<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, 1997
-------------
[ ] 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.)
201 Perimeter Park, Suite A, Knoxville, TN 37922
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(423) 691-5799
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
130 Mabry Hood Road, Suite 220, Knoxville, TN 37922
- --------------------------------------------------------------------------------
(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
---------------- -------------------
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
--------------------------
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. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors including the timing of acquisitions,
fuel prices and the addition of new customers.
RESULTS OF OPERATIONS
During the first quarter of 1997, the Company merged two of its
existing companies, Amanday Express and one of its existing operations located
in Dalton, Georgia, 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.
During the second quarter ADS acquired two regional trucking companies,
Bar-J Enterprises, Inc., based in Calhoun, Georgia, and Walker Trucking Company,
based in Columbus, Ohio. Concurrent with its acquisition of Bar-J, ADS combined
its Dalton, Georgia, operations with Bar-J and moved the combined operations to
a new facility in Calhoun, Georgia.
COMPARISON OF SECOND QUARTER 1997 TO SECOND QUARTER 1996
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues.
Three Months Ended June 30
<TABLE>
<CAPTION>
Percentage of
Operating Revenue
---------------------
1997 1996
---------------------
<S> <C> <C>
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and employee benefits 39.2% 39.0%
Purchased transportation 9.2% 4.3%
Fuel 16.1% 17.3%
Depreciation and amortization 11.8% 12.2%
Rent 7.4% 7.0%
Operating supplies and expenses 7.1% 8.6%
Insurance and claims 2.8% 3.0%
Operating taxes and licenses 2.1% 1.8%
General and administrative expenses 3.2% 2.9%
Communications and utilities 1.6% 1.1%
---- ----
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
Total operating expenses 100.5% 97.1%
------ -----
Operating income (0.5%) 2.9%
Other Income (deductions):
Interest expense, net 4.0% 3.1%
---- ----
Income before income taxes (4.5%) (0.2%)
Income taxes (1.6%) (0.3%)
----- -----
Net income (2.9%) 0.0%
===== ====
</TABLE>
OPERATING REVENUES
Operating revenues for the second quarter of 1997 increased
approximately $.615 million or 7.5 percent to $8.8 million from $8.2 million in
the second quarter of 1996. The increase in operating revenues was due primarily
to the completion of the Company's fourth and fifth acquisitions, Bar-J
Enterprises which was combined into the existing Calhoun operation, effective
May 5, 1997, and Walker Trucking which became the Columbus operation of ADS,
effective June 1, 1997, respectfully. Partially offsetting these increases was a
reduction in revenue generated by MDX during second quarter of 1997 compared to
the same quarter of 1996.
OPERATING EXPENSES
Salaries, wages and benefits, insurance and claims, operating taxes and
general and administrative expenses remained relatively unchanged as a
percentage of revenue during the second quarter of 1997 compared to the same
quarter of 1996. Purchased transportation increased from 4.3% of revenue in 1996
to 9.2% during the same period of 1997. This increase resulted from the use of
independent contractors associated with the Company's recent acquisitions. Fuel
expense declined from 17.3% during the second quarter of 1996 to 16.1% in 1997
as a result of lower fuel prices during 1997 and a higher percentage of revenue
handled by independent contractors during 1997.
Depreciation as a percentage of revenue declined from 12.2% during the
second quarter of 1996 to 11.8% for the same period in 1997 as a result of less
equipment owned and more freight handled by independent contractors in 1997.
Rent increased during 1997 to 7.4% from 7.0% in 1996 as a result of financing
some of the 1997 acquisition equipment with operating leases. Operating supplies
and expenses declined as a percentage of revenue in the second quarter of 1997
to 7.1% from 8.0% for the same period in 1996 as a result of expense reductions
and, partially, from a higher percentage of expenses absorbed by independent
contractors during 1997.
Communication expense increased .5% as a percentage of revenue in the
second quarter of 1997 compared to the same period in 1996. This increase
resulted from centralization of data processing and the associated communication
cost necessary to establish continuous real time interaction with the various
remote operating centers of ADS.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30, 1996
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues.
