(On cover OTRX logo omitted)
OTR Express is a nationwide truckload carrier
and logistics company serving customers
throughout the 48 states
Table of Contents
Highlights 1
Letter from the President 2
Selected Financial Data 5
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6
Report of Independent Public
Accountants 11
Financial Statements 12
Directors and Officers 23
Quarterly Financial Data 24
Stockholder Information 26
Financial Highlights OTR Express, Inc.
(In thousands except per share data)
1999 1998 1997 1996 1995
Income Statement Data
Operating revenue $80,480 $72,284 $63,797 $55,261 $49,211
Operating income 2,249 4,766 4,090 2,195 2,029
Net income (loss) (892) 883 509 (368) (157)
Outstanding shares 1,803 1,836 1,840 1,836 1,830
Earnings (loss) per share -
basic and diluted $ (0.49) $ 0.48 $ 0.28 $ (0.20) $ (0.09)
Operating ratio (1) 97.2% 93.4% 93.6% 96.0% 95.9%
Balance Sheet Data
Current assets $11,179 $10,011 $ 9,223 $ 7,681 $ 6,799
Current liabilities 18,874 18,271 18,140 19,152 17,187
Total assets 63,576 59,220 56,034 50,576 48,883
Current portion of long-term
debt 13,843 13,837 14,260 15,751 13,968
Long-term debt, less
current portion 33,890 28,658 26,688 21,019 20,844
Stockholders' equity 8,981 9,891 9,346 8,805 9,156
(1) Operating expenses as a percentage of operating revenue
Operational Highlights
1999 1998 1997 1996 1995
Total miles (in thousands) 66,020 64,216 58,253 52,330 47,197
Average number of tractors 586 583 525 506 450
Revenue per loaded mile $ 1.178 $ 1.165 $ 1.121 $ 1.066 $ 1.031
Revenue per mile $ 1.077 $ 1.060 $ 1.036 $ 0.996 $ 0.963
Miles per week per truck 2,165 2,119 2,135 1,984 2,015
Empty miles percentage 8.6% 9.0% 7.6% 6.6% 6.6%
Miles per load 993 1,120 1,332 1,464 1,506
Employees - end of period 626 650 642 559 575
Licensed tractors - end of
period 505 526 526 503 503
Owner operators - end of
period 83 47 10 - -
Total tractors - end of
period 588 573 536 503 503
Licensed trailers - end of
period 1,062 1,042 765 608 567
Average equipment age (years)
Tractors - end of period 1.42 2.43 1.97 1.82 1.23
Trailers - end of period 2.94 1.93 1.53 1.88 3.05
(Picture of William P. Ward Chairman and CEO ommitted)
Dear Fellow Shareholder:
Our results for 1999, particularly the second half of the year, were very
disappointing. Several factors impacted OTR Express, including some external
causes and some internal issues.
We have responded aggressively to turn around the outlook for OTR Express. We
are taking decisive actions to improve operating results and strengthen our
financial position.
OTR Express has a lot going for it. As a nationwide truckload carrier with
about 600 trucks, we give customers one of the best on-time service records
around. Our drivers are experienced, and our equipment is top-notch. Through
advanced technology, we offer superior ability to track loads and provide
timely information. Our logistics business is growing rapidly.
However, we are well aware of our problems in 1999 and the need for change.
When I resumed the post of president in October, we immediately set in motion a
plan to increase revenues and return to profitability, while reducing debt and
focusing on non-asset based business. We also moved quickly to reduce driver
turnover and restore OTR's longstanding reputation as a driver-oriented company
- - which benefits customers and our financial performance.
Taking Action to Meet Challenges
The external factors hurting our financial performance this past year included
higher fuel prices, unseated trucks due to a driver shortage, increasing wages
and higher interest rates. Much of the industry felt these same pressures. We
have taken several actions to mitigate the effect of these external challenges
while strengthening our own business.
We also faced issues within our organization in 1999. A key part of our Five
Year Plan was to transition our customer base from price-driven brokers and
shippers to customers who need premium service truckload carriers to add value
to their supply chain management. Although we made progress in changing our
customer base, we fell short of where we wanted to be in 1999.
To turn this around, we brought in a new vice president of sales and marketing,
Glen Rittgers. Since August, we have completely replaced our outside regional
sales force. Three new regional sales managers have more than 50 years of
combined truckload sales experience. Glen and the new sales team have made a
good start, and we are very pleased to have them aboard.
The sales shortfall also impacted operations in 1999. Our average miles per
load declined, and we did not have the freight to reload drivers as quickly as
we would like. Our driver turnover began to spike upward in mid-1999, and our
unseated truck count grew as high as 80 in a company-owned fleet of
approximately 520. As a result, we saw a significant shortfall in freight
revenue in the third and fourth quarters.
By implementing a number of driver-friendly programs, we were able to lower the
unseated truck count to 22 by year-end. There were some added costs, as we
increased driver pay approximately 3% and committed a considerable amount to
classified advertising.
Key Operating Statistics
As a result of issues I have mentioned, operating performance was mixed. You
will read more about our income statement in the financial section, so I will
comment here on operations.
Revenue per unit per week improved nearly 4% to $2,332 in 1999 from $2,246 in
1998. Our revenue per mile increased modestly to $1.077, from $1.060 in 1998
and $1.036 in 1997. The 1999 figure includes a fuel surcharge, which we began
implementing in September.
Miles obtained directly from shippers decreased slightly to 81% of the total in
1999, from 83% in 1998 - although we are still up from 77% in 1997. A goal of
our Five Year Plan is to reduce reliance on freight brokers to below 10% of
total miles, which we believe is within reach in 2000.
Our empty miles percentage actually declined to 8.58% in 1999 from 9.03% in
1998 - a testimony to the success of our operations department, since average
miles per load dropped from 1,120 in 1998 to 993 in 1999. Total miles
increased only 2.8% in 1999, but the number of loads we carried increased 16%.
Our operations and support personnel did a good job with the workload from this
rising number of transactions.
We are proud to say OTR Express remains one of the more efficient truckload
carriers. Our tractor to staff ratio, a key indicator of operating efficiency,
was 4.78:1 at the end of 1999, which we believe to be excellent when compared
to other truckload carriers.
New Directions
In late 1999, we began making significant changes to return to profitability,
to improve leverage ratios and to reduce reliance on asset-based revenues:
We launched a training program of five seminars to increase the productivity
of drivers and owner operators.
We implemented a non-driver workforce reduction and achieved a 10% decrease
compared to January 1, 1999. Our associates have continued to produce the
same high-quality work.
We began a non-driver hiring freeze in December 1999. As employees leave in
the future, we will assess the need to fill those positions.
We upgraded our sales force in the fourth quarter, hiring regional sales
managers based in Chicago, Baltimore, Atlanta and Dallas. We anticipate
adding sales managers in other key areas.
We intensified our recruiting of owner operators, to increase trucking
revenues without adding company assets or debt. Since September 1999, we
have increased the number of owner operators from 64 to more than 100.
