U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended to
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Commission File Number: 33-30123-A
TRANSIT GROUP, 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.)
2859 Paces Ferry Road, Suite 1740, Atlanta, Georgia 30339
(Address of principal executive offices)
(770) 444-0240
(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 19,018,811 shares of the Company's common stock outstanding as of
November 13, 1997.
TRANSIT GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with the
Consolidated Financial Statements including the footnotes and is qualified in
its entirety by the foregoing and other more detailed financial information
appearing elsewhere herein. Historical results of operations and the percentage
relationships among any amounts included in the Consolidated Statements of
Operations, and any trends which may appear to be inferable therefrom, should
not be taken as being necessarily indicative of trends in operations or results
of operations for any future periods.
Comments in this Management's Discussion and Analysis of Financial
Condition and Results of Operations regarding the Company's business which are
not historical facts are forward looking statements that involve risks and
uncertainties. Among these risks are the Company is in a highly competitive
business, has a history of operating losses, and is pursuing a growth strategy
that relies in part on the completion of acquisitions of companies in the
trucking industry. There can be no assurance that in its highly competitive
business environment, the Company will successfully improve its operating
profitability or consummate such acquisitions.
The following discussion and analysis reflect the Company's financial
position, results of operations and cash flows as restated to reflect the
disposal of the parcel delivery and courier operations in accordance with APB
No. 30.
Liquidity and Capital Resources
The Company has incurred substantial operating losses and cash flow
deficits since inception. From September 1985 through September 30, 1997, the
Company had accumulated a deficit from operating losses of $32,288,048. As of
September 30, 1997, the Company had raised $57,769,705 from (i) private
placements of preferred stock, (ii) its initial public offering of November 2,
1989, (iii) the sale of restricted and unrestricted common shares and has paid
dividends on its preferred stock of approximately $1,338,804 and (iv) stock
issued in connection with the acquisition of the four truckload carriers. As a
result of equity placements, dividends on preferred stock and cumulative losses,
the stockholders' equity as of September 30, 1997, was $16,042,853, and common
stock issued subject to put arrangements was $8,100,000.
Management believes, but can offer no assurances, that it can improve
operating performance and cash flows through the following measures:
Eliminating Parcel Delivery and Courier Operations. Management has
entered into a contract to sell it's unprofitable parcel delivery operations to
a company controlled by its Chairman and expects this sale to close in December
1997 with an effective date of September 30, 1997. Management is currently
negotiating for the sale of it's courier operations and expects to complete this
sale by December 31, 1997.
Acquiring Profitable Trucking Operations. The Company has reorganized
into a "holding company" format based in Atlanta, Georgia. This new corporate
structure is intended to increase the Company's flexibility to pursue the
acquisition and operation of profitable truckload motor carriers. The Company's
intent is to continue to identify and acquire additional mid-size trucking
companies, primarily with annual revenues between $10 million and $100 million,
that possess strong market positions, sound management and a commitment to a
high level of service and quality. The Company has completed the acquisition of
four companies at September 30, 1997 and is pursuing additional accounts.
Relying on Equity Sales to or Loans from Major Shareholders. In July
1997, an affiliate of the Company's Chairman loaned the Company $4 million to
consummate the acquisition of Carolina Pacific Distributors, Inc. During August,
September and October of 1997, the affiliate loaned the Company an additional
$2,600,000 to fund the continuing operations of the parcel delivery and courier
operations and fund certain expenses associated with the acquisition of the
truckload companies. The $2,600,000 is expected to be assumed by the purchaser
of the parcel delivery operations.
Obtaining Bank Financing. Management is negotiating new lines of hank
financing to provide working capital financing and financing for acquisition of
additional truckload motor carriers. Management has received a $20 million
commitment from a bank to make available to Capital Warehouse, Carroll Fulmer,
Service Express and Carolina Pacific an asset based line of credit secured by
accounts receivable and other intangible assets. The Company expects this line
of credit to be closed by the end of 1997.
In connection with the acquisition of three of the truckload carriers
completed during the third quarter of 1997, the Company granted selling
shareholders the option to put a portion of the shares which they received in
exchange for selling their business to the Company. The amount of the puts
issued by the Company aggregates approximately $8.1 million. Of this $8.1
million, options in the amounts of $4.6 million are exercisable before August
29, 1998 when an additional $3.5 million become exercisable. The put options
expire in the amounts of $2.1 million at August 15, 1998 and $6.0 million at
August 29, 2003.
Holders of options to put $6.0 million of stock at $3.60 per share may
require either the Company to redeem the stock or a major shareholder of the
Company to acquire the stock. Holders of options to put $1.8 million of stock at
$3.875 per share and $0.3 million at $6.75 per share have the right to put the
stock to the Company with a guarantee from a major shareholder.
