UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1998 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, Olathe, Kansas 66062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 829-1616
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $.01 par value
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 the 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of Registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
The aggregate market value of voting stock held by non-affiliates of
the Registrant was $7,799,477 as of February 28, 1999.
1,835,171
(Number of shares of common stock outstanding as of February 28, 1999)
Part II incorporates certain information by reference from the
Registrant's Annual Report to Stockholders for fiscal year ended
December 31, 1998. Part III incorporates certain information by
reference from the Registrant's definitive Proxy Statement dated March
31, 1999.
OTR EXPRESS, INC.
1998 Annual Report on Form 10-K
Table of Contents
Page
Part I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
Part III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management 12
Item 13. Certain Relationships and Related Transactions 12
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 12
PART I
Item 1. Business
Overview
The discussion set forth below as well as other documents incorporated
by reference herein and oral statements made by officers of the Company
relating thereto, may contain forward looking statements. Such comments
are based upon information currently available to management and
management's perception thereof as of the date of this Form 10-K.
Actual results of the Company's operations could materially differ from
those forward looking statements. Such differences could be caused by a
number of factors including, but not limited to, potential adverse
affects 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; issues arising from
addressing Year 2000 Issues; 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.
The Company
OTR Express, Inc., a Kansas corporation organized in 1985 (the
"Company" or "OTR") operates primarily as a dry van, truckload carrier.
The Company transports a diversified mix of general commodities for a
large base of customers (currently over 1,200) throughout the
continental United States and operates its business as one reportable
segment. OTR is headquartered in Olathe, Kansas, a suburb of Kansas
City, Missouri. The Company also provides third party logistics
services including rail, truckload, and less-than-truckload service to its
customers.
Operating Strategy
OTR's business philosophy is to provide high quality transportation
services at a low cost. The Company has historically achieved this by
(1) focusing on technology; (2) operating premium, late model equipment;
(3) hiring experienced drivers; and (4) maintaining an efficient cost
structure. From its founding in 1985 until 1995, the Company's
operating strategy differed from that of most truckload carriers in that
OTR serviced a large base of customers with no long-term contracts or
commitments. This strategy allowed the Company to obtain the most
profitable loads available on a spot basis. To identify the most
profitable loads, the Company utilized its internally developed,
proprietary Freight Optimization System - a next move probability based
freight system. The Freight Optimization System enables the Company to
analyze historical data to prioritize customers most likely to have
freight that will produce the most profitable combination of rates and
destinations. The Freight Optimization System was designed to maximize
freight opportunities, maximize revenue per mile and minimize empty
miles, but had become dependent to some extent on freight brokers
offering opportunities in the spot market. In mid-1995, using the
system, the Company received as much as 55% of its freight opportunities
from freight brokers who typically pay 10% to 15% less per mile than
direct shippers.
In 1996, due to changing market conditions, the Company determined
that it was necessary to change its operating strategy to market to
larger national accounts and away from
the lower priced spot freight market and its reliance on freight brokers.
The objective of OTR's new operating strategy was to improve revenue per mile,
equipment utilization, stability of the customer base and reduce reliance on
freight brokers. These larger shippers are capable of offering
increased load counts at higher revenue rates. The larger shippers
require additional services, including guaranteed equipment
availability, drop trailers and fifty-three foot trailers.
Additionally, in 1996, the Company began offering Qualcomm satellite
communications on every truck and electronic data interchange (EDI) for
load status information to serve the company's larger national accounts.
The Company is working to integrate these larger shippers into the
Company's existing operating strategy effectively, providing a higher
mix of more profitable shipper freight. In this new operating strategy,
the Company will be able to utilize its Freight Optimization System
which will work in conjunction with the Company's new national accounts
program to identify opportunities on non-national account freight and
backhaul opportunities on national account freight.
OTR has regional short-haul operations in Kansas City, Chicago, and
Dallas/Houston to meet customer demand. Based on management's analysis
of the market size, cost of entry and potential long-term profitability,
the Company expects to make further investments in the short-haul
division.
This flexible operating strategy has contributed to the Company's
rapid growth during the five year period ending December 31, 1998, with
revenue increasing to $72.3 million in 1998 from $30.6 million in 1993
(a compound annual growth rate of 18.7%), and a corresponding increase
in its fleet to 573 tractors (526 company-owned tractors and 47 owner
operators) from 301 during such period.
