SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of The Securities Exchange Act of 1934
For The Quarter Ended June 30, 1996 Commission
file number 1-19773
OTR EXPRESS, INC.
(Exact name of registrant as specified in its
charter)
Kansas
(State or other jurisdiction of incorporation
of organization)
48-0993128
(IRS Employer Identification No.)
804 N. Meadowbrook Drive
PO Box 2819, Olathe, Kansas
(Address of principal executive offices)
(Zip Code)
66063-0819
Registrant's telephone number, including area
code (913) 829-1616
Former name, former address and former fiscal
year, if changed since last report.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the
registrant was required to file such reports),
and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
1,835,518
(Number of shares of common stock outstanding as
of July 31, 1996)
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OTR Express, Inc.
Balance Sheets
June 30 December 31
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 158,952 $ 36,101
Accounts receivable 6,562,575 6,008,392
Fuel Inventory 140,624 155,568
Prepaid expenses and other 1,184,909 598,923
TOTAL CURRENT ASSETS 8,047,060 6,798,984
PROPERTY AND EQUIPMENT 42,109,796 41,989,346
OTHER ASSETS - 94,478
TOTAL ASSETS $ 50,156,856 $ 48,882,808
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ - $ 2,522,555
Accounts payable, trade 1,306,805 1,113,192
Accrued payroll and taxes 1,292,422 1,036,687
Other accrued expenses 1,199,705 1,068,992
Current portion of long-term debt 12,828,441 11,445,508
TOTAL CURRENT LIABILITIES 16,627,373 17,186,934
LONG-TERM DEBT 22,909,602 20,844,188
DEFERRED INCOME TAXES 1,639,030 1,695,772
STOCKHOLDERS' EQUITY 8,980,851 9,155,914
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $50,156,856 $ 48,882,808
OTR Express, Inc.
Statements of Operations
Second Quarter Ended Six Months Ended
June 30 June 30
Unaudited 1996 1995 1996 1995
OPERATING REVENUE
Freight revenue $ 12,599,874 $ 11,204,963 $ 24,915,486 $ 22,032,466
Brokerage revenue 806,513 613,616 1,523,250 1,380,742
Total operating
revenue 13,406,387 11,818,579 26,438,736 23,413,208
OPERATING EXPENSES
Salaries, wages and
benefits 5,255,914 4,670,982 10,659,446 9,230,908
Purchased
transportation 733,775 586,067 1,380,574 1,285,867
Fuel 1,696,242 1,328,997 3,335,531 2,542,603
Maintenance 792,804 778,227 1,597,510 1,498,173
Depreciation 1,755,076 1,653,212 3,454,036 3,036,539
Insurance and claims 361,195 400,772 752,720 806,082
Taxes and licenses 1,441,736 1,300,521 2,964,487 2,570,614
Supplies and other 662,676 655,939 1,285,678 1,224,875
Total operating
expenses 12,699,418 11,374,717 25,429,982 22,195,661
Operating income 706,969 443,862 1,008,754 1,217,547
Interest expense 646,297 547,200 1,337,083 991,883
Income (loss)
before income taxes 60,672 (103,338) (328,329) 225,664
Income tax
expense (benefit) 24,980 (36,519) (142,765) 93,252
Net income (loss) $ 35,692 $ (66,819) $ (185,564) $ 132,412
Average shares
outstanding 1,835,518 1,830,773 1,835,783 1,830,421
Net income (loss)
per share $ 0.02 $ (0.04) $ (0.10) $ 0.07
OTR Express, Inc.
Statements of Cash Flows
Six Months Ended
June 30
Unaudited 1996 1995
OPERATING ACTIVITIES
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,778,545 2,966,464
INVESTING ACTIVITIES
Acquisition of property
and equipment (4,549,487) (12,975,693)
Proceeds from disposition of
property and equipment 975,000 3,118,077
NET CASH USED
IN INVESTING ACTIVITIES (3,574,487) (9,857,616)
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 11,910,687 12,443,736
Repayment of long-term debt (8,462,340) (5,544,077)
Net increase (decrease) in
bank note payable (2,522,555) 11,000
Other (6,999) (19,246)
NET CASH PROVIDED
BY FINANCING ACTIVITIES 918,793 6,891,413
NET INCREASE IN CASH 122,851 261
CASH, BEGINNING OF PERIOD 36,101 20,607
CASH, END OF PERIOD $ 158,952 $ 20,868
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest $ 1,356,024 $ 992,019
Cash paid (received)
for income taxes (81,460) 242,697
OTR EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The financial statements included herein have
been prepared by management, without audit,
pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain
information and footnote disclosures normally
included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted
pursuant to such rules and regulations, although
management believes that the disclosures are
adequate to enable a reasonable understanding of
the information presented. In the opinion of
management, all adjustments considered necessary
for a fair presentation of the financial
statements have been included. For further
information, refer to the Company's financial
statements and footnotes thereto included in the
Annual Report and Form 10-K for the year ended
December 31, 1995.