We introduced a driver purchase program to empower more OTR Express drivers
to become owner operators, which also helps de-leverage the company, yet
keeps the revenue in the company.
We overhauled the marketing approach in our truck logistics division and
gave the team a new, more entrepreneurial focus on growth and profitability.
We intensified marketing efforts in our rail logistics division to pursue
aggressive growth targets for 2000.
Non-Asset Based Revenues
We are now focusing heavily on non-asset based business activities. To achieve
our growth and profitability goals, we must be successful in the logistics
business - and we are making changes to continue to enhance our growth and
profitability in logistics.
In 1999, revenues for our logistics division overall grew 116 percent to $9.7
million, from $4.5 million in 1998.
Most of our logistics growth has come in the rail division, established in 1998
in Salt Lake City, Utah. Coordinating the movement of customers' freight using
railroads, this division does not require any of our equipment. Rail logistics
revenues grew from $600,000 in 1998 to $5.8 million in 1999.
Truck logistics revenue, on the other hand, has been relatively flat. To
ignite this division's growth, we have established a new agent-oriented
marketing program and moved the group to another part of our home office to
create a stand-alone, entrepreneurial atmosphere. Again, we are seeking to
increase profitability and growth without additional capital investment.
Near-Term Outlook
We expect to begin 2000 with a loss in the first quarter, then show gradually
improving results as the year progresses and our recent actions begin to
benefit financial performance.
Through the steps we have taken, we anticipate increasing our revenue per truck
and revenue per non-driver employee in 2000. We are working to leverage our
technology advantages into more miles and higher rates, a critical goal for
this year.
Technology is one way we differentiate OTR Express and provide premium service.
We have now tied our onboard communications technology into the www.otrx.com
website to provide customers more information on their shipments. In a secure
online system, customers can view the position of each of their loads, monitor
service performance and check outstanding invoices.
Our ability to write and implement OTR-specific computer programs has been at
the heart of the growth of our logistics business.
I am hopeful we will see more moderate fuel prices in 2000 - a major external
issue. So far, OPEC has stood firm as U.S. fuel inventories have waned. Since
year-end, our blended average fuel cost has increased 15 cents per gallon, on
top of a 35-cent increase in 1999. Our move to owner operators and non-asset
based revenue should help mitigate the impact.
The shifting balance of supply and demand in trucking also may help. Overall,
Class 8 truck production is slowing, in part due to a lack of qualified over-
the-road drivers. Assuming freight demand remains relatively strong, capacity
restraints could allow truckload carriers like us to improve revenue rates to
help offset higher costs.
We will continue to maintain high standards for hiring OTR Express drivers. We
believe we have the best fleet of drivers in the nation, and our on-time
service percentage bears that out. As competition for drivers remains intense,
pay rates could continue to increase. We are optimistic that customers will
recognize the value of experienced drivers with excellent equipment.
What the Future Holds
Our mission is to create shareholder value, and to achieve this within
specified risk criteria. We believe the change initiatives in progress are the
best way to make this happen. Our management team is constantly evaluating
every aspect of our business - and we are making changes.
I want to thank OTR Express employees and drivers. Every one of them is
working to help OTR Express achieve its goals. We have made good progress, and
the future looks brighter as a result of the operational improvements and other
changes already underway.
Our primary focus now is on strengthening the company's financial condition and
returning to profitability. Thank you for your support and interest in OTR
Express.
Sincerely,
/s/ William P. Ward
William P. Ward
Chairman, President and CEO
Selected Financial Data
(In thousands except per share data)
1999 1998 1997 1996 1995
INCOME STATEMENT
Operating revenue $80,480 $72,284 $63,797 $55,261 $49,211
Operating expenses
Salaries, wages and
benefits 29,903 28,129 25,549 22,395 19,837
Purchased transportation 15,263 7,891 3,757 2,930 2,402
Fuel 6,264 5,691 7,632 7,011 5,511
Maintenance 4,867 4,725 3,654 3,310 3,005
Depreciation 7,547 7,437 7,401 6,723 6,517
Insurance and claims 2,146 1,908 1,882 1,639 1,594
Taxes and licenses 7,363 6,899 6,124 6,048 5,541
Supplies and other 4,878 4,839 3,708 3,010 2,775
Total operating expenses 78,231 67,519 59,707 53,066 47,182
Operating income 2,249 4,765 4,090 2,195 2,029
Interest expense 3,687 3,351 3,269 2,789 2,283
Income (loss) before income
taxes (1,438) 1,414 821 (594) (254)
Income tax expense (benefit) (546) 531 312 (226) (97)
Net income (loss) $ (892) $ 883 $ 509 $ (368) $ (157)
Outstanding shares
Basic 1,803 1,836 1,840 1,836 1,830
Diluted 1,803 1,846 1,842 1,836 1,830
EPS - basic and diluted $ (0.49) $ 0.48 $ 0.28 $ (0.20) $ (0.09)
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and
benefits 37.2 38.9 40.0 40.5 40.3
Purchased transportation 19.0 10.9 5.9 5.3 4.9
Fuel 7.8 7.9 12.0 12.7 11.2
Maintenance 6.0 6.5 5.8 6.0 6.1
Depreciation 9.4 10.3 11.6 12.2 13.2
Insurance and claims 2.7 2.6 2.9 3.0 3.3
Taxes and licenses 9.1 9.6 9.6 10.9 11.3
Supplies and other 6.0 6.7 5.8 5.4 5.6
Total operating expenses 97.2 93.4 93.6 96.0 95.9
Operating income 2.8 6.6 6.4 4.0 4.1
Interest expense 4.6 4.6 5.1 5.1 4.6
Income (loss) before income
taxes (1.8) 2.0 1.3 (1.1) (0.5)
Income tax expense (benefit) (0.7) 0.8 0.5 (0.4) (0.2)
Net income (loss) (1.1) 1.2 0.8 (0.7) (0.3)
Management's Discussion and Analysis of Financial Condition and Results of
Operations
1999 Compared to 1998
Operating Revenue. Operating revenue increased by 11.3% to $80.5
million in 1999 from $72.3 million in 1998 as a result of an increase in
logistics revenue and revenue rate per mile. Revenue per mile increased
by 1.6% to $1.077 from $1.060. Revenue from truck and intermodal
logistics services increased 116.3% in 1999 to $9.7 million from $4.5
million in 1998 primarily as a result of the addition of a logistics rail
division in October 1998.
Operating Expenses. Operating income was 2.8% of revenue compared to
6.6% in 1998.
Salaries, wages and benefits decreased to 37.2% of revenue in 1999
compared to 38.9% in 1998 as a result of the increase in logistics
revenue. Also, the addition of owner operators, who own their trucks and
contract with the company to haul freight, increased the revenues but not
the wages. Owner operators pay their own expenses, including payroll
taxes, fuel, fuel taxes, insurance and interest costs. The cost of owner
operators is classified in purchased transportation.