3
<PAGE> 4
Six Months Ended June 30
<TABLE>
<CAPTION>
Percentage of
Operating Revenue
-----------------
1997 1996
-----------------
<S> <C> <C>
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and employee benefits 39.6% 39.9%
Purchased transportation 9.1% 2.4%
Fuel 16.9% 18.1%
Depreciation and amortization 12.1% 12.4%
Rent 5.9% 7.9%
Operating supplies and expenses 7.5% 8.2%
Insurance and claims 3.3% 3.6%
Operating taxes and licenses 2.0% 1.5%
General and administrative expenses 1.4% 2.7%
Communications and utilities 1.6% 1.2%
------ -----
Total operating expenses 99.4% 97.8%
------ -----
Operating income 0.6% 2.2%
Other Income (deductions):
Interest expenses, net 4.3% 2.9%
------ -----
Income before income taxes (3.7%) (0.6%)
Income taxes (1.3%) (0.3%)
------ -----
Net income (2.4%) (0.4%)
====== =====
</TABLE>
OPERATING REVENUES
Operating revenues for the first six months of 1997 increased
approximately $1.6 million or 11.2 percent to $16.5 million from $14.8 million
for the first six months of 1996. The increase in operating revenue was due
primarily to the Company's recent acqusitions.
OPERATING EXPENSES
Salaries, wages and benefits, depreciation & amortization, insurance &
claims, and communications & utilities remained relatively unchanged as a
percentage of revenue during the first six months of 1997 compared to the same
period of 1996. Purchased transportation increased from 2.4% to 9.1%. The
increase resulted from the use of independent contractors associated with the
Company's recent acquisitions.
Fuel expense decreased from 18.1% of revenue in 1996 to 16.9% of
revenue as a result of lower fuel prices during 1997 and an increase in revenue
handled by independent contractors during 1997. Rent decreased from 7.9% to 5.9%
as a result of financing some of the equipment acquired in recent acquisitions
with capital leases.
Operating supplies and expenses decreased from 8.2% in 1996 to 7.5% in
1997. This was a result of general reductions in expenses and an increase in
expenses absorbed by independent contractors. Operating taxes and licenses
increased from 1.5% to 2.0% due to the licensing of equipment acquired in
connection with recent acquisitions. General and administrative expenses
decreased from 2.7% to 1.4% due
4
<PAGE> 5
to the receipt of a one-time sales tax refund received during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Since its 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. Equipment purchases have principally been financed by manufacturers
or through leases.
In the second quarter of 1997, the Company borrowed $1.1 million from
its line of credit to support working capital needs at MDX and ADS. The Company
also financed certain equipment purchased as a part of the Bar-J and Walker
acquisitions with capital and operating leases. Additionally, certain revenue
equipment purchased with proceeds from the Company's line of credit in the first
quarter of 1997 were refinanced in the second quarter of 1997 with a long term
lease.
The working capital at December 31, 1996 and June 30, 1997 reflect as a
current liability the guaranteed residuals of maturing capitalized leases, while
the corresponding asset values are shown as Property and Equipment, a long term
asset. This amount is in excess of $1.1 million.
ADS will require additional working capital during the start-up phase
of its operations as additional operating centers are established. Acquisitions
to be consummated during 1997 will continue to be financed by equipment lenders,
leases, owner financing and use of 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 facilitates and associated loan covenents.
5
<PAGE> 6
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
6
<PAGE> 7
Attachment-Item 1. Financial Statements
AMPACE CORPORATION
& SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1996 and June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ -----------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 534,629 377,059
Accounts Receivable, net 3,308,102 4,880,549
Other current assets 1,072,994 1,914,887
------------ -----------
Total Current assets 4,915,725 7,172,495
------------ -----------
Property and equipment, net 12,519,656 11,189,721
Other assets 2,259,669 2,466,267
------------ -----------
$ 19,695,050 20,828,483
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and
capital lease obligations 5,000,279 5,929,916
Other current liabilities 1,945,682 2,863,492
------------ -----------
Total current liabilities 6,945,961 8,793,408
Long-term debt and capital lease obligations
excluding current installments 6,387,514 6,075,046
------------ -----------
Total liabilities 13,333,475 14,868,454
------------ -----------
Stockholders' equity:
Common stock, $.0001 par. Value. Authorized
10,000,000 shares at December 31,1996 and
June 30, 1997
Additional paid in capital 7,476,182 7,476,182
Accumulated deficit (1,114,607) (1,516,153)
------------ -----------
Total stockholders' equity 6,361,575 5,960,029
Commitments and contingencies
------------ ------------
$ 19,695,050 20,828,483
