U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended to
Commission File Number: 33-30123-A
GENERAL PARCEL SERVICE, INC.
(Exact name of small business issuer in its charter)
State of Florida 59-2576629
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8923 Western Way, Suite 22,
Jacksonville, FL 32256
(Address of principal executive offices)
904) 363-0089
(Issuer's telephone number)
Check whether issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and 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
There were 3,758,671 shares of the Company's common stock
outstanding as of May 12, 1995
GENERAL PARCEL SERVICE, INC.
FORM 10-QSB
INDEX
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Consolidated Balance Sheets as of
March 31, 1995, and December 31, 1994. 1
Consolidated Statements of Operations for the
three months ended March 31, 1995 and 1994. 2
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994. 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II - Other Information
Item 1 - Legal Proceedings 10
Item 2 - Changes in Securities 10
Item 3 - Defaults upon Senior Securities 10
Item 4 - Submission of Matters to a Vote
of Security Holders 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
GENERAL PARCEL SERVICE, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 33,957 $5,575
Accounts receivable
(net of allowance for doubtful accounts of $8,545 and $5,835
at March 31, 1995 and December 31, 1994 respectively) 1,871,097 1,544,745
Other current assets 626,331 695,583
---------- ----------
Total current assets 2,531,385 2,245,903
Equipment, at net book value 8,083,038 7,568,574
Goodwill 1,009,334 --
Other assets 184,513 181,843
---------- ----------
Total assets $ 11,808,270 $ 9,996,320
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 2,225,000 1,500,000
Current obligations under capital leases 1,006,216 994,714
Current maturities of long-term debt 671,896 457,139
Accounts payable 1,654,612 1,023,300
Accrued expenses and other 167,328 317,339
---------- ----------
Total current liabilities 5,725,052 4,292,492
---------- ----------
Non-current liabilities:
Long-term obligations under capital leases 1,976,811 1,869,609
Long-term debt 1,183,571 588,406
Convertible debentures 300,000 300,000
---------- ----------
Total non-current liabilities 3,460,382 2,758,015
---------- ----------
Total liabilities 9,185,434 7,050,507
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value, 200,000 shares authorized,
100,000 issued and outstanding at March 31, 1995, and
December 31, 1994, liquidation preference $2,500,000. 1,000 1,000
Common stock, $.01 par value, 10,000,000 shares authorized,
3,758,671 shares issued and outstanding at March 31, 1995, and
December 31, 1994. 37,586 37,586
Additional paid-in capital 13,389,655 13,389,655
Accumulated deficit (10,805,405) (10,482,428)
------------ ------------
Total stockholders' equity 2,622,836 2,945,813
------------ ------------
Total liabilities and stockholders' equity $11,808,270 $ 9,996,320
========== ==========
<FN>
<F1>
See accompanying notes.
1
</FN>
GENERAL PARCEL SERVICE, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended March 31,
1995 1994
Revenue $ 5,063,330 $ 4,700,875
Operating expenses
Salaries and benefits 2,536,693 2,267,793
Fuel 287,558 265,760
Equipment rental 8,699 60,542
Insurance 449,000 414,627
Tires and maintenance 174,185 166,741
Depreciation and amortization 410,632 307,568
Facilities expense 331,587 286,797
Terminal expense 56,054 34,573
Purchased Transportation 53,726 --
Other 39,250 17,494
Selling and administrative expense 711,849 666,139
---------- ----------
Total operating expenses 5,059,233 4,488,034
---------- ----------
Income from operations 4,097 212,841
Interest expense 152,074 131,404
---------- ----------
Net income (loss) (147,977) 81,437
Preferred stock dividend requirement 43,750 43,750
--------- ---------
Income (loss) available to common shareholders $ (191,727) $ 37,687
========= =========
Net income (loss) per common share $ (0.05) $ 0.01
========= =========
Weighted average number of common
shares outstanding
3,758,671 3,758,671
========= =========
<FN>
<F1>
See accompanying notes.
