SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(As Filed via EDGAR on August 13, 1997)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14060
INTRENET, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1597565
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
400 TechneCenter Drive, Suite 200, Milford, Ohio 45150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 576-6666
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, without par value, 13,476,338 shares issued and
outstanding at August 1, 1997
INTRENET, INC.
FORM 10-Q
JUNE 30, 1997
INDEX
PAGE
Part I - Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 .................... 3
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended .......... 4
June 30, 1997 and 1996
Condensed Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1997 . .......... 5
Condensed Consolidated Statements of Cash Flows
Three Months and Six Months Ended .......... 6
June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............ 8
Part II - Other Information:
Item 1. Legal Proceedings ................... 11
Item 2. Changes in Securities ................... 11
Item 3. Defaults Upon Senior Securities ................... 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information ........... 12
Item 6. Exhibits and Reports on Form 8-K ........... 12
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(In Thousands of Dollars)
1997 1996
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,810 $ 410
Receivables, principally freight revenue less
allowance for doubtful accounts of $966 in 1997
and $770 in 1996 31,174 25,334
Prepaid expenses and other 5,009 4,604
Total current assets 37,993 30,348
Property and equipment, at cost, less accumulated
depreciation 33,437 35,882
Reorganization value in excess of amounts allocated
to identifiable assets, net of accumulated amortization 7,401 7,611
Deferred income taxes, net 2,723 2,723
Other assets 586 604
Total assets $ 82,140 $ 77,168
Liabilities and Shareholders' Equity
Current liabilities:
Current debt and capital lease obligations $ 5,683 $ 6,510
Accounts payable 8,845 8,190
Current accrued claim liabilities 8,066 8,400
Other accrued expenses 9,426 7,116
Total current liabilities 32,020 30,216
Long-term debt and capital lease obligations 26,849 24,210
Long-term accrued claim liabilities 2,850 2,850
Total liabilities 61,719 57,276
Shareholders' equity:
Common stock, without par value; 20,000,000
shares authorized; 13,457,138 and 13,412,138 shares
issued and outstanding, respectively 16,661 16,594
Retained earnings since January 1, 1991 3,760 3,298
Total shareholders' equity 20,421 19,892
Total liabilities and shareholders' equity $ 82,140 $ 77,168
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1997 and 1996
(Unaudited)
(In Thousands of Dollars, Except Per Share Data)
Three Months Six Months
Ended June 30, Ended June 30
1997 1996 1997 1996
Operating revenues $ 64,507 $ 57,615 $ 122,170 $ 110,315
Operating expenses:
Purchased transportation
and equipment rents 27,443 22,187 51,278 42,602
Salaries, wages, and benefits 15,622 15,232 30,102 29,665
Fuel and other operating expenses 12,765 12,579 25,039 24,533
Operating taxes and licenses 2,534 2,658 5,152 5,265
Insurance and claims 2,199 2,117 4,180 4,028
Depreciation 1,190 1,066 2,368 2,145
Other operating expenses 933 897 1,635 1,987
62,686 56,736 119,754 110,225
Operating income 1,821 879 2,416 90
Interest expense (770) (614) (1,512) (1,190)
Other expense, net (105) (110) (210) (219)
Earnings (loss) before income taxes 946 155 694 (1,319)
Provision for income taxes (232) 0 (232) 0
Net earnings (loss) $ 714 $ 155 $ 462 $ (1,319)
Earnings (loss) per common and common
equivalent share $ 0.05 $ 0.01 $ 0.03 $ (0.10)
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
For the Six Months Ended June 30, 1997
(In Thousands of Dollars)
Retained
Common Stock Earnings Equity
Shares Dollars
Balance, December 31, 1996 13,412,138 $16,594 $3,298 $19,892
Exercise of stock options 45,000 67 - 67
Net Earnings for 1997 - - 462 462
Balance, June 30, 1997 13,457,138 $16,661 $3,760 $20,421
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months and Six Months Ended June 30, 1997 and 1996
(Unaudited)
(In Thousands of Dollars)
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Cash flows from operating activities:
Net earnings (loss) $ 714 $ 155 $ 462 $ (1,319)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Deferred income taxes 0 0 0 0
Depreciation and amortization 1,295 1,171 2,578 2,355
Provision for doubtful accounts 99 73 226 156
Changes in assets and liabilities, net:
Receivables (3,452) (4,134) (6,062) (6,621)
Prepaid expenses 738 1,644 (404) (475)
Accounts payable and accrued expenses 1,427 1,151 2,645 2,384
Other 0 0 (2) 0
Net cash provided by (used in)
operating activities 821 60 (557) (3,520)
Cash flows from financing activities:
Net borrowings (repayments) on line of
credit, net 479 (811) 4,928 3,942
Principal payments on long-term debt (926) (1,707) (3,118) (3,556)
Proceeds from exercise of stock options 15 0 67 49
Net cash provided by (used in)
financing activities (432) (2,518) 1,877 435
Cash flows from investing activities:
Additions to property and equipment (213) (283) (735) (690)
Disposals of property and equipment 312 2,653 815 3,826
Net cash provided by
investing activities 99 2,370 80 3,136
Net increase (decrease) in cash
and cash equivalents 488 (88) 1,400 51
Cash and cash equivalents:
Beginning of period 1,322 310 410 171
End of period $ 1,810 $ 222 $ 1,810 $ 222
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(Unaudited)
(1) Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
include the accounts of Intrenet, Inc. and all of its
subsidiaries (collectively, the Company). Operating subsidiaries
at June 30, 1997 were Roadrunner Trucking, Inc. (RRT), Eck
Miller Transportation Corporation (EMT), Advanced Distribution
System, Inc. (ADS), and Roadrunner Distribution Services, Inc.
