SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14060
INTRENET, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1597565
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No)
400 TechneCenter Drive, Suite 200, Milford, Ohio 45150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(513)
576-6666
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, without par value, 13,162,728 shares issued and
outstanding at March 31, 1995
INTRENET, INC.
FORM 10-Q
MARCH 31, 1995
INDEX
PAGE
Part I - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 . . . . . 3
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994 . . 4
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1995 . . . . . . 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 . . 6
Notes to Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 8
Part II - Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . 11
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 11
Item 5. Other Information . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . 11
INTRENET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
(In Thousands of dollars)
Assets 1995 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,494 $ 2,734
Receivables, principally freight
revenue less allowance for
doubtful accounts of $1,421
in 1995 and $1,363 in 1994 21,229 20,177
Prepaid expenses and other 7,428 6,409
Total current assets 31,151 29,320
Property and equipment, at cost
less accumulated depreciation 28,851 27,976
Reorganization value in excess
of amounts allocated to
identifiable assets, net of
accumulated amortization 8,346 8,451
Deferred tax assets, net of
valuation allowance 2,525 2,525
Other assets 1,078 786
Total assets $71,951 $69,058
Liabilities and Shareholders' Equity
Current liabilities:
Current notes payable to banks $ 3,376 $ 2,000
Current equipment borrowings and
capital lease obligations 5,367 5,425
Accounts payable and cash overdrafts 9,277 8,553
Current accrued claim liabilities 5,908 5,681
Other accrued expenses 7,861 6,670
Total current liabilities 31,789 28,329
Long-term notes payable to banks 5,000 5,000
7% convertible subordinated debentures 0 5,988
Long-term equipment borrowings and
capital lease obligations 10,026 11,303
Long-term accrued claim liabilities 2,000 2,000
Total liabilities 48,815 52,620
Shareholders' equity:
Common Stock, without par value;
20,000,000 shares authorized;
13,162,728 and 9,087,164 shares
issued and outstanding, respectively 15,888 9,453
Retained earnings since January 1, 1991 7,248 6,985
Total shareholders' equity 23,136 16,438
Total liabilities and
shareholders' equity $71,951 $69,058
The accompanying notes are an integral part of
these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994
(In Thousands of dollars, Except Per Share Data)
1995 1994
Operating revenues $ 54,750 $ 49,555
Operating expenses:
Purchased transportation
and equipment rents 19,785 18,490
Fuel and other operating expenses 12,348 11,422
Salaries, wages, and benefits 14,423 10,889
Insurance and claims 2,121 1,911
Operating taxes and licenses 2,385 2,349
Depreciation 1,086 1,309
Other operating expenses 1,323 906
53,471 47,276
Operating Income 1,279 2,279
Interest expense (788) (896)
Other expense, net (115) (91)
Earnings before income taxes 376 1,292
Provision for Income taxes (113) (260)
Net earnings $ 263 $ 1,032
Earnings per common and common
equivalent share
Primary $ 0.03 $ 0.10
Fully Diluted $ N/A $ 0.08
The accompanying notes are an integral part of
these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 1995
(In Thousands of dollars)
Share
Retained holders
Shares Dollars Earnings Equity
Balance, December 31, 1993 9,087,164 $ 9,453 $6,985 $16,438
Exercise of Stock Options 439,212 445 - 445
Conversion of 7% Convertible
Subordinated Debentures 3,636,352 5,990 - 5,990
Net Earnings for 1995 - - 263 263
Balance, March 31, 1995 13,162,728 $15,888 $7,248 $23,136
The accompanying notes are an integral part of
these consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994
(In Thousands of dollars)
1995 1994
Cash flows from operating activities:
Net earnings (loss) $ 263 $1,032
Adjustments to reconcile net earn-
ings (loss) to net cash
provided by operating activities:
Income taxes 113 260
Depreciation and amortization 1,191 1,415
Provision for doubtful accounts 212 118
Changes in assets and liabilities, net
Receivables (1,265) (2,360)
Prepaid expenses (1,702) (1,999)
Accounts payable and accrued
expenses 2,695 3,083
Other (56) (95)
Net cash provided by operating
activities 1,451 1,454
Cash flows from financing activities:
Net borrowings (repayments) on
line of credit 1,376 (142)
Principal payments on capital
leases and equipment borrowings (1,382) (2,264)
Proceeds from exercise of
stock options 251 -
245 (2,406)
Cash flows from investing activities:
Purchases of property and
equipment (2,081) (203)
Disposals of property and
equipment 145 1,088
Net cash provided by (used in)
investing activities (1,936) 885
Net increase (decrease) in cash and
cash equivalents (240) (67)
Cash and cash equivalents:
Beginning of period 2,734 2,356
End of period $ 2,494 $2,289
The accompanying notes are an integral part of these
consolidated financial statements.