2
</FN>
GENERAL PARCEL SERVICE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended March 31,
1995 1994
Cash flows from (for) operating activities:
Net income (loss) $( 147,977) $ 81,437
Adjustments to reconcile net loss to cash provided by (used in)
operating activities:
Loss on disposal of fixed assets 2,718 --
Depreciation and amortization 423,263 317,394
Changes in assets and liabilities:
Increase in accounts receivable (216,150) (419,082)
Decrease (increase) in other current assets 105,837 (88,625)
Increase in other assets (2,670) (2,740)
Increase (decrease) in accounts payable 605,342 (54,762)
Increase (decrease) in accrued expenses and other (150,012) 138,729
Total adjustments 768,328 (109,086)
Net cash provided by (used in) operating activities 620,351 (27,649)
Cash flows for investing activities:
Business acquisition (288,030) --
Purchase of equipment (354,913) (200,611)
Net cash used in investing activities (642,943) (200,611)
Cash flows from financing activities:
Dividends on preferred stock (175,000) --
Repayment of long-term debt (150,893) (77,835)
Principal payments under capital lease obligations (264,617) (280,418)
Increase (decrease) in bank overdrafts (83,516) 505,417
Increase in short term borrowings 725,000 --
----------- ----------
Net cash provided by financing activities 50,974 147,164
----------- ----------
Increase (decrease) in cash and cash equivalents 28,382 (81,096)
Cash and cash equivalents, beginning of period 5,575 1,069,007
---------- ----------
Cash and cash equivalents, end of period $ 33,957 $ 987,911
========== ==========
<FN>
<F1>
Supplemental disclosure:
Cash paid during the period for interest $ 145,693 $ 132,517
========== ==========
Non-cash investing and financing activities:
Capital lease and notes payable obligations of $375,191 and $16,820 were incurred when the Company entered into
lease agreements for new vehicles and communication equipment for the three months ended March 31, 1995 and 1994,
respectively.
See accompanying notes.
3
</FN>
GENERAL PARCEL SERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The information presented herein as of March 31, 1995, and for
the three months ended March 31, 1995 and 1994, is unaudited.
The December 31, 1994, balance sheet data was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
1. Summary of Significant Accounting Policies
Management's Representation
In the opinion of management, all adjustments necessary for a
fair presentation of such consolidated financial statements are
reflected in the interim periods presented. Such adjustments
consisted of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented as
permitted by Form 10-QSB and do not contain certain information
included in the annual financial statements and notes of General
Parcel Service, Inc. (the "Company").
2. Acquisition of Assets of Transit Express of Charlotte, Inc.
On February 10, 1995, the Company through a subsidiary acquired
certain assets of Transit Express of Charlotte, Inc. ("TE"). TE
was based in Charlotte, North Carolina, and provided scheduled
carrier and package delivery services to businesses in North and
South Carolina. The Company paid $75,000 in cash, assumed
certain accounts and notes payable totaling approximately
$525,000 and entered into certain employment contracts and
non-competition agreements with the principals of TE. The
employment contracts are for a term of six months beginning
February 10, 1995, and call for aggregate compensation of
$103,000 payable over the six month period and the
non-competition agreements provide for a payment of $590,000
payable over a sixty month period.
The acquisition of the TE assets was accounted for as a purchase
and, accordingly, the purchase price was allocated to the
acquired assets and assumed liabilities based upon their
respective fair values. The excess of the purchase price over
the fair value of the net assets acquired will be amortized over
40 years on a straight-line basis.
The unaudited pro forma statement of operations of the Company
for the three months ended March 31, 1995, accounts for the
acquisition as if it had occurred on January 1, 1995 and the
unaudited pro forma statement of operations for the three months
ended March 31, 1994, accounts for the acquisition as if it had
occurred on January 1, 1994. The pro forma results give effect
to the amortization of goodwill and the effects of additional
interest expense.