Customers and Marketing
OTR has a large customer base that is diversified in terms of
geographic location and types of commodities shipped. The Company
markets its services based on dependable, time definite delivery and
service.
The Company obtains freight in three different manners: directly from
shippers ("OTR Shippers"), through Company agents ("Agent Shippers") and
from freight brokers. OTR Shippers are marketed directly by internal
OTR sales representatives. Agent Shippers are marketed by the Company's
outside sales agents. The Company's customer database includes
approximately 540 OTR Shippers, 300 Agent Shippers and 400 freight
brokers. In 1998, OTR Shippers accounted for 62% of OTR's revenue
miles, Agent Shippers accounted for 21% and freight brokers accounted
for 17%.
The freight obtained from OTR Shippers and Agent Shippers is generally
more profitable than freight obtained from brokers, having freight rates
which average 10% to 15% more than brokered freight. To maximize this
more profitable revenue base by generating new OTR Shippers, OTR
increased the number of its sales representatives and customer service
representatives to twenty five at February 28, 1999 from three at
December 31, 1994. Historically, sales representatives operated
primarily through direct telemarketing efforts.
During 1998, the Company divided its operations and sales departments
into seven regional teams to better serve customers in those regions.
In order to capitalize on this new structure, the Company added regional
sales managers in Dallas, Boston and the Atlanta area. The focus of
these regional sales managers is to enhance freight opportunities with
current customers and to add new national account customers.
The Company's brokered freight is obtained through a network of
freight brokers who contract for freight directly from shippers and re-
contract with the Company to transport the freight. A freight broker
helps carriers obtain loads in areas where the carrier does not
typically have a large number of customers, thereby minimizing the empty
miles of the carrier. Freight brokers typically earn a margin based on
a percentage of the carrier's freight fee. The Company has developed a
network of approximately 400 freight brokers. The Company expects to
continue to reduce the percentage of revenue miles from freight brokers
in the future.
For the year ended December 31, 1998, the Company's 20, 10 and five
largest customers accounted for 39.7%, 24.3% and 15.7%, respectively, of
the Company's operating revenue. The largest customer accounted for
3.5% of the Company's operating revenue for that period.
Logistics Division
To better serve its customers, OTR has developed a logistics division
which brokers loads to other carriers. The Company contracts with other
trucking companies to haul freight on their equipment for OTR's
customers. The Company is able to increase its profitability while
satisfying its customers' shipping needs without utilizing Company owned
equipment.
In 1998, OTR formed a rail logistics department within its OTR
Logistics division. The intermodal logistics department contracts with
rail carriers to move freight on rail equipment for customers and is
currently based in Salt Lake City, Utah. The new department currently
employs eleven professionals. OTR expects to utilize its information
technology to improve the operating efficiency and capacity for the
intermodal logistics department. OTR's internal computer programmers
have developed a proprietary load order system specifically for
intermodal logistics services which is integrated with the Company's
current system and will substantially reduce the amount of time it takes
to coordinate the movement of a load. The new intermodal logistics
division will operate as a non-asset based transportation service
provider and will not require the purchase of transportation equipment.
Logistics division revenue increased to $4.5 million in 1998 from $3.7
million in 1997. OTR expects to expand the rail logistics department in
the future.
Drivers, Other Employees and Owner-Operator Drivers
Recruiting and retaining professional, experienced drivers is critical
to the Company's success, and all of the Company's drivers must meet
specific guidelines relating primarily to safety record, driving
experience and personal evaluation, including drug and alcohol testing.
OTR's drivers have an average age of 45.9 years and average 13.1 years
of driving experience. Within the Company, drivers are considered
"managers" and are given a high level of responsibility to manage the
profitability of their equipment.
The Company's Driver Incentive Management System allows experienced
drivers to earn higher compensation than prevailing industry wages. The
Company provides incentive programs for its drivers based on number of
miles driven, fuel efficiency, safety record and profitability. OTR
considers each tractor and its driver to be a separate profit center,
with profit center reports, including the actual revenue and expense of
the equipment and fixed expense components for administration, taxes and
depreciation, generated monthly. Under the Company's "profit center"
program, on a quarterly basis, 7.5% of the Company's after tax net
income is distributed to the
drivers based on the profitability of their respective profit centers.
