UNITED STATES OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION OMB Number: 3235-0416
Washington, D.C. 20549 Expires: April 30,2003
Estimated average burden
FORM 10-QSB hours per response: 32.00
(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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number: 0-30185
Gasel Transportation Lines, Inc.
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(Exact name of small business issuer as specified in its charter)
Ohio 31-1239328
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---------------------------------- (IRS Employer Identification No.)
(State of other jurisdiction of
incorporation or organization
County Road 10, Route 4, Box 181A, Marietta, OH 45750
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(Address of principal executive offices)
( 740 ) 373 - 6479
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,237,966 common shares, no par value
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
PART I-- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 2000 (Unaudited) 1-2
Statements of Consolidated Income for the Three
Months Ended September 30, 2000 and 1999
(Unaudited) and for the Nine Months Ended
September 30, 2000 and 1999 (Unaudited) 3
Statements of Consolidated Cash Flows for the Nine
Months Ended September 30, 2000 and 1999 (Unaudited) 4-5
Notes to Consolidated Financial Statements 6-9
</TABLE>
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Sept 30,
2000
(Unaudited)
-----------
<S> <C>
ASSETS
Current Assets
--------------
Cash and Cash Equivalents $ 0
Accounts Receivable-Trade 1,628,549
Allowance for Doubtful Accounts (40,000)
Securities 5,000
Inventory 221,190
Prepaid Licenses 108,512
Prepaid Insurance 3,624
Other Prepaid Expenses 80,317
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Total Current Assets 2,007,192
Property and Equipment
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Land and Buildings 1,000,290
Tractors 10,300,983
Trailers 4,138,780
Shop Equipment 331,985
Office Equipment 180,712
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15,952,750
Less Accumulated Depreciation 5,851,573
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Net Property and Equipment 10,101,177
Deferred Income Taxes 555,814
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Other Assets
------------
ICC Certificate 4,321
Prepaid Expenses 14,865
Investment 5,000
Deposits 3,362
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Total Other Assets 27,548
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TOTAL ASSETS $ 12,691,731
============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Sept 30,
2000
(Unaudited)
------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
-------------------
Notes Payable-Bank $ 1,460,978
Accounts Payable 507,342
Accrued Contract Labor 174,444
Accrued Interest 74,492
Current Portion of Long Term Debt 2,748,728
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Total Current Liabilities 4,965,984
Long Term Debt 5,245,445
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Deferred Income Taxes 849,970
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Total Liabilities 11,061,399
Stockholders' Equity
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Common Stock, no par value, 3,000,000
shares authorized, 2,237,966 issued
and outstanding 1,277,140
Additional Paid in Capital 223,229
Retained Earnings 213,796
Less: Treasury Stock, at cost,
7,900 shares (17,833)
Less: Notes Receivable (66,000)
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Total Stockholders' Equity 1,630,332
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,691,731
============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues
--------
Freight Income $ 3,083,723 $ 2,811,018 $ 9,480,262 $ 8,394,953
Rental Income -- 1,950 781 12,450
Training School Revenue 141,651 73,788 318,408 191,549
----------- ----------- ----------- -----------
3,225,374 2,886,756 9,799,451 8,598,952
Cost of Revenue 3,057,649 2,301,371 8,649,665 6,802,518
----------- ----------- ----------- -----------
Gross Profit 167,725 585,385 1,149,786 1,796,434
Operating Expenses
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Garage Expenses 67,646 105,309 215,245 268,706
General and
Administrative Expenses 362,597 269,150 1,075,703 817,619
----------- ----------- ----------- -----------
430,243 374,459 1,290,948 1,086,325
Operating Income (Loss) (262,518) 210,926 (141,162) 710,109
Other Income (Expense)
----------------------
Interest Income 419 1,599 9,315 9,487
Other Income 4,685 5,661 23,457 11,791
Interest Expense (223,161) (180,527) (644,514) (533,227)
Gain on Sale of Equipment -- -- -- --
----------- ----------- ----------- -----------
(218,057) (173,267) (611,742) (511,949)
Income (Loss) Before
Tax Provision (480,575) 37,659 (752,904) 198,160
Provision for Income Taxes (149,000) 8,681 (238,000) 63,603
----------- ----------- ----------- -----------
Net Income (Loss) $ (331,575) $ 28,978 $ (514,904) $ 134,557
=========== =========== =========== ===========
Basic Earnings Per Share $ (.149) $ .013 $ (.231) $ .062
=========== =========== =========== ===========
Diluted Earnings Per Share $ (.136) $ .012 $ (.214) $ .057
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding:
Basic 2,230,066 2,218,240 2,230,066 2,182,501
=========== =========== =========== ===========
Diluted 2,440,066 2,417,129 2,402,703 2,381,390
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
Sept 30, Sept 30,
2000 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
Cash Flows From Operating Activities
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Net Income (Loss) $ (514,904) $ 134,557