Purchased transportation, which represents payments to other
transportation service providers for hauling loads contracted through the
company's logistics division, and the cost of owner operators, was 19.0%
of revenue in 1999 compared to 10.9% in 1998. The increase is a result of
the addition of owner operators to the fleet and the increase in logistics
revenue.
Fuel decreased to 7.8% of revenue from 7.9% in 1998. The decrease
is due to the increase in logistics revenue and the increase in owner
operators in 1999. This was partially offset by a substantial increase in
fuel prices during the second half of 1999. The company began
implementing a fuel surcharge program to customers in September 1999 to
partially offset the increased cost of diesel fuel. The company's hedging
program offset a small percentage of the increased fuel costs.
Maintenance decreased from 6.5% of revenue in 1998 to 6.0% in 1999 as a
result of increased revenue rate per mile.
Depreciation as a percent of revenue decreased to 9.4% in 1999 from
10.3% in 1998 as a result of a increase of owner operator drivers,
increase of logistics revenue and the longer holding period for tractors.
Insurance and claims increased slightly to 2.7% of revenue in 1999 from
2.6% in 1998.
Supplies and other expenses decreased to 6.1% of revenue from 6.7% in
1998 as a result of decrease in advertising cost for new drivers, a
decrease in commissions paid to independent sales agents, the costs of a
planned stock offering in 1998 that was canceled due to unfavorable market
conditions, the increase in logistics revenue and the increase in owner
operators.
The average age of company tractors declined from 2.43 years in 1998
to 1.42 years in 1999. This decrease is primarily a result of the
company's purchase of more than 250 tractors in 1999, which replaced
tractors traded in 1999 that were between three and four years old.
Interest Expense. Interest expense was 4.6% of revenue in 1998 and
1999. In 1999, 84% of the company's capital was interest bearing compared
to 81% in 1998.
Net Income (Loss). Net loss for 1999 was $892,000 or $0.49 per share
compared to net income of $883,000 or $0.48 per share in 1998.
1998 Compared to 1997
Operating Revenue. Operating revenue increased by 13.3% to $72.3
million in 1998 from $63.8 million in 1997 as a result of an increase in
revenue rate per mile and average number of tractors in service. Revenue
per mile increased by 2.3% to $1.060 from $1.036. The average number of
tractors in service increased by 11.0% from 525 to 583 for the year.
Revenue from truck and intermodal logistics services increased 22.2% in
1998 to $4.5 million from $3.7 million in 1997 primarily as a result of
the addition of a logistics rail division in October 1998.
Operating Expenses. Operating income improved to 6.6% of revenue
from 6.4% in 1997.
Salaries, wages and benefits decreased to 38.9% of revenue in 1998
compared to 40.0% in 1997 as a result of the increased revenue rates per
mile. Also, the addition of owner operators, who own their trucks and
contract with the company to haul freight, increased the revenues but not
the wages. Owner operators pay their own expenses, including payroll
taxes, fuel, fuel taxes, tolls, insurance, licenses and interest costs.
The cost of owner operators is classified in purchased transportation.
There were three increases in wage rates for drivers in 1998 to retain
and attract experienced drivers and no such increases in 1997.
Purchased transportation, which represents payments to other
transportation service providers for hauling loads contracted through the
company's logistics division, and the cost of owner operators, was 10.9%
of revenue in 1998 compared to 5.9% in 1997. The increase is a result of
the addition of owner operators to the fleet beginning in October 1997 and
a 22% increase in logistics revenue.
Fuel decreased to 7.9% of revenue from 12.0% in 1997. The decrease
is due to an increase in revenue rate per mile, lower fuel costs
nationwide in 1998 versus 1997, and the increase in owner operators in
1998.
Maintenance increased from 5.8% of revenue in 1997 to 6.5% in 1998 as a
result of a longer holding period on company-owned trucks.
Depreciation as a percent of revenue decreased to 10.3% in 1998 from
11.6% in 1997 as a result of higher revenue per truck in 1998 and the
increase in owner operators in 1998.
Insurance and claims decreased to 2.6% of revenue in 1998 from 2.9% in
1997. This is a result of lower premiums on insurance policies, more
favorable loss experience and an increase in the revenue rate per mile.
Supplies and other expenses increased to 6.7% of revenue from 5.8% in
1997. Advertising costs for new drivers and a write-off of costs
associated with a stock offering that was suspended due to unfavorable
market conditions resulted in the increase in 1998.
Interest Expense. Interest expense decreased to 4.6% of revenue in
1998 from 5.1% in 1997 primarily as a result of lower interest rates and
an increase in owner operators. In both 1997 and 1998, 81% of the
company's capital was interest bearing.
Net Income. Net income for 1998 was $883,000 or $0.48 per share
compared to net income of $509,000 or $0.28 per share in 1997.
Seasonality
Seasonality causes variations in the operations of the company as well
as industry-wide operations. Demand for the company's service is
generally the highest during the summer and fall months. Historically,
expenses are greater during the winter months when fuel costs are higher
and fuel efficiency is lower.
Cash flow is typically negative in the first quarter primarily as a
result of the costs of licensing tractors, which is paid in that quarter.
Inflation
The effect of inflation on the company has not been significant during
the last three years. An extended period of inflation could be expected
to have an impact on the company's earnings by causing interest rates,
fuel and other operating costs to increase. Unless freight rates could be
increased on a timely basis, operating results could be adversely
affected.
Liquidity and Capital Resources
The growth of the company's business has required significant
investments in new revenue equipment acquired primarily through secured
borrowings. Net capital expenditures, principally for revenue equipment,
were $11.3 million, $10.0 million and $10.8 million for the years ended
December 31, 1997, 1998 and 1999, respectively. At February 29, 2000, the
company had arrangements for 30 replacement tractors at a cost of $2.4
million. The company's capital expenditures are expected to be generated
through secured borrowings.
Historically, the company has obtained loans for its revenue equipment
which are of shorter duration (three to five years for trailers, four and
a half years for tractors) than the economic useful lives of the
equipment. While such loans have current maturities that tend to create
working capital deficits that could adversely affect cash flows,
management believes these factors are mitigated by the more attractive
interest rates and terms available on these shorter maturities. This
financing practice has been a significant cause of the working capital
deficit which has existed since the company's inception.
The company intends to continue to obtain loans with shorter
maturities than the useful lives of its revenue equipment. This method of
financing can be expected to continue to produce working capital deficits
in the future. The company's working capital deficit at December 31, 1999
was $7.7 million. Primarily due to the company's equity position and the
potential for refinancing of both unencumbered and encumbered assets,
working capital deficits historically have not been a barrier to the
company's ability to borrow funds for operations and expansion.