(RDS). Also included is the Company's intermodal broker and
logistics manager, INET Logistics, Inc. (INL). All significant
intercompany transactions are eliminated in consolidation.
Through its subsidiaries, the Company provides general and
specialized truckload carrier, brokerage and logistics
management services throughout North America.
The consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). In management's opinion, these
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation
of the results of operations for the interim periods presented.
Pursuant to SEC rules and regulations, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements
unless significant changes have taken place since the end of the
most recent fiscal year. For this reason, the accompanying
consolidated financial statements and notes thereto should be
read in conjunction with the financial statements and notes for
the year ended December 31, 1996 included in the Company's 1996
Annual Report on Form 10-K.
The results for the three month and six month periods ended
June 30, 1997 are not necessarily indicative of the results to
be expected for the entire year.
(2) Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share have been
computed on the basis of the weighted average common shares
outstanding during the periods. No effect has been included for
options or warrants outstanding, if the effect would be
antidilutive.
(3) Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year.
(4) Contingent Liabilities
On June 13, 1997, the Company received notice from the Central
States Southeast and Southwest Areas Pension Fund (the "Fund")
of a claim pursuant to the Employee Retirement Income Security
Act of 1974, as amended by the Multiemployer Pension Plan
Amendments Act of 1980 ("MPPAA"). MPPAA provides that, if an
employer withdraws from participation in a multi-employer
pension plan, such as the Fund, the employer and members of the
employer's "controlled group" of businesses are jointly and
severally liable for a portion of the plan's underfunding. The
notice states that the claim is based on the withdrawal of R-W
Service Systems, Inc. ("RW") from the fund in June, 1991. The
Company's records indicate that RW was an indirect subsidiary of
the Company's predecessor, Circle Express, Inc., from March 1985
through April 1988, when it and certain other subsidiaries were
sold. The notice states that RW's withdrawal liability is
approximately $4.3 million with accrued interest in the amount
of approximately $1.9 million. Based on its investigation to
date, and, after consultation with counsel, management believes
that the Company is not liable to the Fund for RW's withdrawal
liability. The Company is entitled to initiate a review of the
Fund's claim and, among other remedies, seek resolution of the
claim in binding arbitration. The Company intends to vigorously
contest the Fund's claim and seek a prompt resolution of this
matter. The Company is obligated to make interim payments to
the Fund until the issue of liability is resolved. The interim
payment obligation is approximately $121,000 per month and
commenced August 1, 1997. There can be no assurance that either
the need to make interim payments to the Fund or the ultimate
resolution of this matter will not have a material adverse
effect on the Company's liquidity, results of operation or
financial condition.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Introduction
The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto
appearing elsewhere in this report. Certain statements made in
this report may constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
For a description of risks and uncertainties relating to
forward looking statements, see the discussion in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
The Company reported net earnings of $714,000 ($0.05 per share)
on revenues of $64.5 million in the three months and net
earnings of $462,000 ($0.03 per share) on revenues of $122.2
million in the six months ended June 30, 1997. This compares
with net earnings of $155,000 on revenues of $57.6 million, and
a net loss of $1.3 million on revenues of $110.3 million in the
comparable periods of 1996, respectively. The Company's revenue
grew by 12.0 percent in the second quarter of 1997 and each of
its four carrier subsidiaries reported revenue improvements. The
revenue growth reported in the first quarter has continued at a
more robust pace. Fuel prices continued to decline during the
second quarter and were lower than the second quarter of the
prior year, although the average cost per gallon for the first
half of 1997 still exceeds the average for the first half of
1996. Barring any unforeseen changes in the overall economy or
in the price of fuel, management expects that the Company will
benefit from continuing cost reduction programs in the area of
safety, fuel purchasing and insurance costs and greater
equipment utilization and that an expanded fleet will allow for
revenue growth. These trends should enable the Company to remain
profitable for the balance of 1997.