4
Unaudited Pro Forma Combined Results of Operations
For the Quarter Ended March 31, 1995
Pro Forma
The Company TE Adjustments Combined
Sales $ 5.063,330 $ 184,712 $ - $ 5,248,042
========== ========== ========== ==========
Net Earnings $ (147,977) $ (10,426) $ (19,867) $ (178,270)
========== ========== ========== ==========
Net earnings per common share $ (.05) $ (.06)
========== ==========
Unaudited Pro Forma Combined Results of Operations
For the Quarter Ended March 31, 1994
Pro Forma
The Company TE Adjustments Combined
Sales $ 4,700,875 $ 509,593 $ - $ 5,210,468
========== ========== ========== ==========
Net Earnings $ 81,437 $ 5,736 $ (21,078) $ 66,095
========== ========== ========== ==========
Net earnings per common share $ .01 $ .01
========== ==========
<FN>
<F1>
The above pro forma statements do not purport to be indicative
of the results of operations which would have occurred had the
acquisition been made on January 1, 1995 or 1994.
</FN>
5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Since inception, the Company has not generated sufficient cash
flows from operations to fund its business expansion and
operating losses. Expansion of operations and operating losses
since inception have been funded from seven major sources: 1)
private placements of restricted shares of common stock to its
principal shareholders, 2) proceeds from its initial public
offering of common stock in November 1989, 3) installment loans
and leases from third party lenders collateralized by equipment
acquired to support business growth, 4) a bank line of credit
collateralized by accounts receivable and guaranteed by a major
shareholder, 5) short term borrowings from banks and
shareholders, 6) private placement of preferred stock and 7)
debt issued and liabilities assumed in connection with the
acquisition of TE.
As of March 31, 1995, the Company had raised net equity capital
of $8,145,052 from private placements of restricted common
shares, $2,715,700 from its initial public offering of November
2, 1989, $2,417,489 from private placements of preferred stock,
and $150,000 from the sale of unrestricted common shares. When
combined with cumulative operating losses since inception of
$10,630,405 and the $175,000 dividend paid on the Company's
preferred stock, the Company's net capital surplus as of March
31, 1995 was $2,622,836. There were no issuances of the
Company's restricted common stock or preferred stock during the
first quarter of 1995.
As of March 31, 1995, the Company was contractually obligated to
repay $7,363,494 of indebtedness to equipment lessors, banks and
other secured and unsecured lenders. In addition, the Company
owed $1,654,612 to suppliers of goods and services necessary for
the conduct of ongoing business including amounts represented by
issued and outstanding checks, and had accrued salaries and
other expenses of $167,328, which were unpaid at the close of
the period.
In 1994, the Company entered into a revolving credit loan
agreement ("Line of Credit") with a bank. The aggregate
principal amount due under the agreement may not exceed
$2,250,000. The agreement is evidenced by a demand note with
interest payable monthly for advances of $1,000,000 or greater
at the lower interest of the thirty day LIBOR rate plus .75% or
the Bank's prime interest rate less .75% and for all other
advances at the Bank's prime interest rate less .75%. The loan
is collateralized by the Company's accounts receivable and
certain stock certificates pledged by the Company's Chairman.
The amount borrowed under the line of credit at March 31, 1995,
was $2,225,000.
Cash provided by operations in during the first quarter of 1995
was $620,351 as compared to cash used in operations in the first
quarter of 1994 of $27,649. The net cash provided by operations
resulted primarily from an increase in accounts payable, the
non-cash expense of depreciation and amortization and a decrease
in other current assets. These were partially offset by an
increase in accounts receivable and a decrease in accrued
expenses and other liabilities. The increase in cash and cash
equivalents of $28,382 in the quarter ended March 31, 1995,
required utilization of $725,000 of the Company's available line
of credit during the first quarter of 1995. In response to the
Company's future cash flow requirements, the Company has
received a commitment from a major shareholder to fund the
Company's operations through 1995, if necessary. Because of the
Company's continuing requirement for cash to fund operating
losses and to repay existing debt, it increased its line of
credit to $2,250,000 in the first quarter of 1995. To the extent
the Company requires additional cash for operations beyond its
available credit line during 1995, it will seek to further
increase its credit line or attempt to privately place common
and/or preferred stock of the Company with investors. Should
the Company not be able to provide cash for its operations as
described above, it will rely on the commitment of one of its
major shareholders to fund losses of the Company through
December 31, 1995.
