OTR EXPRESS, INC.
(Pictured on cover OTR tractor omitted)
1997 ANNUAL REPORT
(Pictured on cover OTR logo omitted)
OTR's revised operating strategy, stronger freight
demand and lower fuel costs produced an 86 percent
increase in operating income in 1997.
OTR's investment in service capability and its national
account marketing program have enabled the company to
begin serving large national shippers.
OTR now offers QualComm OmniTRACS satellite
communications on every truck, electronic data interchange
(EDI) for transmitting load status to customers, and 53-foot
air-ride trailers for premium capacity and safety.
OTR's operating strategy and technological leadership have
enabled it to increase revenues at an annual compound
growth rate of 24 percent during the past five years.
Table of Contents
Highlights 1
Letter from the Chairman 3
Letter from the President 4
New Operating Strategy and Technology 6
Customer Service and Marketing 7
Driver Incentive Management System 8
Financial Review 9
Financial Statements 13
Directors and Officers 25
Quarterly Financial Data 26
Stockholder Information 28
(Graphs-five year histories of various operating statistics omitted)
Financial Highlights
CAPTION>
(In thousands except per share data)
1997 1996 1995 1994 1993
Income Statement Data
Operating revenue $63,797 $55,261 $49,211 $42,760 $30,646
Operating income 4,091 2,195 2,029 3,648 2,452
Net income (loss) 509 (368) (157) 1,278 744
Outstanding shares 1,840 1,836 1,830 1,825 1,817
Earnings (loss) per share $ 0.28 $ (0.20) $ (0.09) $ 0.70 $ 0.41
Operating ratio (1) 93.6% 96.0% 95.9% 91.5% 92.0%
Balance Sheet Data
Current assets $ 9,223 $ 7,681 $ 6,799 $ 6,109 $ 4,413
Current liabilities 18,140 19,152 17,187 10,781 7,402
Total assets 56,034 50,576 48,883 36,720 28,508
Short-term debt 14,260 15,751 13,968 7,913 5,606
Long-term debt, less
current portion 26,688 21,019 20,844 14,595 11,995
Stockholders' equity 9,346 8,805 9,156 9,301 7,973
(1) Operating expenses as a percentage of operating revenue
Operational Highlights
1997 1996 1995 1994 1993
Total miles (in thousands) 58,253 52,330 47,197 40,279 30,644
Average number of tractors 525 506 450 345 262
Revenue per loaded mile $ 1.121 $ 1.066 $ 1.031 $ 1.041 $ 1.013
Revenue per mile $ 1.036 $ 0.996 $ 0.963 $ 0.983 $ 0.957
Miles per week per truck 2,135 1,984 2,015 2,247 2,249
Empty miles percentage 7.6% 6.6% 6.6% 5.6% 5.6%
Miles per load 1,332 1,464 1,506 1,576 1,552
Number of employees -
end of period 642 559 575 464 365
Licensed tractors -
end of period 526 503 503 394 301
Owner operators -
end of period 10 - - - -
Total tractors -
end of period 536 503 503 394 301
Licensed trailers -
end of period 765 608 567 449 329
Average equipment age
(years)
Tractors - end of period 1.97 1.82 1.23 1.50 1.34
Trailers - end of period 1.53 1.88 3.05 2.92 2.81
Fuel purchases at wholesale
(% of total ) 27.0% 32.1% 31.9% 36.4% 32.3%
Average fuel cost
per gallon $ 1.12 $ 1.17 $ 1.07 $ 1.04 $ 1.04
To Our Stockholders:
1997 was a year in which our restructuring program produced very positive
results, both financially and organizationally. In 1995, we began
implementing a revised operating strategy to return OTR to the levels of
profitability we enjoyed during the first ten years of the company's life. We
have now implemented about 50 percent of the new plan and established
important financial and operational benchmarks to help guide us through the
next five years. These initiatives, coupled with the hard work of our
associates, have returned OTR to profitability and laid the groundwork for our
long-term growth and success.
I am pleased to report that, effective February 1, 1998, Gary Klusman was
promoted to president and chief executive officer. Gary has been our chief
operating officer for nearly three years and has been largely responsible for
developing and implementing our restructuring and five year plan. I have
worked closely with Gary for the past six years since he joined OTR as chief
financial officer and I am excited about the diversified experience he brings
to his new position. Gary's financial background, along with his systems
development, planning and operating experience make him an excellent choice
to lead OTR into the next millennium.
The compensation committee of our board of directors has developed a
program for executive management to acquire a larger ownership stake in the
company. The executives' compensation will largely be incentive-based so that
their primary focus is increasing shareholder value. Each of the executives
will have a substantial ownership position in the company.
In addition to management and operational changes, we are also making
changes at the board level. The board will restructure itself under a new
corporate governance plan. One key aspect of our
governance plan includes our emphasis on long term independence of board
members. As shareholders, it is important that you are represented by a board
that is independent of management. We also plan to conduct more committee
meetings and fewer board meetings. The new plan calls for each board member
to chair a committee of the board, to specialize in policy issues essential to
that committee, and to report to the Board on his or her area of
specialization.
As chairman of the board, I will be a member of each board committee and
will continue to work closely with management as the primary liaison to the
board.
As a result of these changes, we hope to provide our stockholders with more
effective oversight of our company's management while not intruding on
management prerogatives. We expect to continue OTR's rapid growth in the
years ahead. As such, it is imperative that the board and management have a
framework for reporting and decision making that is effective for both groups.
During the past two years, we have undergone many changes; and we continue
to change every day. We could not be successful implementing these changes
without the most talented group of professionals in the trucking industry. I
would like to take this opportunity to thank our dedicated employees and
driver/managers for their responsiveness to the challenges we have presented
to them. I also would like to thank you, our shareholders, for your
confidence in our board and management team. We all have reason to be very
excited about the future.
Very truly yours,
/s/ William P. Ward
William P. Ward
Chairman of the Board
To Our Stockholders:
1997 was indeed an exciting year for OTR Express. Our return to
profitability was highlighted by especially strong results in the third and
fourth quarters. More importantly, we continued to make significant progress
in our ability to serve larger, national account customers who represent the
future of OTR.