The program is designed to give OTR's drivers the incentive to improve their
individual productivity, minimize costs and thereby increase overall Company
profitability.
Driver recruitment and retention is essential to the maintenance of
high equipment utilization, particularly during periods of rapid fleet
growth. OTR's drivers are given recruiting bonuses for the referral of
new drivers to the Company. In order to attract and retain highly
qualified drivers and to promote safe operations, the Company purchases
premium quality tractors and equips the tractors with optimal comfort
and safety features, such as on-board satellite communications, high
quality interiors, power steering, automatic braking systems, engine
brakes and oversized sleepers. As a result of management's attention to
driver retention, the Company's driver turnover rate was 71% in 1998,
which management believes to be below the industry average.
At December 31, 1998, the Company's ratio of tractors to non-driving
employees was 5.03 to one, which management believes is well above
industry standards. At February 28, 1999, the Company had 680
employees, of whom 536 were drivers and 144 were management and
administrative personnel. At February 28, 1999, the Company also had
contracts with independent contractors (owner-operators) for the
services of 43 tractors that provide both a tractor and a qualified
driver. The Company's employees are not represented by a collective
bargaining unit. Employees participate in OTR's 401(k) program and in
Company-sponsored health, life and dental plans. The Company does not
have any employees who are receiving post retirement benefits and does
not anticipate offering any post retirement benefits in the future.
Management considers relations with its employees to be very good.
In 1997, the Company began contracting with owner-operators to haul
freight for the Company's customers. The Company recognizes that
carefully selected owner-operators complement its company drivers.
Owner-operators supply their own tractor and driver, and are responsible
for their operating expenses. Because owner-operators provide their own
tractors, less capital is required from the company for growth and they
provide the Company with another source of drivers to support its
growth. The Company expects to continue to recruit owner-operators, as
well as company drivers.
Revenue Equipment
The Company believes that a key to the successful retention of drivers
is the use of standardized, fuel efficient, late-model tractors and
trailers. The Company purchases all new tractors, primarily with driver
comfort, fuel efficiency, safety and overall economy in mind. To
recruit and retain high-quality drivers, all the tractors owned by the
Company have deluxe interiors and oversized sleepers. The average age
of OTR's tractors and trailers at December 31, 1998 was 2.4 years and
2.0 years, respectively. The Company plans its trade cycle based on
engine warranties and routinely replaces its tractors after forty five
months of use (approximately 450,000 miles).
At December 31, 1998 the Company owned 243 Navistar tractors, 169
Peterbilt tractors and 114 Freightliner tractors. The tractors include
engines which are fully electronic, manufactured by Detroit Diesel,
Caterpillar or Cummins. Trailers in the fleet at year end were
manufactured by Pines, Utility, Stoughton and Trailmobile. All of the
Company's trailers have a 110 inch inside and are 102 inches wide, the
maximum width generally allowed by law. The trailer
fleet at December 31, 1998 included 777 fifty-three foot trailers and 265
forty-eight foot trailers. The Company owns only dry van trailers.
The following table shows the age of Company-owned equipment in
service at December 31, 1998.
Acquisition Year Tractors Trailers
1998 84 280
1997 150 292
1996 65 205
1995 199 130
1994 28 120
1993 - 15
Total 526 1042
The Company's preventive maintenance program focuses on early
diagnosis of problems and contracting maintenance out to third-party
providers. In addition to annual Department of Transportation ("DOT")
inspections, tractors are inspected when they pass through the Company's
diagnostic facilities at its headquarters. Virtually all tractors are
still under warranty and are generally traded in before their engine
warranties expire. The exclusive use of third-party maintenance
providers, coupled with the effective utilization of manufacturers'
warranties and the Company's trade-in policy, allows the Company to
minimize its maintenance costs. Owner-operator tractors are inspected
prior to acceptance by the company for compliance with operational and
safety requirements of the company and the Department of Transportation.
These tractors are then periodically inspected, similar to company-owned
tractors, to monitor continued compliance.
Fuel Availability and Cost
The Company actively manages its fuel costs through a five component
fuel management system which incorporates: wholesale purchasing for the
Company's unmanned fuel facilities, mileage pay rates based upon fuel
economy, the "profit center" incentive driver compensation program, fuel
hedging, and equipment specifications. See "- Drivers and Other
Employees."