The company has a credit line, as amended, of $10.0 million, or 85% of
eligible accounts receivable, whichever is less, with its primary lending
bank that bears interest at a variable rate, based upon the prime rate, or
LIBOR plus 2.75%, at the company's election. Borrowings under this
amended line were $1,479,000 at December 31, 1999, and $976,000 of the
available amended credit line was committed for letters of credit issued
by the bank and the guarantee of the unsecured portion of certain loans
made to certain company officers for purchases of company stock. The
amended line expires August 1, 2001 and is secured by accounts receivable.
The company has received commitments for up to $2.4 million of new
revenue equipment financing that will be at fixed interest rates. In the
opinion of management, the company has adequate liquidity for the
foreseeable future based upon funds expected to be generated from
operations, the company's equity position, the potential for refinancing
of assets owned by the company and the company's ability to obtain secured
equipment financing.
Diesel fuel prices are approaching ten year highs and sustained high
fuel prices can have a substantial negative impact on the company's
liquidity and operating ratio. The company is making efforts to mitigate
the increased cost of fuel by implementing a fuel surcharge to customers
in the third quarter of 1999. Additionally, the company's fuel hedging
program offset a small percentage of the increased fuel costs.
The trucking industry is facing a nationwide shortage of qualified
over-the-road drivers. Many trucking companies have a relatively high
percentage of unseated trucks as a result of the shortage. During 1999,
the company had as many as eighty unseated trucks. In October 1999, the
company increased driver pay by approximately 3% to attract and retain
high quality, experienced drivers. Competition for qualified over the
road drivers is strong and the company may
increase pay in order to continue to keep its trucks staffed, which could
negatively impact the company's liquidity and operating ratio. The company
had twenty-two unseated trucks, or 4.4% of its company-owned fleet, at
December 31, 1999.
Year 2000 Issue
The company completed substantially all of its Year 2000 modifications
during the third quarter of 1999. The total estimated cost of Year 2000
compliance was less than $20,000, substantially all of which was recorded
in 1999.
There were no significant projects deferred as a result of the Year
2000 remediation effort.
As a result of the company's efforts, the transition from 1999 to 2000
proved to be uneventful. The company has not identified any unusual
business trends relative to the transition to Year 2000.
Market Risk
The company is exposed to various market risks, including the effects
of interest rates and fuel prices. The company utilizes primarily fixed
rate financial instruments with varying maturities. The company's long-
term financing is all at fixed rates. The company's working capital line
of credit is at a variable rate. The detail of the company's debt
structure is more fully described in Note 5 to the financial statements.
The company uses call options of heating oil in order to manage a
portion of its exposure to variable diesel fuel prices. These agreements
provide some protection from rising fuel prices. The company's exposure
to loss on the call options is limited to the premium cost of the
contract. Based on historical information, the company believes the
correlation between the market prices of diesel fuel and heating oil is
highly effective. The company's fuel hedging program is discussed in more
detail in Note 3 to the financial statements. The company's heating oil
option contracts are not material to the company's financial position and
represent no significant market exposure. The company maintained fuel
inventories for use in normal operations at December 31, 1999 and
represented no significant market exposure.
The table below provides information about the company's fixed rate
financial instruments at December 31, 1999. The table below also presents
principal cash flows (in millions) and related weighted average interest
rates by contractual maturity dates.
Expected Fixed Average
Maturity Rate Interest
Date Debt Rate
2000 $ 16.6 7.22%
2001 13.3 7.19%
2002 11.8 7.06%
2003 7.5 7.73%
2004 1.9 7.00%
Thereafter 0.1 7.00%
Total $ 51.2
Fair value $ 44.9
Other
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (FAS) No 133, Accounting for
Derivative Instruments and Hedging Activities. In June 1999, the FASB
issued Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133. FAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. FAS 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
FAS 133, as amended, is effective for fiscal years beginning after June
15, 2000. A company may also implement FAS 133 as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16,
1998, and thereafter). FAS 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts. With respect to hybrid instrument, a company may elect to
apply FAS 133, as amended, to (1) all hybrid contracts, (2) only those
hybrid instruments that were issued, acquired, or substantively modified
after December 31, 1997, or (3) only those hybrid instruments that were
issued, acquired, or substantively modified after December 31, 1998. The
Company has not yet determined the timing or impact of adoption of
statement No. 133. However, FAS 133 could increase volatility in earnings
and other comprehensive income or involve certain changes in our business
practices.
Forward Looking Statements
This annual report contains statements contained in, and preceding
management's discussion and analysis, that are not purely historical and
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, that are based on current
expectations and are subject to risks and uncertainties. These statements
include statements regarding the company's expectations, hopes, beliefs
and intentions on strategies regarding the future. Such comments are
based upon information available to management and management's perception
thereof as of the date of this annual report. Actual results could differ
materially from those forward looking statements. Such differences could
be caused by a number of factors including, but not limited to, potential
adverse effects of regulation; changes in competition and the effects of
such changes; increased competition; changes in fuel prices; changes in
economic, political or regulatory environments; changes in the value of
revenue equipment; litigation involving the company; changes in the
availability of a stable labor force; ability of the company to hire
drivers meeting company standards; changes in management strategies;
environmental or tax matters; Year 2000 matters as discussed herein and
risks described from time to time in reports filed by the company with the
Securities and Exchange Commission. Readers should take these factors
into account in evaluating any such forward-looking statements.
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
OTR Express, Inc.:
We have audited the accompanying balance sheets of OTR Express, Inc. (a
Kansas corporation), as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OTR Express, Inc., as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 24, 2000
Balance Sheets OTR Express, Inc.
At December 31 1999 1998
ASSETS
CURRENT ASSETS
Cash $ 113,284 $ 521,484
Accounts receivable, less
allowance of $186,220 and $77,403 10,051,486 8,409,332
Inventory 449,735 534,623
Prepaid expenses and other 564,009 545,734
TOTAL CURRENT ASSETS 11,178,514 10,011,173
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation 52,397,851 49,209,269
TOTAL ASSETS $63,576,365 $59,220,442
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,274,541 $ 2,060,251
Accrued payroll and payroll taxes 1,284,506 1,007,735
Insurance and claims and other 1,472,432 1,365,739
Current portion of long-term debt 13,842,822 13,837,296
TOTAL CURRENT LIABILITIES 18,874,301 18,271,021
LONG-TERM DEBT, less current portion above 33,889,580 28,658,211
DEFERRED INCOME TAXES 1,831,900 2,400,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
20,000,000 shares authorized, 1,853,709
and 1,852,709 issued 18,537 18,527
Additional paid-in capital 6,602,169 6,598,679
Retained earnings 2,783,653 3,675,738
Debt guarantee (130,000) (297,877)
Treasury stock, 71,038 and 16,753 shares (293,775) (103,857)
TOTAL STOCKHOLDERS' EQUITY 8,980,584 9,891,210
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $63,576,365 $59,220,442
The notes to financial statements are an integral part of these statements.
Statements of Operations OTR Express, Inc.
