SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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, 13,674,066 shares issued and
outstanding at May 1, 1999
INTRENET, INC.
FORM 10-Q
MARCH 31, 1999
INDEX
PAGE
Part I - Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 .... 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1999 and 1998 .... 4
Condensed Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1999 .... 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998 .... 6
Notes to Condensed Consolidated Financial Statements .... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .... 9
Part II - Other Information:
Item 1. Legal Proceedings .... 13
Item 2. Changes in Securities .... 13
Item 3. Defaults Upon Senior Securities .... 13
Item 4. Submission of Matters to a Vote of Security Holders .... 13
Item 5. Other Information .... 14
Item 6. Exhibits and Reports on Form 8-K .... 14
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
(In Thousands of Dollars)
Assets 1999 1998
(Unaudited)
Current assets:
Cash and cash equivalents $ 485 $ 271
Receivables, principally freight revenue less
allowance for doubtful accounts of $1,402 in 1999
and $1,537 in 1998 36,369 33,233
Prepaid expenses and other 7,103 5,402
Total current assets 43,957 38,906
Property and equipment, at cost, less accumulated
depreciation 27,416 28,833
Reorganization value in excess of amounts allocated to
identifiable assets, net of accumulated amortize 4,800 4,967
Deferred income taxes, net 2,886 2,886
Other assets 2,496 2,208
Total assets $ 81,555 $ 77,800
Liabilities and Shareholders' Equity
Current liabilities:
Current debt and capital lease obligations $ 5,429 $ 5,789
Accounts payable and cash overdrafts 9,865 9,439
Current accrued claim liabilities 8,554 7,878
Other accrued expenses 6,443 7,418
Total current liabilities 30,291 30,524
Long-term debt and capital lease obligations 23,835 20,105
Long-term accrued claim liabilities 2,800 2,800
Total liabilities 56,926 53,429
Shareholders' equity:
Common stock, without par value; 20,000,000
shares authorized; 13,674,066 and 13,662,066 shares
issued and outstanding, respectively 16,881 16,856
Retained earnings since January 1, 1991 7,748 7,515
Total shareholders' equity 24,629 24,371
Total liabilities and shareholders' equity $ 81,555 $ 77,800
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1999 and 1998
(Unaudited)
(In Thousands of Dollars, Except Per Share Data)
1999 1998
Operating revenues $ 66,316 $ 60,676
Operating expenses:
Purchased transportation
and equipment rents 30,333 27,237
Salaries, wages, and benefits 16,890 14,464
Fuel and other operating expenses 11,730 11,199
Operating taxes and licenses 2,524 2,514
Insurance and claims 1,756 1,971
Depreciation 982 987
Other operating expenses 1,004 1,020
65,219 59,392
Operating income 1,097 1,284
Interest expense (619) (660)
Other expense, net (105) (105)
Earnings before income taxes 373 519
Provision for income taxes (140) (131)
Net earnings $ 233 $ 388
Earnings per common and common
equivalent share
Basic $ 0.02 $ 0.03
Diluted $ 0.02 $ 0.03
Weighted average shares outstanding during period 13,669,244 13,549,221
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 1999
(In Thousands of Dollars)
Retained Shareholders'
Common Stock Earnings Equity
Shares Dollars
Balance, December 31, 1998 13,662,066 $ 16,856 $ 7,515 $ 24,371
Exercise of stock options 12,000 25 - 25
Net earnings for 1999 - - 233 233
Balance, March 31, 1999 13,674,066 $ 16,881 $ 7,748 $ 24,629
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
(Unaudited)
(In Thousands of Dollars)
1999 1998
Cash flows from operating activities:
Net earnings $ 233 $ 388
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Deferred income taxes 61 131
Depreciation and amortization 1,094 1,107
Provision for doubtful accounts 106 59
Changes in assets and liabilities, net:
Receivables (3,242) (6)
Prepaid expenses (1,701) (2,140)
Accounts payable and accrued expenses (162) 1,035
Net cash provided by (used in)
operating activities (3,611) 574
Cash flows from financing activities:
Net borrowings (repayments) on line of
credit, net 4,251 619
Principal payments on long-term debt (879) (972)
Proceeds from exercise of stock options 25 5
Net cash provided by (used in)
financing activities 3,397 (348)
Cash flows from investing activities:
Additions to property and equipment (948) (89)
Disposals of property and equipment 1,376 78
Net cash (used in)
investing activities 428 (11)
Net increase in cash
and cash equivalents 214 215
Cash and cash equivalents:
Beginning of period 271 598
End of period $ 485 $ 813
The accompanying notes are an integral part of these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
(1) Unaudited Condensed Consolidated Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements
include the accounts of Intrenet, Inc. and all of its
subsidiaries (collectively, the "Company"). Truckload carrier
subsidiaries at March 31, 1999, 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 regional truckload carrier, brokerage
and logistics management services throughout North America.