The Company owns five automated fuel facilities, one located at the
Company's headquarters in Kansas and one each located on major traffic
lanes in Arizona, Ohio, Texas and Wyoming. Each of the four remote
unmanned fuel facilities consists of an above-ground fuel tank, pump and
a computer modem linking it directly to the Company's computers. In
1998, the Company purchased 21.5% of its fuel in bulk for distribution
through its automated fuel facilities. These facilities allow the
Company to purchase fuel at wholesale prices.
As a way to protect the Company against major fuel price increases,
since October 1994 the Company has engaged in a fuel hedging strategy.
Pursuant to this program, the Company buys six month call options within
five cents of current market prices, to buy futures contracts for #2
heating oil, in amounts equal to 15% of the Company's anticipated fuel
purchases for such period.
All of the Company's tractors have fully electronic engines, which
typically deliver enhanced fuel economy compared to tractors with
mechanically governed engines.
Environmental Matters
The Company's operations are subject to federal, state and local laws
and regulations concerning the environment. There is the possibility of
environmental liability as a result of the Company's use of fuels, from
the fuel storage tanks installed at its fuel facilities and also from
the cargo it may transport. The Company's only underground storage
tanks are two fiberglass tanks installed at its headquarters facility.
One tank was installed in 1988 and the other in 1995. The tanks have
overfill protection hardware, spill containment manhole covers and leak
detection equipment. The Company believes that the use of above-ground
storage tanks at its remote fuel facilities minimizes both potential
liability and the cost of compliance with environmental regulations.
The Company occasionally transports environmentally hazardous substances
in accordance with hazardous material guidelines. To date, the Company
has experienced no material claims for hazardous substance shipments.
The Company believes that its environmental practices comply with
applicable federal, state and local environmental laws and regulations.
In the event the Company should fail to comply with applicable
regulations, the Company could be subject to substantial fines or
penalties and to civil or criminal liability.
Competition
The truckload industry is extremely competitive and highly fragmented,
with numerous regional, inter-regional and national truckload carriers,
none of which dominates the market. The Company competes primarily with
other long-haul truckload carriers, rail-truck intermodal
transportation, railroads and, to a lesser degree, with less-than-
truckload ("LTL") carriers. Most of OTR's larger truckload competitors
utilize "core carrier" or "lane density" marketing concepts, which
emphasize greater individualized service to a smaller number of
shippers. Many long haul truck load carriers utilize driver teams which
allow them to provide expedited service while complying with DOT
regulations concerning driver's duty hours. OTR's drivers consist
principally of single drivers. Intermodal transportation and railroads
typically have created downward pressure on the truckload industry's
pricing structure. The Company competes for freight based primarily on
freight rates, service and reliability.
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.
Governmental Regulation
The Company is a contract and common motor carrier subject to the
authority of federal and state agencies. These regulatory authorities
have broad powers, but the rates and charges of the Company are not
directly regulated by these authorities. OTR, as primarily a contract
carrier, negotiates competitive rates directly with its customers as
opposed to adhering to scheduled tariffs.
The trucking industry is subject to regulatory and legislative changes
such as increasingly stringent environmental regulations and limits on
weight and size that can affect the economics of the industry by
requiring changes in operating practices or influencing the demand for,
and the costs of providing, services to shippers.
In August 1994, the Federal Aviation Administration Authorization Act
of 1994 (the "1994 FAA Act") became law. Effective January 1, 1995, the
1994 FAA Act preempted certain state and local laws regulating the
prices, routes or services of motor carriers (other than household
carriers). State agencies may continue to impose tax, license, bonding
and insurance requirements. The 1994 FAA Act does not limit the
authority of a state or other political subdivision to impose safety
regulations or highway route limitations or controls based on the size
or weight of the motor vehicle, the hazardous nature of cargo being
transported by motor vehicles or minimum financial responsibility
requirements relating to insurance and self-insurance authorization.
The Negotiated Rates Act of 1993 ("NRA"), in tandem with the Trucking
Industry Regulatory Reform Act of 1994 ("TIRRA"), further redefined the
regulatory structure applicable to interstate transportation of goods.