6
Financial Condition
As of March 31, 1995, the Company's working capital deficit
(current liabilities less current assets) was $3,193,667, which
increased the deficit by $1,147,078 from the $2,046,589 working
capital deficit at December 31, 1994. Total current assets of
$2,531,385 included cash of $33,957, accounts receivable of
$1,871,097, prepaid expenses of $333,214, inventories of
uniforms and supplies of $243,473 and other receivables of
$49,644. Current liabilities of $5,725,052 included current
obligations under leases and other lending agreements of
$3,903,112, amounts owed to trade creditors of $1,654,612,
including amounts represented by issued and outstanding checks,
and other accrued expenses of $167,328.
Total assets as of March 31, 1995, at $11,808,270, increased by
$1,811,950 (or 18.1%) during the quarter ended March 31, 1995,
primarily as a result of the TE acquisition, an increase in
accounts receivable and an increase in equipment at net book
value.
Accounts receivable at $1,871,097 increased by $326,352 (or
21.1%) during the quarter ended March 31, 1995. The number of
weeks sales in outstanding receivables was 4.8 at March 31,
1995, compared to 3.5 at December 31, 1994. Other current
assets at $626,331 decreased by $69,252 during the first quarter
of 1995 primarily because of a decrease in prepaid expenses.
The net book value of equipment increased by $514,464 to
$8,083,038 during the quarter as a result of equipment additions
of $938,445 in excess of depreciation of $421,263 and disposals
of $2,718. The additions included $384,969 for 10 new delivery
vans, $44,014 for other rolling stock equipment, $208,340 for
equipment acquired in the TE acquisition, $127,340 for
electronic clipboards, $163,294 for conveyor and other terminal
equipment and $10,488 for computers and other office equipment.
Other assets at $184,513 increased by $2,670 because of advance
rental payments and security deposits related to new facilities
lease agreements.
Total liabilities at $9,185,434 increased by $2,134,927 (or
30.3%) during the quarter ended March 31, 1995. Total debt of
$7,363,494 increased by $1,653,626 (or 29.0%). The increase was
primarily due to the increase in short term borrowings and debt
issued and liabilities assumed in connection with the
acquisition of TE.
Capital lease obligations at $2,983,027 were increased by
$118,704 during the quarter as a result of $383,321 of new
additions in excess of $264,617 of scheduled principal
payments. The additions to capitalized leases were for six new
delivery vans and assets acquired in the TE acquisition. Long
term debt at $1,855,467 increased $809,922 as a result of
$960,815 of new additions net of $150,893 of scheduled principal
payments. The additional new debt was incurred to finance the
purchase of four new delivery vans and the assets acquired in
the TE acquisition. Short-term borrowings increased by $725,000
to $2,225,000 as a result of an increase in the Company's
utilization of its line of credit.
Accounts payable increased by $631,312 to $1,654,612 during the
quarter ended March 31, 1995. Accrued expenses decreased by
$150,011 to $167,328.
The Company's stockholders' equity decreased by $322,977 for the
quarter ended March 31, 1995, as a result of a net loss for the
period and payment of a $175,000 dividend on its preferred
stock. Total stockholders' equity as of March 31, 1995 was
$2,622,836.
7
Results of Operation - Three Months ended March 31, 1995
Revenue for three months ended March 31, 1995, was $5,063,330
representing an increase of $362,455 (or 7.7%) over revenue for
the same period of 1994. The increased in revenue from existing
customers and new customers acquired in the TE acquisition was
significantly offset by revenue lost from several major accounts
which provided revenue to the Company during the first quarter
of 1994 but not during the first quarter of 1995. The impact of
the loss of these customers has caused a lower income from
operations in the first quarter of 1995, as compared to the
first quarter of 1994.
Several major accounts were lost to UPS in the third quarter of
1994. In response to the loss of these major customers, the
Company filed a civil complaint in federal district court
against UPS, alleging, among other things, that UPS has
attempted to monopolize the market for ground-based
business-to-business parcel delivery service in Georgia and
Florida in violation of federal and state anti-trust laws.