The condensed 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, 1998, included in the Company's 1998
Annual Report on Form 10-K.
The results for the three month period ended March 31, 1999,
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. The Company has adopted the
Financial Accounting Standard Board issue of SFAS No. 128,
"Earnings Per Share", and restated its computation of EPS for
all prior periods. The adoption of this new standard resulted
in an immaterial difference in its computation of basic and
diluted EPS.
(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 Multi-employer 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
claim is based on the withdrawal of R-W Service System, Inc.
("RW") from the Fund in 1992. 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 Fund currently
claims that RW's withdrawal liability is approximately $3.7
million plus accrued interest in the amount of approximately
$1.7 million. Based on its investigation to date, and, after
consultation with counsel, management believes that the Company
is not liable to the Fund for any of RW's withdrawal liability.
The Company has filed a formal request for review of the claim
as provided by the MPPAA and the Fund rejected that request on
January 28, 1998. The Company is in the process of seeking
resolution of the claim in binding arbitration. The Company is
obligated to make interim payments to the Fund until the issue
of liability is resolved. The interim payment obligation is
currently approximately $88,500 per month. The Company has made
payments to the Fund that total approximately $1,855,000 as of
March 31, 1999, which are included in other assets on the
Company's balance sheet. 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 operations or
financial condition.
The Company's subsidiary, RDS, is a defendant in an action
brought on March 20, 1997, in the 327th District Court, El Paso,
Texas, by a former employee. The plaintiff alleged that he was
injured as a result of the negligence and gross negligence of
RDS and received discriminatory treatment in violation of the
Texas Health and Safety Code. On March 13, 1998, a default
judgment was entered against RDS in the approximate amount of
$1.0 million, representing damages for medical expenses, loss of
wage earning capacity, physical pain and mental anguish,
physical impairment, disfigurement and punitive damages. RDS
has filed an appeal to the 8th Circuit Court of Appeals in El
Paso, Texas, which is currently pending. In its appeal, RDS
asserted it was never properly served in the action and that
there was insufficient basis to support an award of punitive
damages. RDS has notified its workers' compensation carrier of
the award. Management believes that RDS is likely to prevail on
its appeal and therefore, this action should not have a material
adverse effect on the Company's liquidity, results of operations
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
litigation incidental to its business, primarily involving
claims for personal injury and property damage incurred in the
transportation of freight. The Company maintains insurance
which covers liability resulting from such transportation
related claims in amounts customary for the industry and which
management believes to be adequate.
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 relating to trends in the Company's business, as
well as other statements including words such as "believe",
"expect", "estimate", "anticipate" and similar expressions,
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, 1998.
The Company reported net earnings of $233,000 on revenues of
$66.3 million in the three month period ended March 31, 1999.
This compares with a net earnings of $388,000 on revenues of
$60.7 million in the comparable period of 1998. The Company's
revenue grew by 9.2 percent compared to the first quarter of
1998 and three of its four largest wholly owned subsidiaries,
EMT, RRT and RDS, reported revenue improvements. Average fuel
prices were lower during the first quarter of 1999 than the
first quarter of 1998, despite the rise in price during the
latter weeks of March, 1999. Despite the increase in revenues
and the benefit of lower fuel prices, the Company's operating
margin deteriorated as a result of higher driver wages, more
unmanned tractors and poorer tractor utilization. Barring any
unforeseen changes in the overall economy and despite the rise
in fuel prices, management expects the Company will benefit from
continuing cost reduction programs in the areas of safety, fuel
purchasing and insurance costs. In addition, management expects
that the Company will experience growth in revenue from better
equipment utilization and an expanded fleet. As a result,
management expects the Company will continue to operate
profitably in 1999.