The NRA provided further regulation governing interstate transportation,
including prohibitions on off-bill discounting, certain re-regulation of
contract shipping arrangements, and, with respect to common carriers,
regulation regarding the collection of undercharge claims, and
applicable defenses and exceptions to such claims. The TIRRA further
deregulated the trucking industry by partially repealing the "filed-
rate" doctrine previously applicable to common carriers. Under the
TIRRA, while collectively-made bureau rates must still be published in
tariffs, individually negotiated rates are not.
The Company's drivers must be licensed as "commercial drivers"
pursuant to requirements established by the Federal Highway
Administration ("FHA") of the DOT. In addition to the knowledge and
driving skills tests required to obtain a commercial driver's license (a
"CDL"), there are various disqualifying offenses set forth in the FHA
rules, which, if committed, could result in suspension or termination of
the operator's CDL, as well as potential civil or criminal liabilities.
Also, DOT regulations impose mandatory drug testing of drivers and the
Company has its own ongoing drug-testing program. DOT alcohol testing
rules require certain tests for alcohol levels in drivers and other
safety personnel.
Motor carrier operations are also subject to safety, equipment and
operators' hours of service requirements prescribed by the DOT. The
Company currently has a satisfactory rating from the DOT based upon the
DOT's most recent audit of the Company.
Safety
The Company maintains a program for training and supervising personnel
to keep safety awareness at its highest level. The emphasis on safety
begins in the hiring and training process. A minimum of 1.5 years of
over-the-road driving experience is required for new company drivers.
OTR also verifies the driving records of all new drivers before they
begin employment. Prospective employees are given physical examinations
and drug tests, and newly hired drivers are trained in the Company's
safety procedures. In general, any driver who violates the
Company's safety standards will receive a warning letter, and any driver who
has more than two such violations within certain periods of time is subject
to termination. The Company continuously monitors driver performance
and has final authority regarding employment and retention of drivers.
OTR currently has a "satisfactory" safety and fitness rating from the
DOT. See "- Governmental Regulation."
Item 2. Properties.
The Company owns real estate in Olathe, Kansas, where the Company is
headquartered. The property includes a 22,000 square foot office
facility and a 9,400 square foot diagnostic and inspection facility.
The property also includes approximately 258,000 square feet of parking
space and the Kansas fuel facility. Additionally, the Company owns
tracts, each approximately one acre in size, in Arizona, Ohio, Texas and
Wyoming, on which its remote fuel facilities are located. See "Item 1-
Fuel Availability and Cost."
Item 3. Legal Proceedings.
The Company is routinely a party to litigation incidental to its
business, primarily involving claims for personal injuries and property
damage incurred in the transportation of freight. All litigation in
which the Company is currently involved is covered by the Company's
liability insurance (personal injury, physical damage and cargo) or
workers' compensation insurance. The Company believes the ultimate
outcome of current litigation will not have a material adverse effect on
its financial position or results of operations.
The Company maintains liability insurance (including umbrella
coverage) in the amount of $10 million per occurrence for personal
injury, property damage and cargo. Under the terms of the policy, the
Company retains the first $50,000 of losses paid and loss adjusting
expense. The Company is self-insured for workers' compensation
insurance. The Company is responsible for claims up to $250,000 per
occurrence and $900,000 aggregate per year. The Company carries excess
insurance to cover losses over $250,000, subject to a maximum coverage
of $5 million per occurrence.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The information required by this Item is incorporated by reference
from the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998, under the caption "Price Range of Stock."
Item 6. Selected Financial Data.
The information required by this Item is incorporated by reference
from the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998, under the caption "Financial Highlights."
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this Item is incorporated by reference
from the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998 under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
The information required by this Item is incorporated by reference
from the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998 under the caption "Financial Statements" and
"Quarterly Financial Data."
Annual Report Page
Report of Independent Public Accountants 17
Balance Sheets 18
Statements of Operations 19
Statements of Stockholders' Equity 20
Statements of Cash Flows 21
Notes to Financial Statements 22
Supplemental Financial Information 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this Item is incorporated by reference
from the Company's definitive Proxy Statement dated March 31, 1999 under
the headings "Proposal One: Election of Class A Directors- Nominees,"
"The Board of Directors-Continuing Directors," "Executive Officers-
Information About Other Executive Officers" and "Miscellaneous-Section
16 Reporting" to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference
from the Company's definitive Proxy Statement under the heading
"Executive Compensation and Other Information" to be filed with the
Commission not later than 120 days after the end of the fiscal year
covered by this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this Item is incorporated by reference
from the Company's definitive Proxy Statement dated March 31, 1999 under
the heading "Stock Ownership of Certain Beneficial Owners and
Management" to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated by reference
from the Company's definitive Proxy Statement dated March 31, 1999 under
the heading "Certain Relationships and Other Transactions" to be filed
with the Commission not later than 120 days after the end of the fiscal
year covered by this Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) List of Documents filed as part of this Report on Form 10-K.