Through November 10, 1997, the Company has received notification that
puts in the amount of approximately $2,200,000 will be exercised within the next
60 days for stock at amounts ranging from $3.60 to $6.75 per share. The Company
will be required to fund the cash required to meet its obligations under such
puts through borrowing such funds, drawing down on bank lines which may be
available to its subsidiaries or to call upon a major shareholder to purchase
the stock under such shareholder's obligations and guarantees associated with
the acquisition contracts. Funding such could affect materially the Company's
liquidity and capital resources.
Financial Condition
As of June 30, 1997, the Company treated it's parcel delivery
operations and courier operations as discontinued operations. The Company's
outstanding vehicle and equipment indebtedness, operating leases, and most
remaining liabilities (other than $4.0 million in debt to a related shareholder)
will be assumed by the companies purchasing the operations.
Results of Operations - Three months ended September 30, 1997 versus three
months ended September 30, 1996
At June 30, 1997, the Company had no revenues from continuing
operations. Such revenues commenced on July 11, 1997 with the purchase of
Carolina Pacific Distributors, Inc. and continued to increase with the
acquisitions of the three additional companies with which it had executed
letters of intent.
The following table sets forth items in the Consolidated Statement of
Operations for the three months ended September 30, 1997 as a percentage of
operating revenue. Because the truckload operations were acquired during the
third quarter of 1997, the table is not comparable to an earlier period.
Percentage of
Operating Revenues
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Operating revenues 100.0%
Operating expenses
Purchased transportation 38.1%
Salaries, wages and benefits 23.5%
Fuel 9.8%
Operating Supplies and expenses 10.5%
Insurance 2.4%
Depreciation and amortization expense 7.5%
General and administrative expense 3.8%
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Total operating expense 95.7%
Operating income 4.3%
Interest expense 3.8%
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Earnings from continuing operations before income taxes 0.5%
Income taxes attributable to continuing Operations 0.4%
--------
Income from continuing operations 0.1%
========
The Company incurred corporate administration expenses for the three
months ended September 30, 1997 of approximately $0.4 million as compared to
approximately $47 thousand for the three months ended September 30, 1996. These
increases are attributable the reorganization to a holding company format, the
opening of new corporate office in Atlanta, Georgia and the acquisition of the
four truckload companies.
Revenues attributable to the discontinued businesses were $5.0 million
and $5.8 million for the three months ended September 30, 1997 and 1996,
respectively. The reduction in revenue resulted primarily from closing terminals
in North and South Carolina. The Company has recorded a provision for losses
during the phase-out period of approximately $0.8 million. A tax benefit has not
been provided on the losses from discontinued operations because it is more
likely than not that a portion or all of the losses may not produce a tax
benefit.
Results of Operations - Nine months ended September 30, 1997 versus nine months
ended September 30, 1996
The following table sets forth items in the Consolidated Statement of
Operations for the nine months ended September 30, 1997 as a percentage of
operating revenue. Because the truckload operations were acquired during the
third quarter of 1997, the table is not comparable to an earlier period.
Percentage of
Operating Revenues
------------------
Operating revenues 100.0%
Operating expenses
Purchased transportation 38.1%
Salaries, wages and benefits 23.5%
Fuel 9.8%
Operating Supplies and expenses 10.5%
Insurance 2.4%
Depreciation and amortization expense 7.5%
General and administrative expense 6.4%
--------
Total operating expense 98.2%
Operating income 1.8%
Interest expense 3.8%
--------
Earnings from continuing operations before income taxes (2.0%)
Income taxes attributable to continuing Operations 0.4%
--------
Income from continuing operations (2.4%)
========
The Company incurred general and administrative expenses for the nine
months ended September 30, 1997 of approximately $0.7 as compared to
approximately $0.3 million for the nine months ended September 30, 1996. These
increases are attributable the reorganization to a holding company format, the
opening of new corporate office in Atlanta, Georgia and the acquisition of the
four truckload companies.
During the second quarter of 1997, the Company approved a plan to
dispose of its parcel delivery and courier operations and has executed a letter
of intent for the sale of the parcel delivery portion of such businesses. It is
expected that substantially all property and equipment and substantially all
capital and operating lease obligations will be assumed by the buyer. The
Company anticipates that the disposal will be completed in December 1997.
Revenues attributable to the discontinued businesses were approximately
$14.7 million and $17.2 million for the nine months ended September 30, 1997 and
1996, respectively. The Company has recorded a provision for losses during the
phase-out period of approximately $0.8 million. A tax benefit has not been
provided on the losses from discontinued operations because it is more likely
than not that a portion or all of the losses may not produce a tax benefit.
SIGNATURE
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.
TRANSIT GROUP, INC.
Date: February 10, 1998 By:/s/ Wayne N. Nellums
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Wayne N. Nellums,
Vice President, Chief Financial Officer
and Secretary