For the Years Ended December 31 1999 1998 1997
Operating revenue
Freight revenue $70,776,151 $67,798,883 $60,127,246
Logistics revenue 9,703,615 4,485,389 3,669,346
Total operating revenue 80,479,766 72,284,272 63,796,592
Operating expenses
Salaries, wages and benefits 29,903,013 28,128,618 25,548,804
Purchased transportation 15,263,182 7,891,384 3,756,648
Fuel 6,264,472 5,691,461 7,631,908
Maintenance 4,867,123 4,725,008 3,654,294
Depreciation 7,546,771 7,437,151 7,400,583
Insurance and claims 2,145,985 1,908,459 1,881,278
Taxes and licenses 7,362,510 6,899,020 6,124,075
Supplies and other 4,878,228 4,836,841 3,708,124
Total operating expenses 78,231,284 67,517,942 59,705,714
Operating income 2,248,482 4,766,330 4,090,878
Interest expense 3,686,567 3,351,438 3,269,138
Income (loss) before income taxes (1,438,085) 1,414,892 821,740
Income tax expense (benefit) (546,000) 531,916 312,262
Net income (loss) $ (892,085) $ 882,976 $ 509,478
Weighted average number of shares
Basic 1,802,887 1,836,342 1,840,091
Diluted 1,803,227 1,846,156 1,841,805
Earnings (loss) per share
Basic $ (0.49) $ 0.48 $ 0.28
Diluted $ (0.49) $ 0.48 $ 0.28
The notes to financial statements are an integral part of these statements.
Statements of Stockholders' Equity OTR Express, Inc.
Common Additional Retained Debt Treasury Total
Stock Paid-In Earnings Guarantee Stock Stockholder's
Capital Equity
Balance,
December 31,
1996 18,422 6,540,124 2,283,284 - (36,735) 8,805,095
Allocation of
common stock
held by ESOP 70 41,090 - - - 41,160
Repurchase of
common stock - - - - (9,649) (9,649)
Net income - - 509,478 - - 509,478
Balance,
December 31,
1997 18,492 6,581,214 2,792,762 - (46,384) 9,346,084
Debt guarantee - - - (297,877) - (297,877)
Allocation of
common stock
held by ESOP 35 17,465 - - - 17,500
Repurchase of
common stock - - - - (57,473) (57,473)
Net income - - 882,976 - - 882,976
Balance,
December 31,
1998 18,527 6,598,679 3,675,738 (297,877) (103,857) 9,891,210
Reduction in
debt
guarantee - - - 167,877 - 167,877
Exercise of
stock options 10 3,490 - - - 3,500
Repurchase of
common stock - - - - (189,918) (189,918)
Net loss - - (892,085) - - (892,085)
Balance,
December 31,
1999 $18,537 $6,602,169 $2,783,653 $(130,000)$(293,775) $8,980,584
The notes to financial statements are an integral part of these statements.
Statements of Cash Flows OTR Express, Inc.
For the Years Ended December 31 1999 1998 1997
OPERATING ACTIVITIES
Net income (loss) $ (892,085) $ 882,976 $ 509,478
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation 7,546,771 7,437,151 7,400,583
Deferred income taxes (568,100) 540,197 312,262
Other 28,000 140,009 41,160
Changes in certain working capital
items
Accounts receivable (1,642,154) (672,972) (1,299,440)
Other assets 66,613 87,922 (18,718)
Accounts payable 214,290 456,597 206,894
Accrued expenses 383,464 96,896 271,867
Net cash provided by operating
activities 5,136,799 8,968,776 7,424,086
INVESTING ACTIVITIES
Acquisition of property and
equipment (21,646,957) (13,414,633) (17,631,434)
Disposition of property and
equipment 10,883,604 3,456,481 6,314,599
Net cash used in investing
activities (10,763,353) (9,958,152) (11,316,835)
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 30,277,168 21,501,500 21,250,515
Repayments of long-term debt (23,077,069) (20,044,277) (19,164,775)
Net increase (decrease) in line
of credit (1,795,327) (207,650) 2,092,312
Other (186,418) (57,473) (9,650)
Net cash provided by financing
activities 5,218,354 1,192,100 4,168,402
Net increase (decrease) in cash (408,200) 202,724 275,653
Cash, beginning of year 521,484 318,760 43,107
Cash, end of year $ 113,284 $ 521,484 $ 318,760
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 3,679,303 $ 3,346,500 $ 3,265,120
Cash paid (refunded) for
income taxes, net 22,100 (8,281) 41,474
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Net increase (decrease) in
debt guarantee $ (167,877) $ 297,877 $ -
The notes to financial statements are an integral part of these statements.
OTR Express, Inc.
Notes To Financial Statements
December 31, 1999
1. NATURE OF OPERATIONS:
OTR Express, Inc. (the Company), operates primarily as a dry van, truckload
carrier and logistics company headquartered in Olathe, Kansas. The Company
transports general commodities through the continental U.S. The Company also
provides non-asset-based logistics transportation services to its customers.
2. LIQUIDITY:
Higher fuel prices, unseated tractors and increased driver payroll costs
contributed to losses of $327,746 and $926,744 being incurred in the third
and fourth quarters of 1999, respectively. Additional losses are expected
through at least the first half of 2000. Management believes adequate
liquidity to maintain operations is available through the Company's line of
credit and its ability to refinance revenue equipment.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Operating revenue is recognized upon receipt of freight. Related
transportation expenses, including driver wages, purchased transportation,
fuel and fuel taxes, are accrued when the revenue is recognized.
Cash Flows
For the statements of cash flows, cash consists of cash on hand and demand
deposits with financial institutions.
Concentration of Credit
The Company's primary market includes medium- and large-sized full truckload
shippers in the U.S. Loads encompass all types of products for dry vans,
excluding perishables. The Company maintains a diversified freight base with
no one customer or industry making up a significant percentage of the
Company's receivables or revenues.
Fuel Hedging
The Company purchases six-month call options on No. 2 heating oil to manage
exposure to fluctuations in diesel fuel prices. The Company's exposure to
loss is limited to the premium cost of the contract. The options are carried
at cost. Gains and losses are deferred and recognized as adjustments to fuel
expense when the underlying hedged transactions (fuel purchases) occur. At
December 31, 1999, option fair values totaled $22,453, deferred losses
totaled $261 and notional amounts totaled $697,200. At December 31, 1998,
option fair values totaled $2,000, deferred losses totaled $12,000 and
notional amounts totaled $672,000.
Property, Equipment and Depreciation
Property and equipment are stated at cost. When equipment is sold, the gain
or loss indicated is recognized. When equipment is traded, the basis of the
new equipment is adjusted when necessary for any gain or loss indicated. The
cost of tires and tubes are capitalized as part of the tractors and trailers
at the time of acquisition and depreciated as a component of the tractors and
trailers. Replacement tires and tubes are charged to maintenance expense
when installed.