The Company reported revenue miles for the first quarter of
1999, of 41.1 million miles, up 3.0% from the same quarter of
1998. Revenue per mile in the first quarter of 1999, improved
by 2.2 percent to $1.38 per mile, up from $1.35 compared to
first quarter 1998, results. The average length of haul for
company-owned tractors was 14% lower in 1999, which was
attributable to the inception of a regional haul operation at
RRT and container movements at EMT. The average length of haul
for the owner-operator fleet remained the same.
Intrenet's total operating fleet as of the end of the quarter,
including owner-operators, increased approximately 3.6 percent
during the first quarter of 1999, to 2,283 tractors from 2,203
tractors in 1998.
A discussion of the impact of the above and other factors on
the results of operations in the three months ended March 31,
1999, as compared to the comparable period of 1998 follows.
1999 Compared to 1998
Three Months Ended March 31,
Key Operating Statistics 1999 1998 %Change
Operating Revenues ($ millions) $ 66.3 $ 60.7 9.2%
Net Earnings ($ 000's) $ 233 $ 388 (40.0%)
Average Number of Tractors 2,308 2,198 5.0%
Total Loads (000's) 92.0 83.8 9.8%
Revenue Miles (millions) 41.1 40.0 3.0%
Average Revenue per Revenue Mile* $ 1.38 $ 1.35 2.2%
* Excluding brokerage revenue
Operating Revenues
Operating revenues for the three months ended March 31, 1999,
totaled $66.3 million as compared to $60.7 million for the same
period in 1998, reflecting better freight availability than the
prior year. Company owned tractor revenues increased 8.6%, or
$2.7 million, and the freight revenue brokered to others
increase by over 39.0%, or $2.7 million. Approximately $1.2
million of the growth in freight revenue brokered to others was
generated as a result of the June, 1998, acquisition of the
assets of Ram Trans, a Denver based flatbed and logistics
company. Revenues generated by owner operators increased over
$200,000, or 1.1% over the same period in 1998. The average
number of tractors increased by 5.0% in the first quarter 1999,
over 1998, as a result of 110 (2,308 versus 2,198), additional
operating tractors. The average Company operated fleet increased
by 164 tractors while the owner operator average fleet declined
by 54 tractors. Approximately 51% of the Company's revenue for
three months ending March 31, 1999, was generated from
company-owned equipment, while 35% was generated by
owner-operator equipment and 14% by freight revenue brokered to
others. In 1998, the company-owned equipment provided
approximately 51% of total revenue while the owner-operator
equipment registered 38% with the balance attributable to
freight revenue brokered to others.
The Company experienced a 2.2% improvement in the average
revenue per revenue mile in 1999 as compared to 1998.
Operating Expenses
The following table sets forth the percentage relationship of
operating expenses to operating revenues for the three months
ended March 31.
Three Months Ended March 31,
1999 1998
Operating revenues 100% 100%
Operating expenses:
Purchased transportation
and equipment rents 45.7 44.9
Salaries, wages and benefits 25.4 23.8
Fuel and other operating expenses 17.7 18.5
Operating taxes and licenses 3.8 4.1
Insurance and claims 2.7 3.3
Depreciation 1.5 1.6
Other operating expenses 1.5 1.7
Total operating expenses 98.3% 97.9%
Purchased transportation and equipment rents increased as a
percentage of revenue due to the Company's increase in brokerage
revenue activity and the use of operating leases for replacement
equipment as well as incremental Company equipment growth. The
Company uses operating leases almost exclusively as a means of
financing it's company fleet. If the same equipment were
purchased, the Company estimates that operating costs would be
lower by 1.4% of revenue and interest expense would increase by
a corresponding amount. Salaries, wages and benefits increased
as a percentage of revenue because of the proportional gain in
Company revenues and the carryover effect of driver wage
increases implemented in mid-1998. The percent of fuel and
operating expenses decreased slightly as a percent of revenue.