Revenue miles for the second quarter of 1997 increased to 44.9
million miles up from 42.8 million miles. Revenue per mile in
the second quarter of 1997 also improved by 3.9 percent to $1.32
per mile, up from $1.27 last year, continuing the trend
reported in the first quarter.
The Company's total operating fleet, including
owner-operators, at the end of the second quarter of 1997 was
2,231 tractors up from 2,023 at the end of the second quarter of
1996, representing an increase of more than 10 percent. The
growth in the Company's fleet is due to a 25 percent increase in
the number of owner-operators as compared with the second
quarter of 1996.
A discussion of the impact of the above and other factors on
the results of operations in the three months and six months
ended June 30, 1997 as compared to the comparable periods of
1996 follows.
1997 Compared to 1996
Three Months Six Months
Ended June 30, Ended June 30,
Key Operating Statistics 1997 1996 %Change 1997 1996 %Change
Operating Revenues ($ millions) $64.5 $ 57.6 12.0 $122.2 $110.3 10.8
Net Earnings (Loss) ($ 000's) $ 714 $ 155 360.7 $ 462 ($1,319) NM
Average Number of Tractors 2,282 2,041 11.8 2,275 2,079 9.4
Total Loads (000's) 79.0 66.1 19.5 147.3 128.1 15.0
Revenue Miles (millions) 44.9 42.8 4.9 85.2 81.9 4.0
Average Revenue per
Revenue Mile * $ 1.32 $ 1.27 3.9 $ 1.32 $ 1.28 3.1
* Excluding brokerage revenue
Operating Revenues
Operating revenues for the three months and six months ended
June 30, 1997 totaled $ 64.5 million and $122.2 million,
respectively, as compared to $57.6 million and $110.3 million
for the same periods in 1996, reflecting better freight
availability than the prior year. Each of the Company's four
carriers continued to grow in 1997. Revenue increased by $6.9
million, or 12.0 %, in the three months, and $11.9 million, or
10.8 %, in the six months ended June 30, 1997, over the
comparable 1996 periods. The average number of Company owned
tractors declined 3.1% from 1,247 to 1,208 in the six month
period ended June 30, 1997 from the comparable period in 1996,
while the average owner-operator tractor count increased 28.3 %
from 832 to 1,067. Approximately 54.3 % of the Company's
revenue was generated by Company-operated equipment, and 37.8 %
by owner-operator equipment in the six months ended June 30,
1997. This compares to 60.1 % and 34.6 % in the 1996 period. The
remaining revenues were from freight brokered to other carriers.
The Company experienced a 3.1 % improvement in the average
revenue per revenue mile in the first six months of 1997 as
compared to 1996. This is generally the result of a slight
tightening of capacity in the markets served by the Company.
Operating Expenses
The following table sets forth the percentage relationship of
operating expenses to operating revenues for the three months
and six months ended June 30.
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Operating revenues 100 % 100 % 100 % 100 %
Operating expenses:
Purchased transportation
and equipment rents 42.5 38.5 42.0 38.6
Salaries, wages and benefits 24.2 26.4 24.6 26.9
Fuel and other operating expenses19.8 21.8 20.5 22.2
Operating taxes and licenses 4.0 4.6 4.2 4.8
Insurance and claims 3.5 3.7 3.5 3.7
Depreciation 1.8 1.9 1.9 1.9
Other operating expenses 1.4 1.6 1.3 1.8
Total operating expenses 97.2 % 98.5 % 98.0 % 99.9%
Purchased transportation and equipment rents increased as a
percentage of revenue due to the significant growth in the
Company's use of owner-operators. Correspondingly, salaries,
wages and benefits decreased as a percentage of revenue because
of the relatively smaller portion of the Company's total revenue
generated by Company operated equipment and the growing portion
of the Company's total revenue from owner-operators and from
freight brokered to other carriers. Fuel and other operating
expenses are attributable to Company-operated equipment and
these expenses also decline in relation to growth in the use of
owner-operators and freight brokered to other carriers. Other
operating expenses decreased in 1997 over 1996 due to reduced
professional fees and reduced accounts receivable service fees.
Interest Expense
Interest expense increased in 1997, primarily as a result of
the increased borrowings under the Company's bank credit
facility resulting from the Company's decision to discontinue
its accounts receivable factoring service.
Provision for Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year.
