UNITED STATES
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 March 31, 1997 Commission file number 1-19773
OTR EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0993128
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
804 N. Meadowbrook Drive
PO Box 2819, Olathe, Kansas 66063-0819
(Address of principal executive offices) (Zip Code)
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
1,840,515
(Number of shares of common stock outstanding as of April 30, 1997)
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OTR EXPRESS, INC.
BALANCE SHEETS
March 31 1997 December 31 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 70,566 $ 43,107
Accounts receivable, freight 6,363,878 6,139,335
Accounts receivable, other 434,811 356,027
Inventory 584,197 590,165
Prepaid expenses and other 1,042,219 552,426
TOTAL CURRENT ASSETS 8,495,671 7,681,060
PROPERTY AND EQUIPMENT 43,862,743 42,894,525
TOTAL ASSETS $ 52,358,414 $ 50,575,585
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ 2,526,000 $ 1,389,000
Accounts payable, trade 1,583,263 1,396,760
Accrued payroll and taxes 1,129,004 823,811
Other accrued expenses 1,147,576 1,180,900
Current portion of long-term debt 14,275,349 14,361,651
TOTAL CURRENT LIABILITIES 20,661,192 19,152,122
LONG-TERM DEBT 21,637,220 21,019,354
DEFERRED INCOME TAXES 1,459,295 1,599,014
STOCKHOLDERS' EQUITY 8,600,707 8,805,095
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 52,358,414 $ 50,575,585
OTR EXPRESS, INC.
STATEMENTS OF OPERATIONS
Three Months Ended March 31
(Unaudited) 1997 1996
OPERATING REVENUE
Freight revenue $ 12,872,476 $ 12,315,612
Brokerage revenue 958,515 716,737
Total operating revenue 13,830,991 13,032,349
OPERATING EXPENSES
Salaries, wages and benefits 5,523,603 5,403,532
Purchased transportation 940,411 646,799
Fuel 1,824,402 1,639,289
Maintenance 855,824 804,706
Depreciation 1,716,390 1,698,960
Insurance and claims 316,518 391,525
Taxes and licenses 1,454,675 1,522,751
Supplies and other 806,734 623,002
Total operating expenses 13,438,557 12,730,564
Operating income 392,434 301,785
Interest expense 720,642 690,786
Income (loss) before income taxes (328,208) (389,001)
Income tax expense (benefit) (124,719) (167,745)
Net income (loss) $ (203,489) $ (221,256)
Average shares outstanding 1,841,205 1,836,048
Net income (loss) per share $ (0.11) $ (0.12)
OTR EXPRESS, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended March 31
(Unaudited) 1997 1996
OPERATING ACTIVITIES
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,053,151 $ 601,848
INVESTING ACTIVITIES
Acquisition of property and equipment (4,044,607) (263,989)
Proceeds from disposition of property
and equipment 1,360,000 117,000
NET CASH USED IN INVESTING ACTIVITIES (2,684,607) (146,989)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 7,291,017 3,957,000
Repayments of long-term debt (6,759,453) (4,021,463)
Net increase (decrease) in bank note payable 1,137,000 (390,000)
Other (9,649) (6,999)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 1,658,915 (461,462)
NET INCREASE (DECREASE) IN CASH 27,459 (6,603)
CASH, BEGINNING OF PERIOD 43,107 36,101
CASH, END OF PERIOD $ 70,566 $ 29,498
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 720,436 $ 693,121
Cash received for income taxes - (65,025)
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, 1996.
NOTE 2 - LONG-TERM DEBT AND COMMITMENTS
During the three months ended March 31, 1997, the Company financed
the purchase of revenue equipment through the issuance of long-
term debt totaling $4,033,000. This debt bears interest at an
effective rate of 8.00%. The Company refinanced encumbered
revenue equipment through the issuance of long-term debt totaling
$3,300,000. This debt bears interest at an effective rate of
8.66%.
At March 31, 1997, the Company had purchase and finance
commitments outstanding for additional revenue equipment totaling
$11,897,000. The Company anticipates receiving proceeds from the
sale or trade-in of 116 tractors and 190 trailers in association
with these commitments.