NOTE 2 - LONG-TERM DEBT AND COMMITMENTS
During the six months ended June 30, 1996, the
Company refinanced unencumbered revenue
equipment through the issuance of long-term debt
totaling $1,400,000. The Company also
refinanced certain encumbered revenue equipment
through the issuance of long-term debt totaling
$5,035,000. The debt bears interest at fixed
rates ranging from 7.60% to 8.21%.
During the six months ended June 30, 1996, the
Company refinanced unencumbered real estate
through the issuance of long-term debt totaling
$1,400,000. At June 30, 1996, the interest rate
on this debt, adjusted annually, is 8.75%.
At June 30, 1996, the Company had purchase and
finance commitments outstanding for additional
revenue equipment totaling $2,909,000. The
Company anticipates receiving proceeds from the
sale or trade-in of 42 tractors in association
with these commitments.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
2nd Quarter 1996 v. 1995
Operating Revenue. Operating revenue improved
by 13.4% to $13.4 million in the second quarter
ended June 30, 1996 from $11.8 million in 1995.
Freight revenue increased by 12.4% resulting
from an increase of 12.9% in the average number
of tractors in service from 450 in the second
quarter of 1995 to 508 in 1996. Average revenue
per loaded mile decreased slightly to $1.036 in
1996 from $1.038 in 1995. Average miles per
truck per week decreased to 1,928 from 1,946 due
to a higher level of unmanned trucks in the
second quarter of 1996. The Company's empty
mile percent decreased in the second quarter of
1996 to 6.5% from 7.2% in 1995.
Operating Expenses. The operating ratio
(total operating expenses as a percent of
operating revenue) improved to 94.7% in the
second quarter of 1996 compared to 96.2% in
1995.
Salaries, wages and benefits decreased to
39.2% of revenue in 1996 from 39.5% in 1995.
The Company increased wage rates for drivers
twice in 1995 to remain competitive in
attracting and retaining qualified drivers in a
very competitive market. There have been no such
increases in 1996.
Purchased transportation represents payments
to other trucklines for hauling loads contracted
through the Company's freight brokerage
division. Purchased transportation increased to
5.5% of revenue in 1996 compared to 5.0% in
1995.
Fuel was 12.7% of revenue in 1996 compared to
11.2% in 1995. The Company's blended
average cost per gallon was $1.171 in 1996
compared to $1.086 in 1995, as a result of higher
diesel fuel prices nationwide in the 2nd quarter of 1996.
Depreciation as a percent of revenue decreased
to 13.1% in 1996 from 14.0% in 1995 as a result of
lower prices for new tractors in 1996 and an
increase in the holding period of new
tractors from 36 months to 40 months.
Insurance and claims were lower in the second
quarter of 1996 at 2.7% of revenue compared to
3.4% in 1995. The decrease resulted from lower
premium rates on liability insurance and a more
favorable loss experience per mile in 1996.
Interest Expense. Interest expense increased
to 4.8% of revenue in 1996 from 4.6% in 1995 as
a result of lower revenue per mile in 1996 and
higher debt levels.
Net Income (Loss). The Company reported net
income of $36,000, or $0.02 per share, for the
second quarter of 1996 compared to a net loss of
$67,000, or $0.04 per share, in 1995. The
effective income tax rate was 41.2% in 1996
compared to 35.3% in 1995.
Six Months Comparison 1996 v. 1995
Operating Revenue. Operating revenue for the
six months ended June 30, 1996 increased by
12.9% to $26.4 million from $23.4 million in 1995.