Continuing the initiatives that began in late 1995, we greatly enhanced our
reputation as a premium service truckload carrier in 1997. We improved our
technology advantages in the customer service area and raised our level of on-
time delivery to an outstanding 96.9 percent of total loads (in an industry
where 94.0 percent is considered excellent).
As a result of these initatives, we began hauling freight for such well-
known customers as Michael's Stores, Anheuser-Busch, Rheem Manufacturing and
J.C. Penney. Additionally, we increased the percentage of direct shipper
freight to 77 percent from 61 percent in 1996, reducing our reliance on the
less consistent and lower paying broker freight.
1997 Results
Our continued success in implementing these initiatives, combined with
improving market demand for freight services and decreasing fuel prices,
resulted in significantly improved operating results in 1997.
Revenues increased by 15 percent to $63.8 million from $55.3 million in
1996. The increase was primarily driven by higher revenue rates and equipment
utilization. The average number of trucks in service increased only 4 percent
over 1996.
Operating income improved by 86 percent to $4.1 million in 1997 from $2.2
million in 1996. OTR reported an operating margin of 6.4 percent of revenues
compared to 4.0 percent in 1996. Net earnings for the year were $509,000, or
$0.28 per share (basic and diluted) compared to a loss of $368,000, or $0.20
per share (basic and diluted) in 1996.
OTR's revenue and profitability improvements in 1997 were directly related
to the development of strong direct shipper relationships that drove the
revenue per mile up to $1.036 in 1997 from $0.996 in the prior year.
Wages as a percent of revenue decreased to 40.0 percent in 1997 from 40.5
percent in 1996, even while the market for qualified drivers remained highly
competitive. The company also benefited from lower fuel costs in the second
half of 1997 with a yearly blended cost of $1.12 per gallon compared to $1.17
in 1996.
Implementation of Revised
Operating Strategy
OTR's new operating strategy was initiated in late 1995 with four distinct
phases in the implementation process:
I. Develop customer service capabilities
II. Develop direct shipper base to 90 percent of total miles
III. Modify shipper data base for new strategy
IV. Capitalize on market advantagesthrough expansion
We have successfully implemented Phases I and II of the revised operating
strategy with the positive results reflected in the last six months of 1997.
The service capabilities have been developed to meet the needs of virtually
any shipper. In December 1997, the shipper percentage exceeded our goal of
90% of total miles.
We expect to implement Phase III beginning in 1998 and continue our efforts
to improve revenue rates and utilization.
Phase IV expansion should begin in 1998 with the planned addition of 50
company trucks, 50 owner operators and 250 expansion drop trailers to help
customers meet just-in-time inventory needs. Our owner operator program,
which began in late 1997, has been very successful with 25 owner operators on
board at February 28, 1998.
Outlook for 1998
This is an exciting time to be a transportation company that excels in the
areas of technology and customer service. We have the ability and intent to
take advantage of our strengths in both of these areas.
OTR has always been a cost-conscious company, maintaining a low cost per
mile due to our experienced fleet of drivers, dedicated staff and high level
of computer automation.
We have significant potential to increase our revenue rates by adding new
transportation services, modifying our customer data base and optimizing
profitability on loads offered to us by customers. Our continued improvement
in operating margins in 1998 and beyond largely depends on our ability to
increase revenue rates.
We want to thank you for your support as a stockholder of OTR Express. Our
goal is to maximize stockholder value in the long-term within risk criteria
specified by the board of directors. Every one of our 640 associates at OTR
is committed to making your investment in OTR a profitable one.
Sincerely,
/s/ Gary J. Klusman
Gary J. Klusman
President and Chief Executive Officer
OTR's New Operating Strategy
OTR Express has modified its operating strategy to target larger, national
account shippers. OTR utilizes its leading edge technology to be an industry
leader in customer service and on time reliability.
In late 1995, OTR modified its operating strategy that had guided the
company since our founding in 1985. The objective of OTR's new strategy is to
attain substantial improvements in the following areas:
Revenue per mile
Equipment utilization
Stability of the customer base
Reduce reliance on freight brokers
In order to accomplish those key objectives, we separated the plan into four
distinct phases to be implemented:
I. Develop customer service capabilities
Install satellite on-board communications on all units
Implement electronic data interchange (EDI) with customers
Offer guaranteed equipment and rates
Convert to 53-foot air ride trailers
Expand drop trailer fleet
Provide dedicated customer service representatives
II. Develop direct shipper base to 90 percent of total miles
Reduce freight brokers to 10 percent of total miles
Target large, national shippers with higher volume of freight
who demand higher service requirements
III. Modify shipper data base for new strategy
Recruit customers into the data base who are oriented towards higher
levels of service and will pay for that higher level of service
Recruit shippers who feed OTR trucks into national account
origination areas
IV. Capitalize on market advantages through expansion
Expand internally with company trucks or owner operators
Develop acquisition strategy to leverage OTR technology and
operational advantages
Through 1997, OTR has substantially implemented Phases I and II of the plan
and will continue to focus on rate and utilization improvement. OTR will
continue to focus on Phases III and IV by strengthening the customer base and
expanding the fleet to meet customers' service expectations.
OTR Technology
Since its inception, OTR has invested considerably in leading edge
technology so that the company can maintain its customer service leadership.
We invest heavily in technology so that we can continue to operate efficiently
and maximize service to our customers. A few of our significant technological
investments include:
Qualcomm OmniTRACS System
Each OTR truck is equipped with a Qualcomm OmniTRACS on-board satellite
communications system that provides on-demand, immediate contact with drivers
and global positioning reports for truck location, anywhere in the nation.
The company receives hourly position reports on all trucks. This service is
critical for customers with just-in-time inventory management programs.
Electronic Data Interchange (EDI)
Using set protocols, OTR provides daily or on-demand transfer of load
status information to our customers by computer.
Freight Optimization System
OTR continues to utilize its proprietary Freight Optimization System as an
important part of its dispatching system. The Freight Optimization System
utilizes the company's computer network and a software system developed
internally. This unique system is designed to enable OTR to maximize rates
and minimize empty miles.