Adjustments to reconcile net
income to cash provided by
operating activities:
Deferred Taxes (238,000) 63,603
Depreciation 1,357,536 1,198,678
Gain on Sale of Equipment
(Increase) Decrease in:
Accounts Receivable-Trade (204,708) (221,065)
Inventory 2,062 255
Prepaid Expenses and Other Assets (24,462) 16,576
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 490,537 41,971
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Net Cash Provided
by Operating Activities 868,061 1,234,575
Cash Flows From Investing Activities
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Purchases of Property and Equipment (120,755) (199,565)
Repayment of Accounts Receivable- Affiliate 61,356 --
Proceeds from Sale of Equipment -- --
Purchase of Securities -- (5,000)
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Net Cash Provided (Used)
by Investing Activities (59,399) (204,565)
Cash Flows From Financing Activities
------------------------------------
Proceeds under Line of Credit 9,729,032 8,294,476
Proceeds from Long Term Borrowing -- --
Common Stock Repurchased -- --
Payment for Stock Issuance Costs (3,785) --
Proceeds from Warrant Exercise
and Sale of Treasury Stock -- 157,321
Purchase of Treasury Shares -- (26,624)
Principal Payments on Long
Term Borrowing (1,203,475) (955,923)
Principal Payments on
Line of Credit (9,235,101) (8,096,768)
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Nine Months Ended
Sept 30, Sept 30,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Principal Payments Under
Capital Lease Agreements $ (115,945) $ (562,827)
Dividends Paid -- --
----------- -----------
Net Cash Used by
Financing Activities (829,274) (1,190,345)
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Net Increase (Decrease)in Cash (20,612) (160,335)
Cash & Cash Equivalents-
Beginning of Period 20,612 161,536
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Cash & Cash Equivalents-
End of Period $ 0 $ 1,201
=========== ===========
Supplemental Disclosures:
Interest Paid $ 644,514 $ 533,227
=========== ===========
Non-Cash Investing
and Financing Activities
Purchases of Property and
Equipment with Proceeds
of Notes Payable $ 2,353,245 $ 2,065,170
=========== ===========
Issuance of Stock
Warrants and Common
Stock with Proceeds
of Notes Receivable $ -- $ 148,500
=========== ===========
Payoff Various Notes
With Proceeds from
New Financing $ 894,234 $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Gasel
Transportation Lines, Inc. and its subsidiary (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation (consisting of normal recurring accruals) have
been included. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Operating
results for the nine month period ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Report on Form 10-SB for the
year ended December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW.
The following discussion should be read in conjunction with the Financial
Statements, including footnotes, contained herein. The discussion is qualified
in its entirety by the foregoing. Historical results of operations and the
percentage relationships among any amounts in the Financial Statements, and any
trends that may appear to be inferable therefrom, should not be taken as
necessarily indicative of trends of operations or results of operations for any
future periods.
The discussion contains forward-looking statements. These forward-looking
statements involve risks and uncertainties, and the cautionary statements set
forth below identify important factors that could cause actual results to differ
materially from those predicted in the forward-looking statements. These factors
include, but are not limited to, adverse changes in general economic conditions,
including adverse conditions to the companies that are the Company's core of
shippers, fuel prices, driver costs, the ability to have enough drivers to
utilize the Company equipment, the ability to finance equipment, interest rates,
the ability to borrow working capital, and other factors.
The interim financial information for the quarters and nine months periods ended
September 30, 2000, and September 30, 1999, are prepared by an independent C. P.
A. on a reviewed basis. The statements included reflect all adjustments that the
Company considers necessary for a fair presentation of the results of operations
for the interim periods covered and of the financial condition of the Company at
the date of the interim balance sheet. The results of the interim periods are
not necessarily indicative of the results for the entire year.
THREE MONTHS ENDED SEPTEMBER 30, 2000.
Freight revenues for the three months ended September 30, 2000, were $3,083,723,
an increase of $272,705 (9.7%) from the second quarter of 1999. Training school
revenues for the third quarter of 2000 were $141,651, an increase of $67,863
(92%) from the second quarter 1999. The increase in freight revenues was
basically attributable to the fact that the Company placed 20 new tractors into
service during January 2000. Training school revenue increases were due to
increased tuition costs to the students and an increase in the number of schools
and student enrollment.
Equipment operating expenses increased in the third quarter of 2000 to
$3,057,649 from $2,301,371 for the third quarter of 1999. This was an increase
of $756,278 (32.9%) from the prior year. The increase in expenses was primarily
due to the increase in the amount of equipment being operated and the increased
cost of fuel resulting from higher fuel prices. Operating expenses increased
$55,784 (14.9%) to $430,243 for the third quarter of 2000 compared to $374,459
for the like period of 1999.