INTRENET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
(1) Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial
statements include the accounts of Intrenet, Inc. and all of
its subsidiaries (collectively, the Company). Operating
subsidiaries at March 31, 1995 were Roadrunner Trucking, Inc.
(RRT), Eck Miller Transportation Corporation (EMT), Advanced
Distribution System, Inc. (ADS), Roadrunner Distribution
Services, Inc. (RDS), and C.I. Whitten Transfer Company,
(CIW). All significant intercompany transactions are
eliminated in consolidation. Through its subsidiaries, the
Company provides general and specialized truckload carrier
services on a regional basis throughout the forty-eight
continental states and Canada.
The consolidated financial statements included herein
have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC). In management's
opinion, these financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary
for a fair presentation of the results of operations for the
interim periods presented. Pursuant to SEC rules and
regulations, certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted from these statements unless
significant changes have taken place since the end of the most
recent fiscal year. For this reason, the accompanying
consolidated financial statements and notes thereto should be
read in conjunction with the financial statements and notes
for the year ended December 31, 1994 included in the Company's
1994 Annual Report on Form 10-K.
The results for the three month period ended March 31,
1995 are not necessarily indicative of the results to be
expected for the entire year.
(2) Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share have been
computed on the basis of the weighted average common shares
outstanding during the periods. No effect has been included
for options or warrants outstanding, if the effect would be
antidilutive. Fully diluted earnings per share have been
computed under the assumption that the convertible debentures
had been converted into common stock on the date of their
issuance, using the if-converted method. As the debentures
were converted on March 31, 1995 (See Note 3), no dilutive
securities exist at the date of this report. Had the
debentures been converted on January 1, 1995, primary earnings
per share would have been $ 0.02.
(3) Conversion of 7% Convertible Subordinated Debentures
In March, 1995, the Company issued a redemption notice
for its 7% Convertible Subordinated Debentures. As the trading
price of the common stock was in excess of the $ 1.65
conversion price, all debenture holders elected to convert
their debentures into common stock. On March 31, 1995, the
Company issued 3,636,352 shares of common stock in exchange
for all of the debentures, raising the total outstanding
shares of common stock to 13,162,728 at that date. The
conversion had the effect of reducing long term debt, and
increasing shareholders' equity by $ 6.0 million, and reducing
annual interest costs by $ 420,000.
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
Introduction
The Company reported net earnings of $263,000 ($0.03 per
share) for the first three months of 1995 compared to net
earnings of $1,032,000 ($0.10 per share) for the same period
in 1994. As further discussed below, earnings were negatively
impacted by a $ 1.2 million pre-tax loss at the Company's
munitions specialty carrier, CIW.
The Company's three flatbed carriers, RRT, EMT, and ADS,
continued to grow in 1995. Revenue at these three companies
was up $ 6.6 million or 16 percent over the comparable 1994
period. Revenues at RDS remained largely unchanged in the
1995 versus 1994 periods. Excluding the loss at CIW, pre-tax
earnings were up by $ 255,000 or 19 percent in 1995 over 1994.
Further, the Company's 1995 operating ratio would have been
95.5% for the four carriers excluding CIW, as compared to 97.7
% for all carriers combined.