Depreciation of property and equipment is computed using straight-line
methods and the following estimated useful lives:
Assets Estimated Useful Lives
Tractors 4 to 7 years
Trailers 10 years
Computer equipment, software
and other property 5 to 12 years
Buildings and improvements 31.5 to 40 years
The Company depreciates trailers to estimated salvage values, currently 17
percent to 24 percent of original cost. The Company discontinued utilizing
salvage values on tractors as a result of varying holding periods. The
Company typically holds tractors forty to forty-five months.
Fair Value of Financial Instruments
Cash, accounts receivable, payables and accruals approximate fair value.
The fair value of long-term debt, including current portion, approximates
carrying value based on duration of notes and their interest rates.
Insurance and Claims
Accident and workers' compensation claims include the estimated settlements,
settlement expenses and an allowance for claims incurred but not yet reported
for property damage, personal injury and public liability losses from vehicle
accidents and cargo losses as well as workers' compensation claims for
amounts not covered by insurance. Accrued claims are determined based on
estimates of the ultimate cost of settling reported and unreported claims,
including expected settlement expenses. Such estimates are based on
management's evaluation of the nature and severity of individual claims and
an estimate of future claims development based on historical claims
development trends. Since the reported liability is an estimate, the
ultimate liability may be more or less than reported. If adjustments to
previously established accruals are required, such amounts are included in
operating expenses. In 1999, 1998 and 1997, such adjustments were not
significant.
The Company acts as a self-insurer for liability up to $50,000 for any single
occurrence involving cargo, personal injury or property damage. Liability in
excess of this amount is assumed by an insurance underwriter. The Company
acts as a self-insurer for workers' compensation liability up to a maximum
liability of $250,000 per claim and $900,000 aggregate per year. Liability
in excess of this amount up to $5 million per occurrence is assumed by an
insurance underwriter. In addition, the Company has provided its insurance
carriers with letters of credit of approximately $846,000 in connection with
its liability and workers' compensation insurance arrangements.
Reclassification
Certain amounts in the 1998 financial statements have been reclassified to
conform with the presentation in the 1999 financial statements.
4. PROPERTY AND EQUIPMENT:
1999 1998
Cost-
Tractors $39,903,953 $41,313,634
Trailers 20,000,808 19,559,008
Land 838,962 838,962
Buildings and improvements 2,993,784 2,931,435
Computers and onboard
communications equipment 3,075,669 2,842,964
Other 1,381,518 1,422,879
Total cost 68,194,694 68,908,882
Less- Accumulated depreciation 15,796,843 19,699,613
Net property and equipment $52,397,851 $49,209,269
5. LONG-TERM DEBT:
1999 1998
Amended line of credit , interest
payable monthly at the prime rate
(8.50% at December 31, 1999),
due August 1, 2001, collateralized
by accounts receivable $ 1,608,335 $ 3,571,539
Installment notes, 5.36% to 8.76%,
payable in monthly installments of
principal and interest through June
2004, collateralized by tractors,
trailers and computer equipment 44,675,276 37,480,238
Installment notes, 7.75% to 13.80%,
payable in monthly installments of
principal and interest through
November 2004, collateralized by
vehicles 59,874 -
Installment notes, 7.00% to 8.75%,
payable in installments through
January 2005, collateralized by
real property 1,388,917 1,443,730
47,732,402 42,495,507
Less- Current portion 13,842,822 13,837,296
Long-term debt $33,889,580 $28,658,211
Maturities of long-term debt are as follows:
2000 $13,842,822
2001 14,203,530
2002 10,697,479
2003 7,015,733
2004 1,837,908
Thereafter 134,930
$47,732,402
The amended line-of-credit agreement provides for maximum borrowings of $10
million based on an 85 percent advance rate on eligible accounts receivable,
as defined, through December 31, 1999. The amended line bears interest at a
variable rate, based upon the prime rate, or LIBOR plus 2.75 percent, at the
Company's election. The amended agreement contains certain covenants
relating to tangible net worth, leverage ratios, debt service coverage and
other factors. The Company was in compliance with all required covenants at
December 31, 1999. Borrowings on the amended line totaled approximately
$1,479,000 at December 31, 1999. The Company had approximately $6,040,000 of
additional borrowing availability as of December 31, 1999. A total of
$846,000 of the credit line was committed for letters of credit and $130,000
to guarantee officers loans for stock purchases (Note 10). The weighted-
average interest rate on the amended line of credit for the year ended
December 31, 1999 was 8.5 percent. The annual average balance borrowed on
the amended line of credit for the year ended December 31, 1999, was
$3,069,000.
6. STOCK OPTION PLAN:
The Company has reserved 210,000 shares of its common stock for issuance to
key management personnel and directors of the Company under three stock
option plans that permit grants of nonqualified stock options. The option
price cannot be lower than the fair market value of the stock at the date of
grant. The options are exercisable over a period not to exceed 10 years from
the date of grant (5 years for a more than 10 percent shareholder). Options
outstanding at December 31, 1999, had a weighted-average contractual life of
six years, eight months and exercise prices ranged from $3.25 to $7.00 per
share.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its plans, and accordingly
has not recognized compensation costs in its financial statements for such
plans. Had compensation costs been recognized in accordance with Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation," the Company's operating results would have been reported at
the unaudited pro forma amounts indicated below:
1999 1998 1997
Net income (loss)-
As reported $(892,085) $882,976 $509,478
Pro forma (905,663) 731,577 480,071
Earnings (loss) per
share-
As reported (0.49) 0.48 0.28
Pro forma (0.50) 0.40 0.26
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for the 1999, 1998 and 1997 grants:
1999 1998 1997
Dividend yield None None None
Expected volatility 52.9% to 53.1% 38.6% to 49.3% 40.5%
Risk-free interest
rate 5.3% to 5.8% 4.6% to 5.6% 5.7% to 6.4%
Expected option life 3 years 3 years 3 years
A summary of the Company's stock option plans as of December 31, 1999, and
changes during 1999, 1998 and 1997 is presented below:
1999 1998 1997
Shares Per Share Shares Per Share Shares Per Share
(a) (a) (a)
Outstanding
at
beginning of
year 197,000 $6.03 110,000 $5.30 80,000 $5.18
Granted 16,000 3.34 94,256 6.83 30,000 5.63
Exercised (1,000) 3.50 - - - -
Forfeited (22,021) 6.20 (7,256) 5.36 - -
Outstanding
at end of
year 189,979 $5.79 197,000 $6.03 110,000 $5.30
Exercisable
at end of
year $3.25 to $3.75 to $3.75 to
183,746 $7.00 158,980 $7.00 52,545 $6.00
Weighted-
average
fair value
of options
granted
during the
year $1.37 $2.29 $1.58
(a) Weighted-average exercise price per share.
7. EMPLOYEE STOCK OWNERSHIP PLAN:
The Company has an Employee Stock Ownership Plan (ESOP) available to all
employees, except executive management, which enables them to receive shares
of the Company's common stock. The cost of the ESOP is borne by the Company.