The average price per gallon of diesel fuel for the first
quarter of 1999, was approximately 13 cents lower than the same
period in 1998, but the Company used over 450,000 more gallons
in 1999 as a result of increased company-owned equipment
activity. Other operating supplies increased slightly due to
the increase in the number of company-owned units, over the 1998
level. Insurance and claims expense declined as a percent of
revenue in 1999, as a result of claim settlements offset
slightly by reserve provisions on two significant accidents.
Depreciation and other operating expenses decreased as a percent
of revenue in 1999, primarily due to the revenue growth in 1999.
The cost for these two items were relatively flat quarter over
quarter.
Interest Expense
Interest expense decreased in 1999, primarily as a result of
the approaching maturity of capital lease obligations and the
replacement equipment financed with operating leases. Interest
expense on bank borrowings were slightly higher in 1999 due to a
higher average borrowing base.
Provision for Income Taxes
The tax rate is lower than the expected statutory rate due to
the release of tax asset valuation reserves, offset by the
impact of state income taxes of $67,000.
Liquidity and Capital Resources
The Company generated $0.2 million in cash in the first three
months of 1999. As reflected in the accompanying Condensed
Consolidated Statement of Cash Flows, $3.6 million of cash was
used in operating activities as compared to $0.6 million
generated in the first quarter of 1998. Historically, the
Company's cash needs are greatest in the first quarter when the
plates and permits are purchased for the Company's fleet.
Borrowing under the Company's bank credit facility increased by
over $4.2 million primarily to fund principal payments on long
term debt, purchase plates and fund revenue growth.
The Company's day-to-day financing is provided by borrowings
under a bank credit facility. As of March 31, 1999, the credit
facility consists of a $5.0 million term loan, $1.3 million of
which is currently outstanding, with a final maturity of
December 31, 1999, and a $28.0 million revolving line of credit
which expires January 1, 2000. 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 line of credit totaled
$13.9 million at March 31, 1999, and outstanding letters of
credit totaled $6.3 million at that date. The combination of
these two amounts totaled $20.2 million, leaving approximately
$5.6 million of borrowing capacity available at March 31, 1999.
On May 7, 1999, the Company's bank agreement was amended,
resulting in changes to maturity dates, term loan principal,
applicable interest rates and financial covenants. The maturity
of the revolving line of credit was extended to January 1, 2001.
The term loan changes resulted in a principal capacity
reduction from $5.0 million to $2.0 million and a maturity date
of December 31, 2000. The term loan principal capacity reduces
the entire credit facility to $35.0 million, from $38.0 million.
The new term loan agreement requires quarterly payments of
$100,000 starting July 1, 1999, with the final installment due
on December 31, 2000. The maturity date for the Capex Loan was
also extended to December 31, 2000. The interest rate margin on
all credit lines was reduced to 175 basis points over LIBOR,
from 250 basis points over LIBOR. The "Book Net Worth" covenant
for June 30, 1999, is amended to $23,500,000, plus cash proceeds
resulting from issuance of capital stock, then to $25,000,000,
plus cash proceeds resulting from issuance of capital stock at
December 31, 1999, and thereafter. The "Fixed Charge Coverage
Ratio" covenant is amended to 1.05 to 1.00 for periods beginning
January 1, 2000, and thereafter.
Management believes that cash generated from operations, and
cash available to the Company under the bank credit facility
will be sufficient to meet the Company's needs for the
foreseeable future.
Year 2000
The Company has assessed, and continues to assess, the
impact of the Year 2000 Issue on its reporting systems and
operations. The Year 2000 Issue exists because many computer
systems and applications currently use two-digit date fields to
designate a year. As the century date occurs, date sensitive
systems will recognize the year 2000 as 1900 or not at all.