(1) Financial Statements
All financial statements of the Registrant as set forth under
Item 8 of this Report on Form 10-K.
(2) Financial Statement Schedules
Page of
Schedule Number Description 1998 10-K
II Valuation and Qualifying Accounts 17
The report of the Registrant's independent public accountants with
respect to the above listed financial statements and financial statement
schedules appears on page 17 of this Annual Report on Form 10-K.
All other financial statement schedules not listed above have been
omitted since the required information is included in the financial
statements or the notes thereto, or is not applicable or required.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the year ended December 31,
1998.
Exhibits
Exhibit Page Number or Incorporation
Number Description By Reference To
3(a)(1) Articles of Incorporation, as amended Exhibit 3(a) to Annual Report
prior to July 10, 1998 for the year ended Dec 31,
1994 on Form 10-K
(SEC File No. 1-19773)
3(a)(2) Amendment to Articles of Incorporation, Page 18 of sequentially
filed July 13, 1998* numbered pages
3(b) Restated By-Laws Exhibit 3(b) to Annual Report
for the year ended Dec 31,
1995 on Form 10-K (SEC
File No. 1-19773)
4 The Registrant, by signing this Report,
agrees to furnish the Securities and
Exchange Commission, upon its
request, a copy of any instrument which
defines the rights of holders of long-term
debt of the Registrant.
4(a) Specimen Common Stock Certificate Exhibit 4(a) to Amendment No.
1 to Registration Statement on
Form S-18(SEC
File No. 33-44422FW)
10(a) 1991 Incentive Stock Option Plan of Exhibit 10(a) to Registration
OTR Express, Inc. Statement on Form S-18
(SEC File No. 33-44422FW)
10(b) Mortgage note dated January 10, 1995 Exhibit 10(xx) to Annual
between Registrant and Toni J. Report for the year ended
Waggoner and Robert E. Waggoner, as Dec 31, 1994 on Form 10-K
Trustees (SEC as File No. 1-19773)
10(c) OTR Express, Inc. 1996 Stock Option Exhibit 10(bbb) to Annual
Plan Report for the year ended
Dec 31, 1995 on Form 10-K
(SEC File No. 1-19773)
10(d) OTR Express, Inc. 1996 Directors' Stock Exhibit 10(ccc) to Annual
Option Plan Report for the year ended
Dec 31, 1995 on Form 10-K
(SEC File No. 1-19773)
10(e) Loan and Security Agreement dated Exhibit 10(ddd) to Quarterly
June 11, 1997 beteewn Registrant and Report for the period ended
HSBC June 30, 1997 on Form 10-Q
(SEC File No. 1-19773)
10(f) Guaranty Agreement dated February 27, Exhibit 10(p) to Quarterly
1998 between Registrant and HSBC Report for the period ended
Business Loans, Inc. - Gary J. Klusman March 31, 1998 on Form 10Q
(SEC File No. 1-19773)
10(g) Guaranty Agreement dated February 27, Exhibit 10(q) to Quarterly
1998 between Registrant and HSBC Report for the period ended
Business Loans, Inc. - Steven W. Ruben March 31, 1998 on Form 10Q
(SEC File No. 1-19773)
10(h) Stock Purchase Assistance Agreement Exhibit 10(r) to Quarterly
dated February 27, 1998 between the Report for the period ended
Registrant and Gary J. Klusman March 31, 1998 on Form 10Q
(SEC File No. 1-19773)
10(i) Stock Purchase Assistance Agreement Exhibit 10(s) to Quarterly
dated February 27, 1998 between the Report for the period ended
Registrant and Steven W. Ruben March 31, 1998 on Form 10Q
(SEC File No. 1-19773)
10(j) Guaranty Agreement dated June 8, Exhibit 10(t) to Quarterly
1998 between Registrant and HSBC Report for the period ended
Business Loans, Inc.-Jeffrey T. Brown June 30, 1998 on Form 10-Q
(SEC File No. 1-19773)
10(k) Guaranty Agreement dated June 8, Exhibit 10(u) to Quarterly
1998 between Registrant and HSBC Report for the period ended
Business Loans, Inc.-Eric T. Janzen June 30, 1998 on Form 10-Q
(SEC File No. 1-19773)
10(l) Stock Purchase Assistance Agreement Exhibit 10(v) to Quarterly