For the year ended December 31, 1999, the Company did not allocate shares to
the plan. For the year ended December 31, 1998, 3,500 shares of stock held
by the ESOP were allocated to participants resulting in ESOP expense of
$17,500. For the year ended December 31, 1997, 7,000 shares of stock held by
the ESOP were allocated to participants resulting in ESOP expense of $41,160.
8. INCOME TAXES:
Deferred income taxes reflect the impact of temporary differences between
assets and liabilities for financial reporting purposes and such amounts as
measured under tax laws and regulations.
Deferred tax assets and liabilities are comprised of the following at
December 31:
1999 1998
Deferred tax assets-
Claims and other reserves $ 514,305 $ 467,624
Net operating loss
carryforward 1,297,494 1,924,655
Other 349,096 273,218
2,160,895 2,665,497
Deferred tax liabilities-
Property and equipment 3,826,948 4,863,827
Revenue 165,847 201,670
3,992,795 5,065,497
Net deferred tax liability $1,831,900 $2,400,000
A reconciliation between the provision for income taxes and the expected
taxes using the federal statutory rate of 34 percent follows:
1999 1998 1997
Tax expense (benefit) at federal
statutory rate $(466,637) $475,320 $279,392
State income tax expense (benefit) (79,363) 56,596 32,870
Deferred income tax expense
(benefit) $(546,000) $531,916 $312,262
The Company has available federal income tax net operating loss carryforwards
of approximately $3,414,000 for regular income tax purposes expiring through
2014.
9. EARNINGS PER SHARE:
Basic earnings per share is based upon the weighted-average common shares
outstanding during the year. Dilutive earnings per share is based upon the
weighted-average common and common equivalent shares outstanding during each
year. Employee stock options are the Company's only common stock
equivalents; there are no other potentially dilutive securities.
10. COMMITMENTS AND CONTINGENCIES:
Legal
Various legal actions, claims and assessments are pending against the
Company. It is the opinion of management that these actions will have no
significant impact on the Company's financial condition or its results of
operations.
Stock Loans
In 1998, the Company entered into Stock Purchase Assistance Agreements
(Agreements) with four of its executive officers that allowed them to
purchase company stock in the amount of $480,000 collectively, with funds
from personal loans which are partially guaranteed by the Company. The loans
are payable in six equal principal installments plus interest payable on
January 1st of each year. The loans bear interest at the prime rate (8.50
percent at December 31, 1999). If the executive officers remain with the
Company for the entire year, the Company will pay to the executive officers,
as compensation, an amount equal to the principal installment loan payments
due for such year. The executive officers are then responsible for paying to
the lender the principal installment loan payment due and any accrued
interest for the year. The Company does not guarantee the accrued interest
portion of the loans. The Company has recorded the guarantee as a reduction
of stockholders' equity and an increase in long-term debt.
During 1999, the Company terminated two executive officers and paid off the
principal balances of their loans totaling $250,000 as specified in the
Agreements. The balance of the guarantee was reduced as a result of the
payoff of these loans. The Company recorded compensation expense of $323,000
and $37,000 in 1999 and 1998, respectively, in connection with the
Agreements.
11. INDUSTRY SEGMENTS:
The Company follows Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
changes the way the Company reports information about its operating segments.
In 1998 and 1997, there was only one reportable segment. The information for
1998 and 1997 has been restated from the prior years' presentation in order
to conform with the 1999 presentation.
The Company's two reportable segments are trucking operations and logistics.
These segments are classified primarily by the type of services they provide.
Performance of the segments is generally evaluated by its operating income.
The trucking operations provide freight transport services to customers. The
logistics operations arrange freight transportation for customers using
various solutions. Customers of both the trucking operations and logistics
operations primarily include manufacturing, retail, wholesale and other
service companies.
1999 1998 1997
Operating revenues-
Trucking revenues $70,776,151 $67,798,883 $60,127,246
Logistics 9,703,615 4,485,389 3,669,346
Total operating revenues $80,479,766 $72,284,272 $63,796,592
Operating income-
Trucking $1,845,183 $4,599,060 $3,913,782
Logistics 403,299 167,270 177,096
Total operating income $2,248,482 $4,766,330 $4,090,878
Due to the minimal amount of long-lived assets required by the logistics
operations, the Company does not separately report such assets and related
depreciation and amortization expense in its financial records used for
allocating company resources and evaluating operating performance. Direct
costs are the only costs allocated to the logistics division.
Board of Directors Executive and Other Officers
William P. Ward (1), (4), (5), (6) William P. Ward
Chairman of the Board President and
OTR Express, Inc. Chief Executive Officer
Janice Kathryn Ward (5) Janice Kathryn Ward
Vice President Vice President
OTR Express, Inc.
Steven W. Ruben
Dr. James P. Anthony (1), (2) Vice President Finance
Radiologist Chief Financial Officer
Carondelet Radiology Group
Jeffrey T. Brown
Terry G. Christenberry (2), (4) Vice President Operations
President
Christenberry, Collet & Co., Inc. Glen P. Rittgers
Vice President Sales and Marketing
Charles M. Foudree (1), (3), (4), (6)
Retired Executive Vice President-Finance Christine D. Schowengerdt
Harmon Industries, Inc. Treasurer and Secretary
Dean W. Graves (1), (6) David McKnight
Owner, Dean Graves, FAIA Vice President Fleet Services
Architectural Firm
Marc C. Hirschmann
Dr. Ralph E. MacNaughton (2), (3), (5) Vice President Maintenance
Physician, Retired and Purchasing
Carondelet Radiology Group
Paul A. MacNaughton
Vice President Management
Information Systems
Chip Seitz
Vice President OTR Logistics
Gary L. Hinkle
Vice President Fleet Management
Member of:
(1) Governance Committee