This inability to recognize or properly treat the year 2000 may
cause our systems to process critical financial and operational
information incorrectly or may cause the system to discontinue
functioning altogether. One of the more significant Year 2000
issues faced by the Company is from its fully integrated
dispatch and equipment control systems, which are not Year 2000
compliant. As a result, the Company is updating and working
with the vendors of any products it is using to install new
models and/or modify all of its applications and computer
systems and, in particular, its dispatch and equipment control
system to insure that they will be Year 2000 compliant. All
programs are expected to be fully tested and problems resolved
by June 30, 1999. The Company does not expect the costs
associated with becoming Year 2000 compliant to be material.
The Company has incurred cost of approximately $40,000 to date,
and expects future costs to be less than $10,000 for a total
cost of $50,000. These costs are being charged to operations as
incurred. Management has not developed any contingency plan
regarding its dispatch and equipment control systems at this
time, but will develop one, if deemed necessary.
As part of the Company's comprehensive review, it is
continuing to verify the Year 2000 readiness of third parties
(vendors and customers) with whom the Company has material
relationships. At present, the Company is not able to determine
the effect on the Company's results of operations, liquidity,
and financial condition in the event the Company's material
vendors and customers are not Year 2000 compliant. The Company
will continue to monitor the progress of its material vendors
and customers and formulate a contingency plan when the Company
believes a material vendor or customer will not be compliant.
The estimated percentage of completion by June 30, 1999,
the date on which the Company believes it will complete its Year
2000 compliance efforts, and the expenses related to the
Company's Year 2000 compliance efforts are based on management's
best estimates, which are based on assumptions of future events,
including the availability of certain resources, third party
modification plans and other factors. There can be no
assurances that these results and estimates will be achieved,
and the actual results could materially differ from those
anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability of
personnel trained in this area and the ability to locate and
correct all relevant computer codes. In addition, there can be
no assurances that the systems or products of third parties on
which the Company relies will be timely converted or that a
failure by a third party, or a conversion that is incompatible
with the Company's systems, would not have a material adverse
effect on the Company.
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 Multi-employer 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
claim is based on the withdrawal of R-W Service System, Inc.
("RW") from the Fund in 1992. 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 Fund currently
claims that RW's withdrawal liability is approximately $3.7
million plus accrued interest in the amount of approximately
$1.7 million. Based on its investigation to date, and, after
consultation with counsel, management believes that the Company
is not liable to the Fund for any of RW's withdrawal liability.
The Company has filed a formal request for review of the claim
as provided by the MPPAA and the Fund rejected that request on
January 28, 1998. The Company is in the process of seeking
resolution of the claim in binding arbitration. The Company is
obligated to make interim payments to the Fund until the issue
of liability is resolved. The interim payment obligation is
currently approximately $88,500 per month. The Company has made
payments to the Fund that total approximately $1,855,000 as of
March 31, 1999, which are included in other assets on the
Company's balance sheet. 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 operations or
financial condition.
The Company's subsidiary, RDS, is a defendant in an action
brought on March 20, 1997, in the 327th District Court, El Paso,
Texas, by a former employee. The plaintiff alleged that he was
injured as a result of the negligence and gross negligence of
RDS and received discriminatory treatment in violation of the
Texas Health and Safety Code. On March 13, 1998, a default
judgment was entered against RDS in the approximate amount of
$1.0 million, representing damages for medical expenses, loss of
wage earning capacity, physical pain and mental anguish,
physical impairment, disfigurement and punitive damages. RDS
has filed an appeal to the 8th Circuit Court of Appeals in El
Paso, Texas, which is currently pending. In its appeal, RDS
asserted it was never properly served in the action and that
there was insufficient basis to support an award of punitive
damages. RDS has notified its workers' compensation carrier of
the award. Management believes that RDS is likely to prevail on
its appeal and therefore, this action should not have a material
adverse effect on the Company's liquidity, results of operations
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
litigation incidental to its business, primarily involving
claims for personal injury and property damage incurred in the
transporting of freight. 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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 3.2 - Amended By-laws of the Registrant
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)
May 14, 1999 /s/ John P. Delavan
John P. Delavan
President and Chief Executive Officer
/s/ Roger T. Burbage
Roger T. Burbage
Executive Vice-President and Chief Financial Officer
(Principal Financial and Accounting Officer)