dated June 8, 1998 between the Report for the period ended
Registrant and Jeffrey T. Brown June 30, 1998 on Form 10-Q
(SEC File No. 1-19773)
10(m) Stock Purchase Assistance Agreement Exhibit 10(w) to Quarterly
dated June 8, 1998 between the Report for the period ended
Registrant and Eric T. Janzen June 30, 1998 on Form 10-Q
(SEC File No. 1-19773)
10(n) Form of Carrier/Shipper Transportation Page 19 of sequentially
Contract* numbered pages
10(o) Contract to Purchase Tractors in 1999 Page 21 of sequentially
between Registrant and Kansas City numbered pages
Peterbilt*
10(p) Contract to Purchase Tractors in 1999 Page 22 of sequentially
between Registrant and Kansas City numbered pages
Peterbilt*
10(q) Contract to Purchase Tractors in 1999 Page 23 of sequentially
between Registrant and KCR International numbered pages
Trucks, Inc.*
11 Statement re: Computation of Earnings Page 35 of sequentially
per Share* numbered pages
13(a) Annual Report to Stockholders for the Exhibit 13(b) to Annual
year ended December 31, 1997 Report for the year ended
December 31, 1997 on Form
10-K/A (SEC File No. 1-19773)
13(b) Annual Report to Stockholders for the Page 36 of sequentially
year ended December 31, 1998* numbered pages
23 Consent of Arthur Andersen LLP* Page 72 of sequentially
numbered pages
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registration has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OTR EXPRESS, INC.
Date: March 30, 1999 /s/ WILLIAM P. WARD
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ WILLIAM P. WARD Chairman of the Board March 30, 1999
William P. Ward
/s/ GARY J. KLUSMAN President, Principal March 30, 1999
Gary J. Klusman Executive Officer and
Director
/s/ JANICE K. WARD Vice President and March 30, 1999
Janice K. Ward Director
/s/ STEVEN W. RUBEN Vice President Finance March 30, 1999
Steven W. Ruben Principal Financial
Officer and Principal
Accounting Officer
/s/ CHRISTINE D. SCHOWENGERDT Treasurer March 30, 1999
Christine D. Schowengerdt
/s/ JAMES P. ANTHONY Director March 30. 1999
James P. Anthony
/s/ DEAN W. GRAVES Director March 30, 1999
Dean W. Graves
/s/ RALPH E. MACNAUGHTON Director March 30, 1999
Ralph E. MacNaughton
/s/ TERRY G. CHRISTENBERRY Director March 30, 1999
Terry G. Christenberry
/s/ CHARLES M. FOUDREE Director March 30, 1999
Charles M. Foudree
/s/ FRANK J. BECKER Director March 30, 1999 _
Frank J. Becker
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES
To the Board of Directors and Stockholders of OTR Express, Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in OTR Express, Inc.'s
annual report to stockholders incorporated by reference in this Form 10-
K, and have issued our report thereon dated February 5, 1999. Our
audits were made for the purpose of forming an opinion on those
statements taken as a whole. Schedule II-Valuation and Qualifying Accounts
is the responsibility of the company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not a part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in our audit of the
basic financial statements, and, in our opinion, fairly states in all material
respects, the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
Kansas City, Missouri
February 5, 1999
Schedule II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at
Beginning of Charged to End
Year Expense Deductions of Year
Allowance for doubtful accounts
1996 56,932 38,070 37,986 57,016
1997 57,016 115,522 71,415 101,123
1998 101,123 47,648 71,368 77,403
CORPORATE INFORMATION
Corporate Offices Common Stock Listing
OTR Express, Inc. OTR Express, Inc. common stock
804 N. Meadowbrook Drive is traded on the NASDAQ Stock
Olathe, Kansas 66062 Market under the Symbol: OTRX
(913) 829-1616
Mailing address:
PO Box 2819
Olathe, Kansas 66063-0819