Operating income for the third quarter of 2000 was ($262,518) compared to
$210,926 for the third quarter of 1999, a decrease of $473,444 (224.5%). The
gross profit margin went down from 7.3% in the quarter ended September 30, 1999
to a minus 8.1% for the same
-6-
<PAGE>
period in 2000. Contributing factors were primarily the increased cost of diesel
fuel, reduced freight revenues per tractor and increased general and
administrative costs.
The net results were that the Company had a net loss after provision for income
taxes for the third quarter of 2000 of ($331,575) compared to net income of
$28,978 for the third quarter of 1999, which is a decrease of $360,553
(1,244.2%) from the prior year.
NINE MONTHS ENDED SEPTEMBER 30, 2000.
Freight revenues for the nine months ended September 30, 2000, increased
$1,085,309 (12.9%) to $9,480,262 from $8,394,953 at the end of the nine months
period ending September 30, 1999. Training school revenues for the nine months
ended September 30, 2000, increased $126,499 to $318,048 (66%) from $191,549 for
the nine months period ended September 30, 1999. The increase in freight
revenues was basically attributable to the fact that the Company had more
revenue equipment in service and because of fuel surcharges that were added
during the year 2000. Training school revenue increases were due to increased
tuition costs to the students and an increase in the number of schools and
student enrollment.
Equipment operating expenses increased in the nine months period ended September
30, 2000 by $1,847,147 (27.2%) to $8,649,665 from $6,802,518 for the same period
in 1999. The increase in expenses was primarily due to the increase in the
amount of equipment being operated and the increased cost of fuel. Operating
expenses increased $204,623 (18.8%) to $1,290,948 for the nine months ended
September 30, 2000 compared to $1,086,325 for the same period of 1999.
Operating income for the nine months ended September 30, 2000 was a loss
($141,162), a decrease of $851,271 (119.9%) from $710,109 for the same period in
1999. The gross profit margin went down from 8.3% through the third quarter of
1999 to a negative (1.4%) in 2000. Contributing factors were primarily the
increased cost of diesel fuel, reduced freight revenues per tractor and
increased general and administrative costs.
The net results were that the Company had a net loss after provision for income
taxes for the nine months period ended September 30, 2000 of ($514,904) compared
to a net profit of $134,557 for the same period of 1999, which is a decrease of
$649,461 (482.7%) from the prior year.
CAPITAL AND LIQUIDITY.
The net loss for the first nine months of 2000 has resulted in the Company being
in a severe need for working capital. Cash at the end of the period was $0.
The Company has increased its short term borrowings and is working with its long
term lenders to reach solutions to its capital needs. Internally, the Company
needs to operate at a profit. To help attain operating profits, during the
second quarter of 2000, management instituted several changes in the method of
Company operations to combat the price of fuel, to reduce mileage without
freight and generally to try to reduce operating costs and increase equipment
productivity. To reduce the cost of fuel per mile, the Company reduced the
maximum speed that the Company tractors could go, which has resulted in
increasing the miles per gallon from 5.3 at the start of the program to 6.0 as
of the month
-7-
<PAGE>
of September, 2000. The Company expects to ultimately reach a level of
operations at 6.2 miles per gallon. The Company is also working on implementing
a program with restricted fuel stops at preferred providers that has resulted
in, and is expected to continue, a fuel cost savings.
Other policies instituted included a new driver wage program that is projected
to increase the average revenue miles per tractor and to decrease the amount of
deadhead miles (miles traveled without carrying freight), reorganizing the
freight dispatch department to increase productivity, a hiring program and
driver incentives program to reduce driver turnover and improve the quality of
the Company drivers, and shifting of equipment among the Company terminals to
make better utilization of it.
While these changes produced positive earnings in the second quarter, third
quarter results were impacted by several significant occurrences. One of them
was the loss of a major customer that formerly provided long hauls by team
drivers to California, which provided the Company to then have the opportunity
to back haul profitable produce shipments. This problem has been resolved by
obtaining new shipping clients who have replaced the lost business, but it was
not able to be implemented until the end of the third quarter.
Secondly, the trucking industry suffered a serious downturn in the mid-summer
and early autumn. Lastly, fuel prices increased another $0.20 per gallon.
Looking forward to the fourth quarter and next year, fuel prices look like they
will remain high, and may go higher with colder weather, and insurance rates for
the industry, and consequently the Company, have gone up considerably (15% to
25%) over last year.
Additional steps are being taken by management to improve the 4th quarter
results and beyond. These include the following:
1. Repositioning some of the equipment, approximately 20 tractors
and trailers, to Lima, Ohio from the Dade City, Florida terminal
(increases rates, freight volume, and decreases empty miles).