NOTE 3 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("FAS 128"), "Earnings Per Share", which
simplifies the computation of earnings per share. FAS 128 is
effective for financial statements issued for periods ending after
December 15, 1997 and requires restatement for all prior period
earnings per share data presented. The Company will be required
to adopt FAS No. 128 in the fourth quarter of 1997, but does not
expect that adoption will have a material effect on earnings per
share.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
1st Quarter 1997 v. 1996
Operating Revenue. Operating revenue improved by 6.1% to
$13.8 million in the first quarter ended March 31, 1997 from $13.0
million in 1996. Freight revenue increased by 4.5% and brokerage
revenue increased by 33.7%.
Freight revenue improved primarily due to an increase in the
rate per mile to $1.012 in the first quarter of 1997 compared to
$0.979 in 1996. The higher rate is primarily a result of a higher
level of shipper miles in 1997 compared to 1996. The average
number of tractors in service were 506 in the first quarter of
1997 compared to 502 in 1996. Average miles per truck per week
increased to 1,974 from 1,955. The Company's empty mile percent
increased to 7.3% from 6.9% in 1996.
Brokerage revenue increased to 6.9% of revenue from 5.5% due to
an increase in the Company's customer base and additional
personnel in the brokerage division.
Operating Expenses. The operating ratio (total operating
expenses as a percent of operating revenue) improved to 97.2% in
the first quarter of 1997 compared to 97.7% in 1996.
Salaries, wages and benefits decreased to 39.9% of revenue in
1997 from 41.5% in 1996. The decrease has resulted from increased
revenue rates per mile and relatively stable driver wage rates per
mile.
Purchased transportation represents payments to other trucklines
for hauling loads contracted through the Company's freight
brokerage division. Purchased transportation increased to 6.8% of
revenue in 1997 compared to 5.0% in 1996 because of the increase
in brokerage revenue.
Fuel was 13.2% of revenue in 1997 compared to 12.6% in 1996.
The Company's blended average cost per gallon was $1.212 in 1997
compared to $1.101 in 1996, as a result of higher diesel fuel
prices nationwide in the first quarter of 1997.
Depreciation as a percent of revenue decreased to 12.4% in 1997
from 13.0% in 1996 as a result of higher revenue.
Taxes and licenses as a percent of revenue decreased from 11.7%
to 10.5% as a result of the increased revenue rate per mile.
Supplies and other expenses were 5.8% of revenue in 1997
compared to 4.8% in 1996 as a result of an increase in advertising
for drivers and monthly service costs of on-board satellite
communications, which were installed in all of the Company's
tractors in August 1996.
Interest Expense. Interest expense declined to 5.2% of
revenue in 1997 from 5.3% in 1996.
Net Income (Loss). The Company reported a net loss of
$203,000, or $0.11 per share, for the first quarter of 1997
compared to a net loss of $221,000, or $0.12 per share, in 1996.
The effective income tax rate was 37.9% in 1997 compared to 43.1%
in 1996.
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. Capital expenditures for
revenue equipment purchases totaled $4,045,000 for the three
months ended March 31, 1997. The Company received $1,360,000 in
proceeds from the disposition of revenue equipment. The Company
has outstanding purchase commitments for 100 replacement tractors
at a cost of $8.0 million and 190 replacement trailers at a cost
of $3.9 million. The Company has finance commitments for the
equipment purchases at fixed interest rates. 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. However, in 1997 the Company began
financing tractors over fifty-four months to reflect a longer
holding period for the tractors. Trailers will be financed over
sixty months. This method of financing can be expected to
continue to produce working capital deficits in the future. The
Company's working capital deficit at March 31, 1997 was $12.2
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.
As of March 31, 1997, 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 May 31, 1997 and is secured by
accounts receivable of the Company. The Company had borrowings of
$2.5 million under this line at March 31, 1997. A total of $1.6
million of the available credit line was committed for letters of
credit issued by the bank.
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 equity in the Company's
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 March 31, 1997.
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: May 9, 1997 /s/ William P. Ward
By: William P. Ward
Chairman of the Board,
President and Principal
Executive Officer
Date: May 9, 1997 /s/ Steven W. Ruben
By: Steven W. Ruben
Principal Financial Officer
and Principal Accounting
Officer