The Freight Optimization System consists of the following four continuous
systems:
o Rate Analysis
o Customer Priority Ranking
o Fleet Replanning
o Equipment Dispersal Management
The Freight Optimization System will continue to benefit the company by
working in conjunction with the new national accounts program to identify
opportunities on non-national account freight and backhaul opportunities on
national account freight.
Customer Service and Marketing
During the past two years, OTR's marketing strategy has adapted to changing
market conditions, primarily as a result of our goal to achieve higher levels
of shipper freight. Today, we are focused on marketing OTR to larger national
accounts capable of offering increased load counts at higher revenue rates.
In addition to the advanced technology that OTR possesses, we offer
customers the following additional services:
o Guaranteed equipment availability and rates, a commitment to a higher
level of customer service.
o Total transportation solutions, including an expanded brokerage department
to cover loads and warehousing.
o Drop trailers to meet customers' just-in-time inventory needs. The
company expects to add an additional 250 drop trailers in 1998 and further
expand its trailer to tractor ratio.
o Dedicated customer service department charged with serving the freight
needs of our larger national account shippers.
The customer service department provides customers with a contact within OTR
who can respond to all customer needs.
Short-haul division
In 1997, in order to meet the needs of our growing customer base, we added
a regional short-haul division at the Olathe terminal facility. In November
1997, the company established an additional short-haul division in Chicago.
The short-haul division allows OTR to complement its national fleet with a
regional fleet. The short-haul division generates higher revenue rates as a
result of the length of haul. Approximately 6 percent of OTR's fleet is made
up of short-haul trucks. As a result of the success of the short-haul
division, OTR will consider expanding to other cities based on the potential
market size, profit potential and customer demand.
On-time reliability
OTR continues to offer customers on-time reliability in a manner that few
can match:
o Our drivers are an average of 46 years of age and have more than 14 years
driving experience.
o We provide high-quality, low mileage, reliable equipment to minimize
downtime.
o We have a superior service record- with a historical on-time delivery
percentage of greater than 96 percent.
Driver Incentive Management System
An article in the industry publication Transport Topics characterized
driving for OTR as "A thinking man's job." Driver/managers are given a high
level of responsibility to manage the profitability of their equipment. OTR
provides financial incentives to its equipment managers to analyze each
decision based on the impact on net income. This system results in higher
revenues and utilization with reduced fuel costs, maintenance, accidents,
insurance premiums and road expenses.
Management has recognized from the start the importance of quality,
experienced equipment managers. The company is committed to paying managers a
premium wage and providing them with equipment they are proud to drive. This
approach has produced a group of managers averaging 46 years of age and 14
years of experience.
The company's Driver Incentive Management System rewards equipment
managers with mileage pay and profit center distributions based on their
profitability for OTR based on the profitability of their equipment.
All manager pay programs provide incentive for managers to keep expenses
low and equipment running efficiently.
Mileage pay at OTR is based on fuel efficiency achieved by a manager.
Above-average fuel economy is rewarded with premium pay per mile. Managers
have a large incentive to run equipment at efficient speeds, reduce out of
route miles, idle less and maintain the equipment in peak operating condition.
Profit Center Distributions
OTR maintains each truck as a separate profit center. Profit center
reports include the actual revenues and expenses of the equipment and fixed
expense components for administration, taxes and depreciation.
Managers receive quarterly profit center distributions based on their
profits and the profit of the company.
Selected Financial Data
(In thousands except per share data)
1997 1996 1995 1994 1993
INCOME STATEMENT
Operating revenue $63,797 $55,261 $49,211 $42,760 $30,646
Operating expenses
Salaries, wages and
benefits 25,549 22,395 19,837 15,912 10,779
Purchased
transportation 3,757 2,930 2,402 2,094 825
Fuel 7,632 7,011 5,511 4,546 3,777
Maintenance 3,654 3,310 3,005 2,648 1,896
Depreciation 7,401 6,723 6,517 5,243 4,276
Insurance and claims 1,882 1,639 1,594 1,738 1,624
Taxes and licenses 6,124 6,048 5,541 4,684 3,508
Supplies and other 3,708 3,010 2,775 2,247 1,509
Total operating
expenses 59,707 53,066 47,182 39,112 28,194
Operating income 4,090 2,195 2,029 3,648 2,452
Interest expense 3,269 2,789 2,283 1,449 1,143
Income (loss) before
income taxes 821 (594) (254) 2,199 1,309
Income tax expense (benefit) 312 (226) (97) 921 497
Income (loss) before change
in acct principle 509 (368) (157) 1,278 812
Cumulative effect of change
in acct principle - - - - (68)
Net income (loss) $ 509 $ (368) $ (157) $ 1,278 $ 744
Outstanding shares
Basic 1,840 1,836 1,830 1,825 1,817
Diluted 1,840 1,836 1,830 1,825 1,817
EPS - basic and diluted $ 0.28 $ (0.20) $ (0.09) $ 0.70 $ 0.41
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and
benefits 40.0 40.5 40.3 37.2 35.2
Purchased
transportation 5.9 5.3 4.9 4.9 2.7
Fuel 12.0 12.7 11.2 10.6 12.3
Maintenance 5.8 6.0 6.1 6.2 6.2
Depreciation 11.6 12.2 13.2 12.3 14.0
Insurance and claims 2.9 3.0 3.3 4.1 5.3
Taxes and licenses 9.6 10.9 11.3 11.0 11.4
Supplies and other 5.8 5.4 5.6 5.2 4.9
Total operating
expenses 93.6 96.0 95.9 91.5 92.0
Operating income 6.4 4.0 4.1 8.5 8.0
Interest expense 5.1 5.1 4.6 3.4 3.7
Income (loss) before
income taxes 1.3 (1.1) (0.5) 5.1 4.3
Income tax expense (benefit) 0.5 (0.4) (0.2) 2.1 1.7
Income (loss) before change
in acct principle 0.8 (0.7) (0.3) 3.0 2.6
Cumulative effect of change
in acct principle - - - - (0.2)
Net income (loss) 0.8 (0.7) (0.3) 3.0 2.4
Financial Review
1997 Compared to 1996
Operating Revenue. Operating revenue increased by 15.4% to $63.8 million
in 1997 from $55.3 million in 1996 primarily as a result of an increase in
revenue rate per mile and utilization. Revenue per mile increased by 4.0% to
$1.036 from $0.996. Miles per week per unit increased 7.6% to 2,135 from
1,984. Revenue per truck per week increased 12% to $2,212 in 1997 from $1,975
in 1996. The average number of tractors in service increased by 4.0% from 506
to 525 for the year. Revenue from brokerage of freight to other carriers
increased 12.8% in 1997 to $3.7 million from $3.3 million in 1996.