2. Raising freight rates to customer base by approximately 5%;
there have been no increases for about six years, except for
fuel surcharges.
3. Continuing implementation of fuel savings program by having all
tractors fuel at the top two fuel providers, which will reduce
the average cost of fuel, step up monitoring of driver use of
equipment to increase the miles per gallon, and developing and
implementing a plan to reward drivers for increasing fuel
performance of their tractors.
4. Installing wireless mobile communications equipment for the
purpose of monitoring equipment locations and routes, which
should reduce the number of dispatchers that are currently
needed, decrease the number of dead-head miles and out of route
miles that are driven without payment for them, reduce phone
costs, and improve dispatching and provide more timely
invoicing.
5. Opening new driver training schools in Lima, Ohio, and in West
Virginia (two).
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<PAGE>
6. Increasing driver productivity by replacing under-performing
drivers.
7. Replacing older equipment with new models that are more fuel
efficient and less expensive to maintain and operate.
8. Looking for additional direct freight from the Northeast and in
the Midwest to replace brokered in-bound freight.
In addition to these steps, the Company hired Strategica Services Corporation of
Miami, Florida to assist the Company in developing a financial plan to raise
equity capital for the Company, to assist in analyzing and funding proposed
transactions for the acquisition of trucking companies, and to provide financial
advisory services.
Further, the Company has been examining several potential trucking company
acquisitions for the purpose of increasing the size of the Company, improving
profit margins, and finding compatible shipping routes to improve overall
efficiencies.
The Company has been named a defendant in a civil suit resulting from an
accident that one of the Company drivers had while driving a Company tractor and
trailer. See PART II, ITEM 1, LEGAL PROCEEDINGS, below. This action includes
claims for punitive damages that are not covered by insurance. Although it is
unlikely that a claim for punitive damages would be sustained against the
Company, any such award could adversely affect the Company and its capital and
liquidity.
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<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company was served with a legal action filed against it on September 20,
2000 in the Circuit Court of Wood County, West Virginia, by Richard A. Hayhurst
for an accident that is alleged to have occurred in June, 2000, by one of its
drivers, while driving a Company tractor and trailer. In addition to the
Company, the driver, Fred W. Myers, and Cambridge Integrated Services Group,
Inc., an insurance adjuster for the Company's insurance carrier, were named
defendants. The suit alleges that the defendants were operating the equipment in
a negligent manner and thereby causing injury to the driver of an automobile
that was struck by the tractor. The driver of the automobile is an attorney and
is representing himself in the action. In addition to a claim for compensatory
damages in the amount of $50,000, he is seeking punitive damages from the
Company in the amount of $250,000 for the driver acting in a dangerous and
willful and wanton manner, and compensatory damages in the amount of $100,000
and punitive damages in the amount of $500,000 allegedly because the Company and
the insurance adjuster have failed to adjust the loss and have acted willfully
and wantonly.
The Company has insurance that has adequate coverage for the amount of the
compensatory claims, but such insurance policy does not cover punitive damages.
<PAGE>
ITEM 5. OTHER INFORMATION.
In September, 2000, the Company entered into an agreement with Strategica
Services Corporation of Miami, Florida that was finally executed in October,
2000. The agreement provides that Strategica Services Corporation is to analyze
the Company and assist it in developing a financial plan to raise $2,000,000 in
equity capital, to assist in analyzing and funding proposed transactions for the
acquisition of trucking companies or other growth opportunities for the Company,
and to provide financial advisory services. In exchange for providing these
services, the Company is to pay Strategica a non-refundable due diligence fee, a
monthly advisory fee, a fee based upon a percentage of any funding that it
provides or arranges for the Company and grant it warrants to purchase shares of
the Company common stock if it arranges a funding transaction that the Company
accepts.
The Company has been in negotiations to acquire certain tangible assets of a St.
Louis based truckload carrier and brokerage operation whose operations would
appear to be compatible with the Company's operations. While the parties have
entered into a letter of intent to pursue a final definitive agreement, no final
agreement has yet been made.
The Company entered into an agreement to purchase 22 new 2000 model year Volvo
and Kenworth tractors and is going to trade-in eighteen (18) 1997 and 1998 model
year Volvo tractors that have higher mileage and are costing more to maintain.
Delivery of the new tractors should be taken in late December, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits.
Exhibit No.
(10) Engagement letter between Gasel Transportation Lines, Inc.
and Strategica Services Corporation
(27) Financial Data Schedule
(B) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ending
September 30,2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Gasel Transportation Lines, Inc.
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(Registrant)
Date September 14, 2000 /s/ Michael J. Post
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(Signature)*Michael J. Post, President
Date
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(Signature)*
