997
(Unaudited)
($000 except EPS)
<TABLE>
<CAPTION>
1996 1997
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<S> <C> <C>
Operating Revenues $ 6,641 $ 7,686
Salaries, wages and employee benefits 2,725 3,077
Other operating expenses including general
and administrative 3,817 4,469
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Total operating expenses 6,542 7,546
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Operating income 99 140
Other income (deductions):
Interest expense, net (172) (356)
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Income (loss) before taxes (73) (216)
Income taxes (16) (78)
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Net income $ (57) $ (138)
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Weighted average common shares 2,800,000 3,075,000
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Income (loss) per share $ (0.02) (0.04)
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</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE> 8
AMPACE CORPORATION & SUBSIDIARY
Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 and 1997
(Unaudited)
($000)
<TABLE>
<CAPTION>
1996 1997
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<S> <C> <C>
Operating Activities:
Net income (loss) $ (57) (138)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 837 849
Changes in operating assets and liabilities:
Accounts receivable, net (340) (646)
Other current assets 597 444
Other current liabilities 278 88
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Net cash provided (used)
by operating activities 1,315 597
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Investing activities:
Purchases of property and equipment (65) (443)
Net cash used by investing activities (65) (443)
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Financing activities:
Principal payments on long-term debt and capital leases (1,167) (689)
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Net cash provided by financing activities (1,167) (689)
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Net increase in cash and cash equivalents 83 (535)
Cash and cash equivalents at beginning of period 1,395 535
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Cash and cash equivalents at end of period $ 1,478 $ 0
============== ==============
Supplementary disclosure of cash flow information:
Interest paid $ 191 215
============== ==============
Income taxes paid $ 17 0
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
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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 audited
financial statements and the notes, as filed with the Securities and
Exchange Commission as part of the Company's 1996 Form 10-KSB. Results
of operations for the interim periods are not necessarily indicative of
the results to be expected for the year.
(2) Merger of Affiliate Companies
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. On February 1, 1997, Amanday Express, Inc., an
affiliated company, and on March 1, 1997 a business segment of MDX,
based in Dalton, Georgia, were merged into ADS.
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<PAGE> 10
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: May 14, 1997 By: s/ Jay N. Taylor
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Jay N. Taylor, Chief Executive Officer
Date: May 14, 1997 By: s/ Bruce W. Jones
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Bruce W. Jones, Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,011,000
<ALLOWANCES> 57,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,583,000
<PP&E> 18,172,000
<DEPRECIATION> 6,058,000
<TOTAL-ASSETS> 18,957,000
<CURRENT-LIABILITIES> 6,821,000
<BONDS> 0
0
0
<COMMON> 3,075,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,224,000
<SALES> 7,686,000
<TOTAL-REVENUES> 7,686,000
<CGS> 0
<TOTAL-COSTS> 7,546,000
<OTHER-EXPENSES> 4,469,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 356,000
<INCOME-PRETAX> 140,000
<INCOME-TAX> 78,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,000)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