Operating Expenses. Operating income improved to 6.4% of revenue from
4.0% in 1996.
Salaries, wages and benefits decreased to 40.0% of revenue in 1997 compared
to 40.5% in 1996 as a result of the increased revenue rates per mile. There
were no increases in wage rates for drivers in 1996 or 1997.
Purchased transportation, which represents payments to other trucklines for
hauling loads contracted through the company's brokerage division and the cost
of owner operators, was 5.9% of revenue in 1997 compared to 5.3% in 1996. The
increase is a result of the addition of owner operators to the fleet beginning
in September 1997 and a 12.8% increase in brokerage volume.
Fuel decreased to 12.0% of revenue from 12.7% in 1996. The decrease is due
to an increase in revenue rate per mile and lower fuel costs in 1997 versus
1996. The company's average fuel cost per gallon was $1.12 in 1997 compared
to $1.17 in 1996. During the second half of 1997 fuel costs declined as a
result of higher fuel inventories and increased oil production. The cost in
1996 is net of $220,000 of gain on fuel hedging contracts which were in the
money as a result of higher fuel prices.
Depreciation as a percent of revenue decreased to 11.6% in 1997 from 12.2%
in 1996 as a result of higher revenue per truck in 1997.
Insurance and claims decreased to 2.9% of revenue in 1997 from 3.0% in
1996. Effective January 1, 1997, the company's liability insurance carrier
reduced its premium rate, lowering premiums by $37,000 in 1997.
Taxes and licenses decreased to 9.6% of revenue in 1997 from 10.9% in 1996
as a result of higher revenue rates per mile in 1997.
Supplies and other expenses increased to 5.8% of revenue from 5.4% in 1996.
The company installed on-board communications on its entire fleet in August
1996. In 1997, the company incurred a full year of on-board communications
costs versus five months of costs in 1996. Additionally, advertising costs
for new drivers increased in 1997.
Interest Expense. Interest expense was 5.1% of revenue in both 1996 and
1997. In both 1996 and 1997, 81% of the company's capital was interest
bearing.
Net Income (Loss). Net income for 1997 was $509,000 or $0.28 per share
compared to a net loss of $368,000 or $0.20 per share in 1996.
1996 Compared to 1995
Operating Revenue. Operating revenue increased by 12.3% to $55.3 million
in 1996 from $49.2 million in 1995. The average number of tractors in
service increased by 12% from 450 to 506 for the year . The company continued
to allocate additional resources to the brokerage operation in 1996, resulting
in a 25.3% increase in revenue from freight brokered by the company to other
carriers to $3.3 million in 1996 from $2.6 million in 1995.
Operating Expenses. Operating income was 4.0% of revenue in 1996 compared
to 4.1% in 1995.
Salaries, wages and benefits increased to 40.5% of revenue in 1996 compared
to 40.3% in 1995. The company increased wage rates for drivers twice in 1995
to attract and retain highly qualified and experienced drivers in a very
competitive market. There were no increases in wage rates for drivers in
1996.
Purchased transportation was 5.3% of revenue compared to 4.9% in 1995 as a
result of the 25% increase in brokerage revenue.
Fuel increased to 12.7% of revenue from 11.2% in 1995. The increase is
primarily due to an increase in the average fuel cost per gallon ($1.17 in
1996 vs. $1.07 in 1995). The cost in 1996 is net of $220,000 of gain on fuel
hedging contracts.
Depreciation as a percent of revenue was 12.2% in 1996 compared to 13.2% in
1995. The decrease is primarily a result of an extended holding period for
tractors. In 1996, the company began depreciating its tractors straight line
over 40 months to an estimated salvage value versus 36 months to an estimated
salvage value in 1995 to better match revenues with expenses.
Insurance and claims decreased to 3.0% of revenue in 1996 from 3.3% in
1995. Effective January 1, 1996, the company's liability insurance carrier
reduced its premium rate, reducing premiums by $115,000 in 1996 versus 1995.
In addition, the company had a more favorable loss experience per mile in
1996.
Supplies and other expenses decreased to 5.4% of revenue from 5.6% in 1995.
In 1995, the company took a one-time charge of $171,000 to write off the cost
of a stock offering which was withdrawn in June 1995 due to market conditions.
Interest Expense. Interest expense increased to 5.1% of revenue in 1996
from 4.6% in 1995 as a result of higher debt levels. In 1996, 81% of the
company's capital was interest bearing compared to 79% in 1995.
Net Income (Loss). The net loss for 1996 was $368,000 or $0.20 per share
compared to a net loss of $157,000 or $0.09 per share in 1995.
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.
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 $18.0 million,
$7.6 million and $11.3 million for the years ended December 31, 1995, 1996 and
1997, respectively. Included in the 1996 figure is $1.6 million for on-board
satellite communications equipment. The company plans to expand its company-
owned fleet by 50 tractors in 1998. At February 28, 1998, the company had
arrangements for 61 tractors (26 new units and 35 replacement units) at a cost
of $4.9 million, as well as 150 new trailers at a cost of $2.9 million. The
company's capital expenditures will be financed through internally generated
funds and 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, 1997 was $8.9 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 of $8.0 million with its primary lending bank
that bears interest at the prime lending rate.
Borrowings under this line were $3.5 million at December 31, 1997 and $1.5
million of the available credit line was committed for letters of credit
issued by the bank. The current line expires June 9, 2000 and is secured by
accounts receivable. The company has received commitments for up to $8
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.