Freight income increased by 13.1% during the
period while brokerage income increased by
10.3%. Average revenue per loaded mile
decreased slightly from $1.039 in 1995 to
$1.030 in 1996. Average miles per week
decreased to 1,923 in 1996 from 2,023
in 1995. The average number of tractors
increased by 20.0% for the first six months of
1996 to 510 average units in service from 425
in 1995. In addition, empty miles was 6.7% of
total miles in the first six months of 1996
and 1995.
Operating Expenses. The operating ratio for
the first six months of 1996 was 96.2% compared
to 94.8% in 1995.
Salaries, wages and benefits increased to
40.3% of revenue for the first six months of 1996
compared to 39.4% in 1995 primarily as a result
of substantially lower revenue per mile in the
first quarter of 1996.
Fuel increased to 12.6% of revenue in 1996
from 10.9% in 1995 as a result of higher diesel
fuel prices. The Company's blended average cost
per gallon was $1.135 in 1996 compared to $1.060
in 1995.
Insurance and claims were lower for the first
six months of 1996 at 2.8% of revenue compared
to 3.4% in 1995 as a result of lower premium
rates and more favorable loss experience in
1996.
Interest Expense. Interest expense increased
to 5.1% of revenue in 1996 from 4.2% in 1995 as
a result of lower revenue per mile in 1996 and
higher debt per unit.
Net Income (Loss). For the first six months
of 1996, the Company reported a net loss of
$186,000, or $0.10 per share, compared to net
income of $132,000, or $0.07 per share, in 1995.
The effective income tax rate for the first six
months of 1995 was 41.3% compared to 43.5% in
1995.
LIQUIDITY AND CAPITAL RESOURCES
The growth of the Company's business has
required significant investments in new revenue
equipment, which has been acquired primarily
through secured borrowings. Net capital
expenditures for revenue equipment were
$4,044,000 for the six months ended June 30,
1996.
Other capital expenditures of $505,000
were primarily for the expansion of the
Company's corporate headquarters. The Company
originally planned to expand
its fleet by 60 tractors in 1996,
conditioned upon improvement in the freight
market. By June 1996,the Company had canceled
delivery of all 60 expansion units. At June 30,
1996, the Company had outstanding purchase commitments
for 28 replacement tractors at a cost of $2.1 million
and 46 trailers at a cost of $0.9 million. In addition,
the Company expects to complete its purchase of
on-board communications units in August 1996, at
an estimated cost of $1.6 million. The
Company's other capital expenditures will be financed
through internally generated funds and secured
borrowings.
Historically, the Company has obtained loans
for revenue equipment which are of shorter
duration (three years for trailers, four 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 that 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 June 30, 1996 was
$8.6 million. Primarily due to the Company's
equity position and the potential for
refinancing of assets owned by the
Company, working capital deficits historically
have not been a barrier to the Company's ability
to borrow funds for operations and expansion.
As of June 30, 1996, the Company had a credit
line of $5.5 million with its primary lending
bank. The line bears interest at the prime
lending rate, expires November 1, 1996 and is
secured by accounts receivable of the Company.
There were no borrowings under this line at June
30, 1996. A total of $1.5 million of the
available credit line was committed for letters
of credit issued by the bank.
In January 1996, the Company received
commitments for up to $12 million of revenue
equipment financing. The Company expects that
100% of new revenue equipment purchases will be
fixed rate. In management's opinion, the
Company has adequate liquidity for the
foreseeable future based upon funds expected to
be generated from operations, the availability
of unencumbered assets and the Company's ability
to obtain secured equipment financing.
PART II OTHER INFORMATION
ITEM 1 - Legal
Proceedings..................................................................*
ITEM 2 - Changes in
Securities...................................................................*
ITEM 3 - Defaults Upon Senior
Securities...................................................................*
ITEM 4 - Submission of Matters to a Vote of
Security Holders.............................................................*
ITEM 5 - Other
Information..................................................................*
* No information submitted under this
caption.
ITEM 6 - Exhibits and Reports on Form 8-K
The Company did not file any reports on Form
8-K during the three months ended
June 30, 1996.
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.
OTR EXPRESS, INC.
(Registrant)
Date: August 9, 1996
WILLIAM P. WARD
By: William P. Ward
Chairman of the Board,
President and Principal
Executive Officer
Date: August 9, 1996
STEVEN W. RUBEN
By: Steven W. Ruben
Principal Financial Officer and
Principal Accounting Officer