(2) Audit Committee
(3) Compensation Committee
(4) Strategy Committee
(5) Risk Management Committee
(6) Investor and Public Relations Committee
Photography by:
Debbie Sauer
QUARTERLY FINANCIAL DATA (Unaudited)
1999
(In thousands except
per share data) Mar 31 Jun 30 Sep 30 Dec 31 Year
INCOME STATEMENT
Operating revenue $18,681 $20,571 $20,502 $20,726 $80,480
Operating expenses
Salaries, wages
and benefits 7,191 7,666 7,289 7,757 29,903
Purchased
transportation 2,934 3,529 4,421 4,379 15,263
Fuel 1,072 1,485 1,753 1,954 6,264
Maintenance 1,197 1,246 1,281 1,143 4,867
Depreciation 1,629 1,838 2,027 2,053 7,547
Insurance and claims 603 470 396 677 2,146
Taxes and licenses 1,845 1,960 1,775 1,783 7,363
Supplies and other 1,143 1,139 1,164 1,432 4,878
Total operating
expenses 17,614 19,333 20,106 21,178 78,231
Operating income (loss) 1,067 1,238 396 (452) 2,249
Interest expense 835 886 923 1,043 3,687
Income (loss) before income
taxes 232 352 (527) (1,495) (1,438)
Income tax expense (benefit) 88 134 (200) (568) (546)
Net income (loss) $ 144 $ 218 $ (327) $ (927) $ (892)
Weighted average number of
shares
Basic 1,832 1,815 1,782 1,782 1,803
Diluted 1,832 1,815 1,782 1,782 1,803
Earnings (loss) per share
Basic $ 0.08 $ 0.12 $ (0.18) $ (0.52) $ (0.49)
Diluted $ 0.08 $ 0.12 $ (0.18) $ (0.52) $ (0.49)
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages
and benefits 38.5 37.3 35.6 37.4 37.2
Purchased
transportation 15.7 17.2 21.6 21.1 19.0
Fuel 5.8 7.2 8.6 9.4 7.8
Maintenance 6.4 6.1 6.2 5.5 6.0
Depreciation 8.7 8.9 9.9 9.9 9.4
Insurance and claims 3.2 2.3 1.8 3.3 2.7
Taxes and licenses 9.9 9.5 8.7 8.6 9.1
Supplies and other 6.1 5.5 5.7 7.0 6.0
Total operating
expenses 94.3 94.0 98.1 102.2 97.2
Operating income (loss) 5.7 6.0 1.9 (2.2) 2.8
Interest expense 4.4 4.3 4.5 5.0 4.6
Income (loss) before income
taxes 1.3 1.7 (2.6) (7.2) (1.8)
Income tax expense (benefit) 0.5 0.6 (1.0) (2.7) (0.7)
Net income (loss) 0.8 1.1 (1.6) (4.5) (1.1)
QUARTERLY FINANCIAL DATA (Unaudited)
1998
(In thousands except
per share data) Mar 31 Jun 30 Sep 30 Dec 31 Year
INCOME STATEMENT
Operating revenue $16,747 $17,750 $18,557 $19,230 $72,284
Operating expenses
Salaries, wages
and benefits 6,498 6,660 7,282 7,689 28,129
Purchased
transportation 1,390 1,850 2,047 2,604 7,891
Fuel 1,589 1,480 1,359 1,263 5,691
Maintenance 1,074 1,165 1,252 1,234 4,725
Depreciation 1,876 1,954 1,914 1,693 7,437
Insurance and claims 546 553 331 478 1,908
Taxes and licenses 1,609 1,678 1,771 1,841 6,899
Supplies and other 1,124 1,101 1,331 1,282 4,838
Total operating
expenses 15,706 16,441 17,287 18,084 67,518
Operating income 1,041 1,309 1,270 1,146 4,766
Interest expense 838 835 843 835 3,351
Income before income taxes 203 474 427 311 1,415
Income tax expense 77 180 154 121 532
Net income $ 126 $ 294 $ 273 $ 190 $ 883
Weighted average number of
shares
Basic 1,836 1,831 1,836 1,836 1,836
Diluted 1,851 1,851 1,841 1,841 1,846
Earnings per share
Basic $ 0.07 $ 0.16 $ 0.15 $ 0.10 $ 0.48
Diluted $ 0.07 $ 0.16 $ 0.15 $ 0.10 $ 0.48
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages
and benefits 38.8 37.5 39.2 40.0 38.9
Purchased
transportation 8.3 10.4 11.0 13.5 10.9
Fuel 9.5 8.3 7.3 6.6 7.9
Maintenance 6.4 6.6 6.7 6.4 6.5
Depreciation 11.2 11.0 10.3 8.8 10.3
Insurance and claims 3.3 3.1 1.9 2.5 2.6
Taxes and licenses 9.6 9.5 9.5 9.6 9.6
Supplies and other 6.7 6.2 7.3 6.6 6.7
Total operating
expenses 93.8 92.6 93.2 94.0 93.4
Operating income 6.2 7.4 6.8 6.0 6.6
Interest expense 5.0 4.7 4.5 4.4 4.6
Income before income taxes 1.2 2.7 2.3 1.6 2.0
Income tax expense 0.5 1.0 0.8 0.6 0.8
Net income 0.7 1.7 1.5 1.0 1.2
Stockholder Information
At March 15, 2000, there were 157 stockholders of record. Since many
stockholders hold their certificates in "street name," management estimates
the number of individual stockholders is approximately 1,000.
Price Range of Stock
OTR Express, Inc.'s common stock trades on The American Stock Exchange
under the symbol OTR. Prior to August 13, 1999, the company's common stock
traded on The Nasdaq Stock Market under the symbol OTRX. The following
table sets forth for the periods indicated the high and low sale prices of
the common stock, as reported by The American Stock Exchange and The Nasdaq
Stock Market.
1998
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1998 $5.625 - $7.625
Apr 1 to Jun 30, 1998 $4.500 - $8.000
Jul 1 to Sep 30, 1998 $4.500 - $6.000
Oct 1 to Dec 31, 1998 $2.750 - $5.500
1999-2000
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1999 $3.000 - $5.250
Apr 1 to Jun 30, 1999 $2.750 - $4.313
Jul 1 to Sep 30, 1999 $3.250 - $4.125
Oct 1 to Dec 31, 1999 $1.500 - $3.688
Jan 1 to Feb 29, 2000 $1.625 - $3.250
To date, the company has not declared or paid any dividends on its Common
Stock and presently does not anticipate paying any such dividends in the
foreseeable future. It is management's present intention to retain future
earnings, if any, for use in the company's business operations.
Stockholder Information
Corporate Offices Transfer Agent
OTR Express, Inc. UMB Bank of Kansas City, N.A.
804 N. Meadowbrook Drive Securities Transfer Division
Olathe, Kansas 66062 P.O. Box 410064
(913) 829-1616 Kansas City, Missouri 64141-0064
Mailing address: Independant Auditors
P.O. Box 410064 Arthur Andersen LLP
Kansas City, Missouri 64141-0064 Suite 400
Olathe, Kansas 66063 2301 McGee Street
Kansas City, Missouri 64108-2604
Annual Meeting General Counsel
The annual meeting of the stockholders Bryan Cave LLP
will be at 3:00 p.m., Thursday, 3500 One Kansas City Place
May 4, 2000, at the Overland Park Marriott 1200 Main Street
Hotel, 10800 Metcalf Avenue, Overland Kansas City, Missouri 64105
Park, Kansas
Form 10-K Common Stock Listing
Stockholders may receive a copy of OTR Express, Inc.'s common stock
the company's 1999 Annual Report to trades on The American Stock
the Securities and Exchange Commission Exchange under the symbol OTR.
on Form 10-K free of charge by writing
to:
Investor Relations
OTR Express, Inc.
P.O. Box 2819
Olathe, Kansas 66063-0819
Visit our website at www.OTRX.com for more information
on transportation and logistics solutions from OTR Express, Inc.
(OTRX logo omitted)
Customer satisfaction. Every day. Every load.
OTR Express, Inc.
804 N. Meadowbrook Drive P.O. Box 2819
Olathe, Kansas 66063-0819
(913)829-1616 Fax (913)829-0622
www.otrx.com