Year 2000 Issue
The company has assessed and continues to assess the impact of the Year
2000 Issue on its reporting systems and operations. The Year 2000 Issue
exists because many computer systems and applications currently use two-digit
date fields to designate a year. As the century date occurs, two-digit date
sensitive systems will recognize the year 2000 as 1900 or not at all. The
company has assessed the impact of the Year 2000 Issue on its computer systems
and is in the process of remediating the affected hardware and software. The
company plans to complete the required modifications by March 31, 1999 and has
not incurred any costs relating to the Year 2000 Issue. The company does not
believe that the cost of either modification of existing software or
conversion to new software will be significant or that the Year 2000 Issue
will pose significant operational problems for its computer systems.
Other
This annual report contains forward-looking statements that are based on
current expectations and are subject to risks and uncertainties. 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; 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 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, 1997 and 1996, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Kansas City, Missouri
February 5, 1998
Balance Sheets OTR Express, Inc.
At December 31 1997 1996
ASSETS
CURRENT ASSETS
Cash $ 318,760 $ 43,107
Accounts receivable, less allowance
of $101,123 and $57,016 7,736,360 6,436,920
Fuel inventory 155,762 162,826
Prepaid expenses and other 1,012,517 1,038,207
TOTAL CURRENT ASSETS 9,223,399 7,681,060
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation 46,810,777 42,894,525
TOTAL ASSETS $56,034,176 $50,575,585
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ - $ 1,389,000
Accounts payable, trade 1,603,654 1,396,760
Accrued payroll and taxes 861,857 823,811
Other accrued expenses 1,414,721 1,180,900
Current portion of long-term debt 14,259,700 14,361,651
TOTAL CURRENT LIABILITIES 18,139,932 19,152,122
LONG-TERM DEBT 26,688,357 21,019,354
DEFERRED INCOME TAXES 1,859,803 1,599,014
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 5,000,000
shares authorized, 1,849,209 and
1,842,209 issued 18,492 18,422
Additional paid-in capital 6,581,214 6,540,124
Retained earnings 2,792,762 2,283,284
Treasury stock, 8,693 and 6,690 shares (46,384) (36,735)
TOTAL STOCKHOLDERS' EQUITY 9,346,084 8,805,095
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $56,034,176 $50,575,585
The notes to financial statements are an integral part of these statements.
Statements of Operations OTR Express, Inc.
For the Years Ended December 31 1997 1996 1995
Operating revenue
Freight revenue $60,127,246 $52,008,754 $46,615,804
Brokerage revenue 3,669,346 3,251,842 2,595,318
Total operating revenue 63,796,592 55,260,596 49,211,122
Operating expenses
Salaries, wages and benefits 25,548,804 22,394,911 19,837,132
Purchased transportation 3,756,648 2,930,271 2,401,605
Fuel 7,631,908 7,011,074 5,511,198
Maintenance 3,654,294 3,310,101 3,005,321
Depreciation 7,400,583 6,722,717 6,516,919
Insurance and claims 1,881,278 1,639,039 1,593,642
Taxes and licenses 6,124,075 6,047,748 5,541,240
Supplies and other 3,708,124 3,010,050 2,774,623
Total operating expenses 59,705,714 53,065,911 47,181,680
Operating income 4,090,878 2,194,685 2,029,442
Interest expense 3,269,138 2,788,749 2,283,107
Income (loss) before income taxes 821,740 (594,064) (253,665)
Income tax expense (benefit) 312,262 (225,744) (96,393)
Net income (loss) $ 509,478 $ (368,320) $ (157,272)
Weighted average number of shares
Basic 1,840,091 1,835,650 1,830,246
Diluted 1,841,805 1,835,650 1,830,246
Earnings (loss) per share
Basic $ 0.28 $ (0.20) $ (0.09)
Diluted $ 0.28 $ (0.20) $ (0.09)
The notes to financial statements are an integral part of these statements.
Statements of Stockholders' Equity OTR Express, Inc.
Common Additional Retained Treasury Total
Stock Paid-In Earnings Stock Stockholders'
Capital Equity
Balance, December
31, 1994 $18,282 $6,484,264 $2,808,876 $(10,490) $9,300,932
Allocation of
common stock held
by ESOP 70 31,430 - - 31,500
Repurchase of common
stock - - - (19,246) (19,246)
Net loss - - (157,272) - (157,272)
Balance, December
31, 1995 18,352 6,515,694 2,651,604 (29,736) 9,155,914
Allocation of
common stock held
by ESOP 70 24,430 - - 24,500
Repurchase of common
stock - - - (6,999) (6,999)
Net loss - - (368,320) - (368,320)
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
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 1997 1996 1995
OPERATING ACTIVITIES
Net income (loss) $ 509,478 $ (368,320) $ (157,272)
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities
Depreciation 7,400,583 6,722,717 6,516,919
Deferred income taxes 312,262 (225,744) (96,393)
ESOP expenses and other 41,160 24,500 31,500
Changes in certain working capital
items
Accounts receivable (1,299,440) (428,528) (489,820)
Other assets (18,718) (223,078) (145,111)
Accounts payable and accrued
expenses 478,761 182,600 99,866
Net cash provided by
operating activities 7,424,086 5,684,147 5,759,689
INVESTING ACTIVITIES
Acquisition of property
and equipment (17,631,434) (11,335,083) (23,409,750)
Disposition of property
and equipment 6,314,599 3,707,187 5,380,077
Net cash used in investing
activities (11,316,835) (7,627,896) (18,029,673)
FINANCING ACTIVITIES
Proceeds from issuance of long
term debt 21,250,515 20,370,872 21,846,185
Repayments of long-term debt (19,164,775) (17,279,563) (11,331,461)
Net increase (decrease) in bank
notes payable 2,092,312 (1,133,555) 1,790,000
Other (9,650) (6,999) (19,246)
Net cash provided by financing
activities 4,168,402 1,950,755 12,285,478
Net increase in cash 275,653 7,006 15,494
Cash, beginning of year 43,107 36,101 20,607
Cash, end of year $ 318,760 $ 43,107 $ 36,101
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 3,265,120 $ 2,794,254 $ 2,271,420
Cash paid (refunded) for
income taxes, net 41,474 (128,986) 250,637
The notes to financial statements are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
OTR Express, Inc. ("the company") is a dry van, truckload carrier
headquartered in Olathe, Kansas. The company transports general commodities
through the continental United States.