The 1995 loss at CIW is primarily attributable to lower
revenues resulting largely from a reduction in hauling
capacity. In addition, freight rates on military traffic were
down from 1994 levels due to lower demand and increased
competition. CIW experienced much higher turnover of owner
operators providing tractors beginning late in 1994 and
continuing into the first quarter of 1995. The Company has
taken a number of steps to address the losses, including
making changes in CIW management, increasing efforts to
recruit drivers and owner operators, and instituting cost
saving measures. These actions appear to be having a positive
effect, however, additional losses at CIW are anticipated in
the second quarter of 1995.
A discussion of the impact of the above and other factors
on the results of operations in the first quarter of 1995 as
compared to the first quarter of 1994 follows.
First Quarter 1995 Compared to First Quarter 1994
Per-
centage
Key Operating Statistics 1995 1994 Change
Operating Revenues ($ millions) $ 54.8 $ 49.6 10.5%
Net Earnings ($ 000's) $ 263 $ 1,032 (74.5)%
Average Tractors 1,970 1,767 11.5%
Total Loads (000's) 62.2 54.0 15.2%
Revenue Miles (millions) 39.2 36.3 8.0%
Average Revenue per Revenue Mile $ 1.24 $ 1.24 - %
Operating Revenues
Operating revenues for the three months ended March 31,
1995 totaled $54.8 million as compared to $49.6 million for
the same period in 1994. This 10.5% increase in revenues is
attributable to an increase in revenue miles of approximately
8.0 %.
The approximately 8% increase in revenue miles (volume)
in 1995 is attributable to an 11.5% increase in the average
number of tractors employed in 1995 versus 1994, offset by
lower equipment utilization as a result of overall softer
shipper demand. The increased number of tractors is the
result of the Company's internal growth plans implemented in
1994 and 1993 when the Company added additional
Company-operated tractors. There was a nominal decline in the
average revenue per revenue mile (price) in the 1995 period as
compared to the 1994 period, which offsets slightly the
favorable volume trends.
The Company's core flatbed business (RRT, EMT, and ADS)
experienced significantly higher volumes in 1995, posting
increased revenues of $ 6.6 million, or 16% over 1994.
Average tractor counts at these subsidiaries were up nearly
13% in 1995 over 1994. These favorable revenue increases were
offset partially by a 30% decrease in revenue at CIW, as
explained above. Revenues at RDS were largely unchanged in the
1995 versus 1994 periods.
Operating Expenses
The following table sets forth the percentage
relationship of operating expenses to operating revenues for
the three months ended March 31:
1995 1994
Operating revenues 100.0% 100.0%
Operating expenses:
Purchased transportation
and equipment rents 36.1 37.3
Fuel and other operating expenses 22.6 23.0
Salaries, wages and benefits 26.3 22.0
Insurance and claims 3.9 3.9
Operating taxes and licenses 4.4 4.7
Depreciation 2.0 2.7
Other operating expenses 2.4 1.8
Total operating expenses 97.7% 95.4%
The Company's 1995 operating ratio excluding CIW would
have been 95.5 %, versus 97.7% for all carriers combined.
Throughout 1994 and 1995, the mix of company-operated
versus owner-operator equipment continued to shift towards
company-operated equipment as a result of increased
competition for qualified owner-operators, and the Company's
ability to secure financing and customer business for
increased company-operated equipment. Approximately 62% of
the Company's revenue in the three months ended March 31, 1995
was generated by company-operated equipment, as compared to
59% in the 1994 period.
The relatively higher use of company-operated equipment
resulted in an increase in salaries, wages and benefits, and
in fixed costs related to ownership or lease of the equipment,
and decreases in purchased transportation as a percentage of
revenue. Salaries and wages have also increased as a result of
driver wage increases implemented in late 1994 and early 1995.
Fuel and other operating expenses decreased as a percentage of
revenue in 1995, as compared to 1994. This is attributable to
a decrease in the other operating expense component offset by
an increase in fuel consumed by more company-operated
equipment. Fuel cost per mile declined slightly in 1995 versus
1994.
Depreciation expense decreased in 1995 as compared to
1994 as the Company continues to replace owned or capital
leased tractors with tractors financed under operating leases.
Operating lease expense is reflected in Purchased
transportation and equipment rents.
Other operating expenses increased in 1995 over 1994 due
to increased communication costs and increased provisions for
doubtful accounts.