Additionally, the Company has redirected part of its sales and
marketing efforts to new market segments. As a result of these
efforts, during the first quarter of 1995, the Company replaced
the revenue from customer losses to UPS, however the margins on
the replacement business are not as large as the margins on the
lost business.
While management believes that its redirected sales and
marketing efforts will provide positive results, there can be no
assurance that such will be the case. While maintaining high
service capability to customers, it is not expected that
management can effect material reduction in cost of operations
during 1995. Accordingly, if the Company cannot continue to
improve its customer base and revenue during 1995, it will have
to rely on outside sources to fund any operating losses and
repayment of indebtedness coming due in 1995. Although, a major
shareholder has indicated his intent to fund any cash losses,
there can be no guarantee that funds will be available when
needed.
Total operating expenses (excluding interest expense) at
$5,059,233 for the first quarter of 1995 increased by $571,199
(or 12.7%) compared to the first quarter of 1994 total. The
operating ratio (total operating expenses as a percentage of
revenue), was 99.9% for the quarter ended March 31, 1995,
compared to 95.5% for the quarter ended March 31, 1994.
Operating salaries and benefits at $2,536,693 increased by
$268,900 (or 11.9%) for the first quarter of 1995, but were
50.1% of revenue compared to 48.2% for the first quarter of
1994. Fuel costs at $287,558, while increased $21,798 from the
first quarter of 1994 level, were 5.7% of revenue, equal to the
same percentage in the quarter ended March 31, 1994. Tires and
maintenance expense at $174,185 increased by $7,444 from the
first quarter 1994 level and represented 3.4% of revenue
compared to 3.5% in the first quarter of 1994 as improved cost
controls and preventative maintenance procedures continued.
Insurance costs increased by $34,373 to $449,000 or 8.9% of
revenue in first quarter of 1995 as compared to $414,627 or 8.8%
of first quarter 1994 revenue. The consistent expense as a
percentage of revenue illustrates the continued success of the
safety control program.
The fixed components of operating cost (depreciation and
amortization, facilities and terminal expense) increased in
first quarter of 1995 over the first quarter of 1994 because of
decisions made in early 1994 to significantly increase in the
number of vehicles placed in service during the last three
quarters of 1994, to open new terminals during the last three
quarters of 1994 and to convert to electronic clipboards.
Depreciation and amortization was $410,632, an increase of
$103,064 (or 33.5%) over the first quarter of 1994, and was 8.1%
of revenue in the first quarter of 1995 as compared to 6.5% in
the same period of 1994. Facilities expense (rent plus
utilities) at $331,587 increased by $44,790 (or 15.6%) and was
6.5% of first quarter 1995 revenue versus 6.1% in the first
quarter of 1994. Terminal expense increased by $21,481 (or
62.1%) to $56,064.
8
Selling and administrative expense at $711,849 was 6.9% higher
than the first quarter 1994 level but was reduced as a
percentage of revenue from 14.2% in 1994 first quarter to 14.1%
in 1995 first quarter.
The Company's operating profit for the quarter ended March 31,
1995 was $4,097 compared to an operating profit of $212,841 for
the quarter ended March 31, 1994. Interest expense at $152,074,
an increase of $20,670 over the interest expense for the quarter
ended March 31, 1994, resulting from additional amounts borrowed
under the Company's line of credit and debt issued and
liabilities assumed in the TE acquisition. The Company's net
loss for the quarter ended March 31, 1995 was $147,977 compared
to a net profit of $81,437 for the same period of 1994.
9
Part II - Other Information
Item 1. Legal Proceedings
None
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
The Company filed a Form 8-K dated February 10, 1995 announcing the
acquisition of certain assets of TE and the filing of a civil
complaint against UPS in the Federal District Court of Northern
Georgia.
10
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.
General Parcel Service, Inc.
Date: May 12, 1995
By: s/E. Hoke Smith, Jr.
E. Hoke Smith, Jr.
President and CEO
s/Wayne N. Nellums
Vice President
Chief Financial Officer