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. Management
believes the difference between the company's method of revenue recognition,
which is acceptable for generally accepted accounting principles, and the
proportional recognition method, which is preferred, is not material to
financial position or the results of operations.
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 United States. Loads encompass all types of products for dry
vans, excluding perishables. Credit is usually granted on an unsecured basis
and no significant concentration of credit currently exists.
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, 1997, option fair values totaled $10,000, deferred losses totaled
$35,000 and notional amounts totaled $1,797,000. At December 31, 1996, option
fair values totaled $127,000, deferred gains totaled $55,000 and notional
amounts totaled $2,794,000.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 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 3.4 years
Trailers 10 years
Computer equipment, software
and other property 5 - 12 years
Buildings and improvements 31.5 - 40 years
The company depreciates tractors to estimated salvage values, currently 46% to
51% of original cost. The company depreciates trailers to estimated salvage
values, currently 21% to 24% of original cost.
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
Accrued expenses include reserves for the estimated cost of claims for health,
workers' compensation, personal injury, property damage, and cargo loss not
covered by insurance. Reserves are established by management based on the
most current information available regarding the accident or claim.
Adjustments to previously established reserves, if required, are included in
operating results. Management does not believe future adjustments to these
reserves, if any, will have a significant impact on financial position or
results of operations.
2. PROPERTY AND EQUIPMENT
1997 1996
Cost
Tractors $41,277,834 $39,261,365
Trailers 13,906,069 10,352,234
Land 838,962 838,962
Buildings and improvements 2,879,459 2,879,459
Computers and onboard communications
equipment 2,358,357 2,140,269
Other 1,235,196 1,081,808
Total cost 62,495,877 56,554,097
Less accumulated depreciation 15,685,100 13,659,572
Net property and equipment $46,810,777 $42,894,525
3. BANK NOTE PAYABLE
Bank note payable at December 31, 1996 consisted of a $5,500,000 short-term
line of credit bearing interest at the prime rate, collateralized by qualified
accounts receivable, as defined. In June 1997, the company elected to convert
the note to a long-term revolving line of credit at another lending
institution as more fully described in Note 4.
Borrowings on the line totaled $1,389,000 at December 31, 1996. The company
had $2,029,000 of additional borrowing availability as of December 31, 1996.
At December 31, 1996, $1,501,000 of the available line was allocated to
outstanding letters of credit. The weighted average interest rate on the line
of credit for the year ended December 31, 1996 was 8.50%. The annual average
balance borrowed on the line of credit for the year ended December 31, 1996
was $1,242,000.
4. LONG-TERM DEBT
1997 1996
Line of credit , interest payable
monthly at the prime rate (8.50%
at December 31, 1997) due June 9, 2000,
collateralized by accounts receivable (1) $ 3,481,312 $ -
Installment notes, 6.20% to 9.16% payable
in monthly installments of principal and
interest through January 2003,
collateralized by tractors, trailers and
computer equipment 35,961,915 33,824,958
Installment notes, 7% to 8.75%,
payable in monthly installments through
January 2005, collateralized by real
property 1,504,830 1,556,047
40,948,057 35,381,005
Less current portion 14,259,700 14,361,651
Long-term debt $26,688,357 $21,019,354
4. LONG-TERM DEBT (continued)
Maturities of long-term debt are as
follows:
1998 $14,259,700
1999 10,460,444
2000 11,972,116
2001 2,993,947
2002 1,013,015
Thereafter 248,835
$40,948,057
(1) The line of credit agreement provides for maximum borrowings of
$7,000,000 based on an 85% advance rate on eligible accounts receivable, as
defined, through December 31, 1997. Should the company's tangible net worth,
as defined, exceed $9,000,000 million based on the December 31, 1997 audited
financial statements, the maximum borrowing on the line increases to
$8,000,000. The line bears interest at a variable rate, based upon the prime
rate, or LIBOR, at the company's election. The 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, 1997. A total of $1,500,000 of the credit line was
committed for letters of credit. The unborrowed amount available at December
31, 1997 was $1,500,000. The weighted average interest rate on the line of
credit for the year ended December 31, 1997 was 8.80%. The annual average
balance borrowed on the line of credit and the bank note payable (Note 3) for
the year ended December 31, 1997 was $2,332,000.
5. STOCK OPTION PLAN
The company has reserved 110,000 shares of its common stock for issuance to
key management personnel and directors of the company under three stock option
plans. The plans 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% shareholder). Options
outstanding at December 31, 1997 had a weighted average contractual life of
seven years, eight months and exercise prices ranged from $3.75 to $6.00 per
share.
The company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for its plan, 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:
1997 1996 1995
Net income (loss):
As reported $509,478 $(368,320) $(157,272)
Pro Forma $480,071 $(388,216) $(191,017)
Earnings (loss) per share:
As reported $ 0.28 $ (0.20) $ (0.09)
Pro Forma $ 0.26 $ (0.21) $ (0.10)
5. STOCK OPTION PLAN (continued)
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 1997, 1996 and 1995 grants:
1997 1996 1995
Dividend yield None None None
Expected volatility 40.5% 32.6% to 36.3% 43.7%
Risk-free interest rate 5.7% to 6.4% 5.9% to 6.2% 5.4%
Expected option life 3 years 3 years 3 Years
A summary of the company's stock option plans as of December 31, 1997 and
changes during 1997, 1996 and 1995 is presented below:
1997 1996 1995
Shares Per Share Shares Per Share Shares Per Share
(a) (a) (a)
Outstanding at
beginning of
year 80,000 $5.18 50,000 $5.30 - -
Granted 30,000 $5.63 30,000 $4.99 50,000 $5.30
Exercised - - - - - -
Forfeited - - - - - -
Outstanding at
end of year 110,000 $5.30 80,000 $5.18 50,000 $5.30
Exercisable at
end of year 52,545 26,333 -
Weighted average
fair value
of options
granted
during the
year $47,000 $32,000 $54,000
(a) Weighted average exercise price per share.