Interest Expense
Interest expense declined slightly to $ 0.08 million in
1995 from $ 0.09 million in the same period in 1994, as the
favorable effect of lower average outstanding bank borrowings
was offset partially by the unfavorable effect of higher
interest rates.
Liquidity and Capital Resources
The Company's cash position for the first three months of
1995 increased by $ 0.2 million. As reflected in the
accompanying Consolidated Statement of Cash Flows, the Company
generated $1.5 million of cash from operating activities, and
financing activities generated another $0.2 million. This was
offset by $1.9 million of cash used in investing activities,
primarily to finance the construction of a new headquarters
facility for RRT.
The Company's day-to-day financing is provided by
borrowings under the Company's bank credit facility.
Presently, the Company has a $22 million long-term credit
facility with a bank, consisting of a $7 million term loan
with a final maturity of December 31, 1997, and a $15 million
revolving line of credit which expires January 15, 1996.
Quarterly principal payments of $500,000 on the term loan
commenced April 1, 1995. The line of credit includes
provisions for the issuance of up to $15 million in stand-by
letters of credit which, as issued, reduce available
borrowings under the line of credit. Borrowings under the
credit facility totaled $8.4 million at March 31, 1995, and
outstanding stand-by letters of credit totaled $8.9 million at
that date. The combination of these two bank credits totaled
$17.3 million, leaving $4.7 million of borrowing capacity
available at March 31, 1995. The Company's liquidity is
generally lowest in the first and early second quarters of the
year, as the Company funds its annual plate and permit
expenses at the same time that working capital finance
requirements are highest. The Company is negotiating a
replacement bank credit facility with its lender. The Company
has requested an increase in the total credit from $ 22
million to $ 33 million. This would provide the Company
adequate financing to support its growth plans and to finance
its on-going working capital needs.
The Company plans to acquire approximately 350 new
tractors in 1995. Approximately 125 of the new tractors will
replace older units and the balance of approximately 225 units
will represent incremental growth units. The new tractors
will be financed primarily under walk-away operating leases,
and are not expected to require any significant amount of
deposits or down payments. In addition, the Company is
nearing completion of the construction of a new $ 3.0 million
headquarters facility for RRT, and improved driver facilities
at the EMT headquarters. Construction costs are being financed
under the bank credit facility, although the Company is
arranging permanent financing for the RRT headquarters.
The Company believes that cash generated from operations,
including cash from the continued sale of certain trade
accounts receivable, and cash available to it under the bank
credit facility will be sufficient to meet the Company's needs
for the foreseeable future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or of which any
of their property is the subject, other than routine
litigation incidental to its business, primarily involving
claims for personal injury and property damage incurred in the
transporting of freight. The Company maintains insurance
which covers liability resulting from such transportation
related claims up to $25 million per occurrence, subject to
deductibles for the first $25,000 to $250,000 of exposure for
each incident. The Company is not aware of any claims or
threatened claims that might materially affect the Company's
operating or financial results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 11 - Computation of Per Share Earnings
(b) Reports on Form 8-K
Current report on Form 8-K, dated April 3, 1995
reporting the conversion on March 31, 1995 of
the Company's 7% Convertible Subordinated
Debentures,and the issuance of 3,363,352 shares
of common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INTRENET, INC.
(Registrant)
May 15, 1995 /s/Jonathan G. Usher
Jonathan G. Usher,
Vice President - Finance,
Treasurer and Chief
Financial
Officer
(Principal Financial and
Accounting Officer)
INTRENET, INC.
STATEMENT RE: COMPUTATION
OF PER SHARE EARNINGS
Three Months Ended March 31,
1995 1994
Weighted average shares
outstanding during
period 9,566,780 9,067,164
Assumed exercise of
options and warrants 619,267 1,004,205
Shares assumed for primary
earnings per share 10,186,047 10,071,369
Assumed conversion of
7% Convertible
Subordinated Debentures - 3,457,036
Shares assumed for fully
diluted earnings
per share N/A 13,528,405
Earnings for the period:
($ in Thousands)
Net earnings $ 263 $1,032
Earnings per common and common
equivalent share:
Primary $0.03 $0.10
Fully diluted N/A $0.08
EXHIBIT 11