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
AMPACE CORPORATION
& SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended June 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Operating Revenues $ 8,202,000 8,817,233
Salaries, wages and employee benefits 3,200,000 3,455,362
Purchased transportation 349,000 814,337
Fuel 1,417,000 1,418,056
Depreciation & amortization 1,000,000 1,044,326
Rent 575,000 649,871
Operating supplies & expenses 704,000 624,680
Insurance & claims 246,000 246,273
Operating taxes & licenses 145,000 187,240
General & administrative expenses 239,000 284,041
Communication & utilities 91,000 137,777
----------- ----------
Total Operating Expenses 7,966,000 8,861,964
----------- ----------
Operating Income 236,000 (44,731)
Other income (deductions):
Interest expense, net 253,460 352,735
----------- ----------
Income (loss) before taxes (17,460) (397,466)
Income taxes (21,000) (138,591)
----------- ----------
Net income (loss) $ 3,540 (258,875)
=========== ==========
Weighted average common shares 3,100,000 3,100,000
=========== ==========
Income (loss) per shares $ .00 $ (0.08)
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
8
<PAGE> 9
AMPACE CORPORATION
& SUBSIDIARIES
Consolidated Statements of Operations
Six Months Ended June 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
------------ ----------
<S> <C> <C>
Operating Revenues $ 14,843,000 16,503,323
Salaries, wages and employee benefits 5,925,000 6,532,411
Purchased transportation 349,000 1,509,695
Fuel 2,684,000 2,785,203
Depreciation & amortization 1,837,000 1,998,848
Rent 1,170,000 980,345
Operating supplies & expenses 1,211,000 1,235,855
Insurance & claims 532,000 538,397
Operating taxes & licenses 217,000 337,585
General & administrative expenses 408,000 224,698
Communication & utilities 181,000 264,724
------------ -----------
Total Operating Expenses 14,514,000 16,407,761
------------ -----------
Operating Income 329,000 95,562
Other income (deductions):
Interest expense, net 425,460 708,856
------------ -----------
Income (loss) before taxes (96,460) (613,294)
Income taxes (37,460) (217,852)
------------ -----------
Net income $ (59,000) (395,442)
============ ===========
Weighted average common shares 3,100,000 3,100,000
============ ===========
Income (loss) per shares $ (0.02) $ (0.13)
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
9
<PAGE> 10
AMPACE CORPORATION
& SUBSIDIARIES
Condensed Statements of Cash Flows
Six Months Ended June 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- ---------
<S> <C> <C>
Operating Activities:
Net income (loss) $ (59,000) (395,442)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,837,000 1,998,848
Changes in operating assets and liabilities:
Accounts receivable, net (135,000) (1,572,447)
Other current assets 643,000 (766,536)
Other current liabilities 108,000 980,294
----------- ----------
Net cash provided (used) by operating activities 2,394,000 244,717
----------- ----------
Investing activities:
Proceeds from disposals of equipment 636,805
Acquisition of net assets of subsidiary (771,000) (438,924)
Purchases of property and equipment (65,000) (450,356)
----------- ----------
Net cash used by investing activities (836,000) (252,475)
----------- ----------
Financing activities:
Proceeds from long-term debt 1,523,000
Purchase of Treasury Stock (6,103)
Payment of Non-Compete (77,000) (77,000)
Principal payments on long-term debt and capital leases (2,187,000) (1,589,709)
----------- ----------
Net cash provided by financing activities (2,264,000) (149,812)
----------- ----------
Net increase in cash and cash equivalents (706,000) (157,570)
Cash and cash equivalents at beginning of period 1,395,000 534,629
----------- ----------
Cash and cash equivalents at end of period $ 689,000 377,059
=========== ==========
Supplementary disclosure of cash flow information:
Interest paid $ 457,000 709,000
=========== ==========
Income taxes paid $ 17,000 0
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
10
<PAGE> 11
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.
11
<PAGE> 12
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 18, 1997 BY: s/ Jay N. Taylor
--------------- --------------------------------------
Jay N. Taylor, Chief Executive Officer
Date August 18, 1997 BY: s/ Bruce W. Jones
--------------- --------------------------------------
Bruce W. Jones, Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 377,059
<SECURITIES> 0
<RECEIVABLES> 4,088,549
<ALLOWANCES> 65,019
<INVENTORY> 0
<CURRENT-ASSETS> 7,172,495
<PP&E> 11,184,721
<DEPRECIATION> 1,044,326
<TOTAL-ASSETS> 20,828,483
<CURRENT-LIABILITIES> 8,793,408
<BONDS> 0
0
0
<COMMON> 3,100,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,960,029
<SALES> 16,503,323
<TOTAL-REVENUES> 16,503,323
<CGS> 0
<TOTAL-COSTS> 16,407,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,856
<INCOME-PRETAX> (613,294)
<INCOME-TAX> (217,852)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395,442)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> 0
</TABLE>