6. EMPLOYEE STOCK OWNERSHIP PLAN
The company has a non-qualified ESOP which enables eligible employees to
acquire shares of the company's common stock. The cost of the ESOP is borne
by the company. In each of the years 1997, 1996 and 1995, 7,000 shares of
stock held by the ESOP were allocated to participants, resulting in ESOP
expense of $41,160, $24,500 and $31,500 for the years ended December 31, 1997,
1996 and 1995, respectively. The company has elected to grant 3,500 shares to
the ESOP in 1998.
7. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between
assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations.
Deferred tax assets and liabilities are comprised of the following at December
31:
1997 1996
Deferred tax assets
Claims and other reserves $ 472,507 $ 378,341
Net operating loss carryforward 1,069,926 2,023,708
Other 273,208 182,655
1,815,641 2,584,704
Deferred tax liabilities
Property and equipment 3,416,036 3,983,038
Revenue 259,408 200,680
3,675,444 4,183,718
Net deferred tax liability $1,859,803 $1,599,014
A reconciliation between the provision for income taxes and the expected taxes
using the federal statutory rate of 34% follows:
1997 1996 1995
Tax expense (benefit) at federal
statutory rate $ 279,392 $(201,982) $ (86,246)
State income tax expense (benefit) 32,870 (23,762) (10,147)
Deferred income tax expense
(benefit) $ 312,262 $(225,744) $ (96,393)
The company has available net operating loss carryforwards of approximately
$2,816,000 for regular income tax purposes expiring through 2011.
8. EARNINGS PER SHARE
In February, 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share", effective for
periods ending after December 15, 1997, requiring presentation of basic and
diluted earnings per share. SFAS 128 supersedes Accounting Principles Board
Opinion (APB) No. 15 and related pronouncements and replaces the computations
of primary and fully diluted earnings per share (EPS) with basic and diluted
EPS, respectively. 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.
There was no effect of this accounting change on previously reported earnings
per share.
Basic earnings (loss) per share and diluted earnings per share were $.28,
($.20), and ($.09) for the years ending December 31, 1997, 1996, and 1995
respectively. Options to purchase 5,000 shares that would have been
outstanding upon the assumed exercise of dilutive options were immaterial for
the year ended December 31, 1997.
Options to purchase an additional 105,000 shares of common stock at various
exercise prices ranging from $3.75 - $6.00 were outstanding during 1997, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average marker price of the common shares.
These options, which expire in 3 to 10 years, were still outstanding at the
end of 1997.
9. COMMITMENTS AND CONTINGENCIES
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.
Under an agreement with its auto liability insurance carrier, the company
retains the first $100,000 of paid losses for any single occurrence involving
cargo, personal injury or property damage. Liability in excess of these
amounts is generally assumed by the carrier up to
$10 million per occurrence. The agreement with the carrier is collateralized
by letters of credit totaling $396,000 and deposits of $39,750.
The company is self-insured for workers' compensation through a program with
the State of Kansas. All claims are processed by a third party administrator
and the company will pay all losses and loss adjusting expense. The company
carries an excess reinsurance policy that will limit the company's losses to
$250,000 per occurrence and $10,000,000 aggregate per year. The agreement
with the State of Kansas is collateralized by letters of credit totaling
$1,100,000.
Board of Directors Executive and Other Officers
William P. Ward (1) William P. Ward
Chairman of the Board Chairman of the Board
OTR Express, Inc.
Gary J. Klusman
Gary J. Klusman (1) President and
President and Chief Executive Officer
Chief Executive Officer
OTR Express, Inc.
Janice Kathryn Ward
Janice Kathryn Ward Vice President Compensation
Vice President Compensation Administration
and Administration
OTR Express, Inc. Steven W. Ruben
Vice President Finance and
Chief Financial Officer
Dr. James P. Anthony (2)
Radiologist
Carondelet Radiology Group Christine D. Schowengerdt
Treasurer and Assistant
Secretary
Frank J. Becker
President
Becker Investments, Inc. Carolyn J. Davidson
Administrative Vice
President and Secretary
Terry G. Christenberry (2)
President
Christenberry, Collet & Co., Inc. Gary L. Hinkle
Vice President Fleet
Management
Charles M. Foudree (2), (3)
Executive Vice President - Finance Susan K. Raymond
Harmon Industries, Inc. Vice President Dispatch
Administration
Marc E. Hirschmann
Vice President Maintenance
Dean W. Graves (1) & Purchasing
Owner, Dean Graves, FAIA
Architectural Firm
Paul A. MacNaughton
Vice President Management
Information Systems
Dr. Ralph E. MacNaughton (3)
Physician, Retired
Carondelet Radiology Group
Chip Seitz
Vice President OTR Services
(1) Member of Executive Committee Eric T. Janzen
(2) Member of Audit Committee Vice President Marketing
(3) Member of Compensation Committee
Jeffrey T. Brown