Liquidity and Capital Resources
The Company generated $ 1.4 million of cash in the first six
months of 1997. As reflected in the accompanying Consolidated
Statements of Cash Flows, the Company used $ 0.6 million of cash
in operating activities, primarily to finance increased accounts
receivable and to purchase plates and permits for the Company's
fleet. This cash use was funded by $ 1.9 million of cash
generated by financing activities, primarily bank borrowings.
The Company's day-to-day financing is provided by borrowings
under its bank credit facility. The credit facility consists of
a $ 5 million term loan with a final maturity of December 31,
1999, and a $ 28 million revolving line of credit which expires
January 15, 1999. Quarterly principal payments of $ 312,500 on
the term loan are required. The line of credit includes
provisions for the issuance of stand-by letters of credit which,
as issued, reduce available borrowings under the line of credit.
Borrowings under the line of credit are limited to amounts
determined by a formula tied to the Company's eligible accounts
receivable and inventories, as defined in the credit facility.
Borrowings under the revolving line of credit totaled $ 7.8
million at June 30, 1997, and outstanding letters of credit
totaled $ 6.2 million at that date. The combination of these two
bank credits totaled $14.0 million, leaving $ 8.1 million of
borrowing capacity available at June 30, 1997. Since that date,
the Company's available borrowing capacity under the credit
facility has averaged approximately $7.7 million in the last 10
business days.
The Company believes that cash generated from operations, and
cash available to it under the bank credit facility will be
sufficient to meet the Company's needs for the foreseeable
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 13, 1997, the Company received notice from the Central
States Southeast and Southwest Areas Pension Fund (the "Fund")
of a claim pursuant to the Employee Retirement Income Security
Act of 1974, as amended by the Multiemployer Pension Plan
Amendments Act of 1980 ("MPPAA"). MPPAA provides that, if an
employer withdraws from participation in a multi-employer
pension plan, such as the Fund, the employer and members of the
employer's "controlled group" of businesses are jointly and
severally liable for a portion of the plan's underfunding. The
notice states that the claim is based on the withdrawal of R-W
Service Systems, Inc. ("RW") from the fund in June, 1991. The
Company's records indicate that RW was an indirect subsidiary of
the Company's predecessor, Circle Express, Inc., from March 1985
through April 1988, when it and certain other subsidiaries were
sold. The notice states that RW's withdrawal liability is
approximately $4.3 million with accrued interest in the amount
of approximately $1.9 million. Based on its investigation to
date, and, after consultation with counsel, management believes
that the Company is not liable to the Fund for RW's withdrawal
liability. The Company is entitled to initiate a review of the
Fund's claim and, among other remedies, seek resolution of the
claim in binding arbitration. The Company intends to vigorously
contest the Fund's claim and seek a prompt resolution of this
matter. The Company is obligated to make interim payments to
the Fund until the issue of liability is resolved. The interim
payment obligation is approximately $121,000 per month and
commenced August 1, 1997. There can be no assurance that either
the need to make interim payments to the Fund or the ultimate
resolution of this matter will not have a material adverse
effect on the Company's liquidity, results of operation or
financial condition.
There are no other material pending legal proceedings to which
the Company or any of its subsidiaries is a party or of which
any of their property is the subject, other than routine
proceedings previously reported in the Company's 1996 Annual
Report on Form 10-K, and litigation incidental to its business,
primarily involving claims for personal injury and property
damage incurred in the transporting of freight. There have been
no material developments in any previously reported proceedings.
The Company maintains insurance which covers liability resulting
from transportation related claims in amounts management
believes are prudent and consistent with accepted industry
practices, subject to deductibles for the first $100,000 to
$250,000 of exposure for each incident. The Company is not
aware of any claims or threatened claims that might materially
affect the Company's operating or financial results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on
May 16, 1997. The following individuals were elected as
directors for the ensuing year or until their successors are
duly elected and qualified with the following votes cast for or
against. There were no abstentions or broker non-votes.
For Against
John P. Delavan 13,214,785 10,638
Ned N. Fleming III 12,256,055 969,368
Eric C. Jackson 12,863,735 361,688
Fernando Montero 12,865,455 359,968
Edwin H. Morgens 12,150,665 1,074,758
Thomas J. Noonan, Jr.12,865,455 359,968
Philip Scaturro 12,256,055 969,368
The shareholders of the Company also ratified the selection of
Arthur Andersen LLP as auditors for 1997 with 12,868,139 votes
in favor, 354,168 against, and 3,116 abstentions. There were no
broker non-votes.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INTRENET, INC.
(Registrant)
/s/ John P. Delavan
John P. Delavan
President and Chief
Executive Officer
August 13, 1997 /s/ Roger T. Burbage
Roger T. Burbage,
Chief Financial Officer
(Principal Financial and
Accounting Officer)