Photography by: Vice President Dispatch
Larry Andrew, Andrew Photography (Cover
and p. 4) , Attig Photography Studio
(p. 5) and OTR Express, Inc. driver/managers
QUARTERLY FINANCIAL DATA (Unaudited)
1997
(In thousands except per share data)
Mar 31 Jun 30 Sep 30 Dec 31 Year
INCOME STATEMENT
Operating revenue $13,831 $15,663 $17,054 $17,249 $63,797
Operating expenses
Salaries, wages
and benefits 5,524 6,217 6,796 7,012 25,549
Purchased
transportation 940 847 934 1,036 3,757
Fuel 1,824 1,876 1,908 2,024 7,632
Maintenance 856 932 965 901 3,654
Depreciation 1,716 1,811 1,936 1,938 7,401
Insurance and
claims 317 535 543 487 1,882
Taxes and licenses 1,455 1,513 1,598 1,558 6,124
Supplies and other 807 894 947 1,060 3,708
Total operating
expenses 13,439 14,625 15,627 16,016 59,707
Operating income 392 1,038 1,427 1,233 4,090
Interest expense 720 800 901 848 3,269
Income (loss) before
income taxes (328) 238 526 385 821
Income tax expense
(benefit) (125) 91 200 146 312
Net income (loss) $ (203) $ 147 $ 326 $ 239 $ 509
Weighted average
number of shares
Basic 1,841 1,841 1,841 1,841 1,840
Diluted 1,841 1,841 1,841 1,842 1,842
Earnings (loss)
per share
Basic $ (0.11) $ 0.08 $ 0.18 $ 0.13 $ 0.28
Diluted $ (0.11) $ 0.08 $ 0.18 $ 0.13 $ 0.28
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages
and benefits 39.9 39.7 39.8 40.7 40.0
Purchased
transportation 6.8 5.4 5.5 6.0 5.9
Fuel 13.2 12.0 11.2 11.7 12.0
Maintenance 6.3 5.9 5.8 5.3 5.8
Depreciation 12.4 11.6 11.4 11.2 11.6
Insurance
and claims 2.3 3.4 3.2 2.8 2.9
Taxes and licenses 10.5 9.7 9.2 9.0 9.6
Supplies and other 5.8 5.7 5.5 6.2 5.8
Total operating
expenses 97.2 93.4 91.6 92.9 93.6
Operating income 2.8 6.6 8.4 7.1 6.4
Interest expense 5.2 5.1 5.3 4.9 5.1
Income (loss)
before income taxes (2.4) 1.5 3.1 2.2 1.3
Income tax expense
(benefit) (0.9) 0.6 1.2 0.8 0.5
Net income (loss) (1.5) 0.9 1.9 1.4 0.8
QUARTERLY FINANCIAL DATA (Unaudited)
1996
(In thousands except per share data)
Mar 31 Jun 30 Sep 30 Dec 31 Year
INCOME STATEMENT
Operating revenue $13,033 $13,406 $14,470 $14,352 $55,261
Operating expenses
Salaries, wages
and benefits 5,404 5,256 5,828 5,907 22,395
Purchased
transportation 647 734 702 847 2,930
Fuel 1,639 1,696 1,687 1,989 7,011
Maintenance 804 793 835 878 3,310
Depreciation 1,699 1,755 1,730 1,539 6,723
Insurance and
claims 392 361 417 469 1,639
Taxes and licenses 1,523 1,441 1,554 1,530 6,048
Supplies and other 623 663 810 914 3,010
Total operating
expenses 12,731 12,699 13,563 14,073 53,066
Operating income 302 707 907 279 2,195
Interest expense 692 646 721 730 2,789
Income (loss) before
income taxes (390) 61 186 (451) (594)
Income tax expense
(benefit) (168) 25 82 (165) (226)
Net income (loss) $ (222) $ 36 $ 104 $ (286) $ (368)
Weighted average
number of shares
Basic 1,836 1,836 1,836 1,836 1,836
Diluted 1,836 1,836 1,836 1,836 1,836
Earnings (loss) per
share
Basic $ (0.12) $ 0.02 $ 0.06 $ (0.16) $ (0.20)
Diluted $ (0.12) $ 0.02 $ 0.06 $ (0.16) $ (0.20)
PERCENT OF REVENUE
Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages
and benefits 41.5 39.2 40.3 41.2 40.5
Purchased
transportation 5.0 5.5 4.8 5.9 5.3
Fuel 12.6 12.7 11.6 13.9 12.7
Maintenance 6.2 5.9 5.8 6.1 6.0
Depreciation 13.0 13.1 12.0 10.7 12.2
Insurance and
claims 3.0 2.7 2.9 3.3 3.0
Taxes and licenses 11.7 10.7 10.7 10.7 10.9
Supplies and other 4.7 4.9 5.6 6.3 5.4
Total operating
expenses 97.7 94.7 93.7 98.1 96.0
Operating income 2.3 5.3 6.3 1.9 4.0
Interest expense 5.3 4.8 5.0 5.0 5.1
Income (loss) before
income taxes (3.0) 0.5 1.3 (3.1) (1.1)
Income tax expense
(benefit) (1.3) 0.2 0.6 (1.1) (0.4)
Net income (loss) (1.7) 0.3 0.7 (2.0) (0.7)
Stockholder Information
At March 12, 1998, there were 169 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
The company's common stock is traded on The Nasdaq Stock Market/National
Market System 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 Nasdaq Stock Market.
1996
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1996 $4.250 - $5.000
Apr 1 to Jun 30, 1996 $4.500 - $5.750
Jul 1 to Sep 30, 1996 $4.875 - $5.875
Oct 1 to Dec 31, 1996 $3.250 - $5.375
1997-1998
Period Stock Price (Low-High)
Jan 1 to Mar 31, 1997 $2.625 - $4.000
Apr 1 to Jun 30, 1997 $2.625 - $5.125
Jul 1 to Sep 30, 1997 $4.625 - $5.750
Oct 1 to Dec 31, 1997 $5.250 - $6.250
Jan 1 to Feb 28, 1998 $5.625 - $7.625
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: Independent Auditors
P.O. Box 2819 Arthur Andersen LLP
Olathe, KS 66063-0819 911 Main
Independent Auditors Suite 1500
Kansas City, Missouri 64105
Annual Meeting General Counsel
The annual meeting of the stockholders Bryan Cave LLP
will be at 3:00 p.m., Wednesday, 7500 College Boulevard
May 13, 1998, at the Doubletree Hotel, Suite 1100
10100 College Boulevard, Overland Park, Overland Park, Kansas 66210
Kansas
Form 10-K Common Stock Listing
Stockholders may receive a copy of OTR Express, Inc. common stock
the company's 1997 Annual Report to is traded on the NASDAQ National
the Securities and Exchange Commission Market System under the
on Form 10-K free of charge by writing symbol: OTRX
to:
Investor Relations
OTR Express, Inc.
P.O. Box 2819
Olathe, Kansas 66063-0819
OTR Express, Inc. P.O. Box 2819 Olathe, Kansas 66063-0819
913-829-1616