SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 11, 1997
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AMERITRUCK DISTRIBUTION CORP.
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(Exact name of registrant as specified in its charter)
Delaware 33-99716 75-2619368
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
City Center Tower II, Suite 1101
301 Commerce Street, Fort Worth, TX 76102-5384
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Address of principal executive offices
Registrant's telephone number, including area code: (817) 332-6020
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Item 5. Other Events
On June 27, 1997, AmeriTruck Distribution Corp. (the "Company") acquired
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all of the capital stock of Tran-Star, Inc. ("Tran-Star"), which was owned by
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Allways Services, Inc. ("Allways"). Tran-Star is a carrier of refrigerated and
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non-refrigerated products. Tran-Star had 1996 revenues of $68.5 million. The
purchase price was $2.6 million, $1.6 million of which was paid in cash and $1
million of which was delivered in the form of a subordinated promissory note due
in 2000 (the "Seller Note"). Of this, $1.5 million in cash and the Seller Note
-----------
were assigned to Norfolk Southern Corporation ("Norfolk") as satisfaction of all
-------
amounts owed to Norfolk. The Company also assumed or refinanced indebtedness
estimated at approximately $30 million. In addition, under the terms of the
agreement, the Company leased a terminal at Etters, Pennsylvania from an Allways
affiliate for one year, and will purchase the property at the end of the lease
term for $400,000, less the amount of certain environmental remediation costs
incurred by the Company or Tran-Star in connection with the property. Tran-
Star, headquartered in Waupaca, Wisconsin, operates primarily in between the
upper midwestern U.S. and the northeast and southeast, with terminals at Etters
and Wyalusing, Pennsylvania.
Also as part of the transaction, the Company, Tran-Star, and Norfolk
entered into an Indemnity Agreement, pursuant to which Tran-Star and the Company
agreed to indemnify Norfolk for certain environmental liabilities with respect
to the Etters, Pennsylvania property.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit
Number Description
------ -----------
(a) Financial Statements of Business Acquired
-----------------------------------------
(i) Audited:
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Operations and Retained
Earnings (Accumulated Deficit) and Cash Flows for years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements
(ii) Unaudited:
Note: It is currently impractical to provide financial
statements for Tran-Star, Inc. for the three months ended
March 31, 1997. These financial statements will be filed as
soon as they are available, but not later than September 8,
1997.
(b) Pro Forma Financial Information
-------------------------------
Note: It is currently impracticable to provide the pro forma
financial information required by Article 11 of
Regulation S-X. This pro forma financial information will be
filed as soon as it is available, but not later than
September 8, 1997.
(c) Exhibits
--------
2 Stock Purchase Agreement, dated as of June 27, 1997, among
AmeriTruck Distribution Corp., Allways Services, Inc., and
Transtar Services, Inc.
The following exhibits have been omitted:*
Exhibit A: Seller Note
Exhibit B-1: Norfolk Southern Settlement
Exhibit B-2: Norfolk Southern Indemnity
Exhibit C: Lease Agreement
Exhibits D-1, D-2, D-3 and D-4: Employment
Agreements
Exhibits E-1, E-2, and E-3: Non-Competition
Agreements
Exhibit F: Tax Agreement
Exhibit G: Opinion of Counsel to Seller, Tran-Star,
and Services
Exhibit H: Opinion of Counsel to Buyer
* The Registrant undertakes to furnish supplementally to the
Commission, upon request, any omitted exhibit.
SIGNATURE
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 hereunto duly authorized.
AMERITRUCK DISTRIBUTION CORP.
Dated: July 11, 1997 By: /s/ J. Michael May
------------------
J. Michael May
Title: General Counsel and Secretary
Tran-Star, Inc.
Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
CONTENTS
Report of Independent Auditors..................................................... 1
Consolidated Financial Statements
Consolidated Balance Sheets........................................................ 2
Consolidated Statements of Operations and Retained Earnings (Accumulated Deficit).. 4
Consolidated Statements of Cash Flows.............................................. 5
Notes to Consolidated Financial Statements......................................... 7
Report of Independent Auditors
The Stockholder
Tran-Star, Inc.
We have audited the accompanying consolidated balance sheets of Tran-Star, Inc.
(the Company), a wholly owned subsidiary of Allways Services, Inc. (Allways), as
of December 31, 1996 and 1995, and the related consolidated statements of
operations and retained earnings (accumulated deficit) and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the CompanyOs 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 audit 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 consolidated financial position of the Company at
December 31, 1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Milwaukee, Wisconsin
February 27, 1997, except for Note 4, as to which the
date is February 28, 1997, and Notes 2 and 9, as to
which the date is June 27, 1997
1
Tran-Star, Inc.
Consolidated Balance Sheets
DECEMBER 31
1996 1995
--------------------------
ASSETS
Current assets:
Cash and cash equivalents (Note 4) $ 101,903 $ 888,317
Short-term investments (Note 4) 1,800,000 1,800,000
Accounts receivable, less allowance for
uncollectible accounts of $188,610 in
1996 and $61,380 in 1995 (Note 4) 6,677,362 6,939,729
Advances to drivers, less
allowance for
uncollectible accounts
of $35,857 in 1996 and
$60,605 in 1995 99,499 173,502
Due from Norfolk Southern 7,269 -
Corporation (Note 2)
Deposits 112,500 112,500
Prepaid expenses:
Licenses and permits 273,748 1,107,110
Messaging services - 228,001
Insurance 348,449 305,821
Other 37,916 36,889
Tires, maintenance parts and supplies 486,331 391,033
Lease receivables from drivers, less
allowance for uncollectible
accounts of $74,250 (Note 3) 87,428 -
Deferred income taxes (Note 6) 1,778,545 1,559,070
------------------------
Total current assets 11,810,950 13,541,972
Lease receivables from
drivers, less allowance
for uncollectible accounts
of $133,151 (Note 3) 156,503 -
Property and equipment:
Land 109,907 109,907
Building and
improvements 1,096,675 1,037,793
Tractors and trailers
(Note 4) 49,613,143 50,129,743
Systems and
communications
equipment 2,701,911 2,649,719
Office and garage
equipment 183,590 154,989
Automobiles 103,757 103,757
-------------------------
53,808,983 54,185,908
Less accumulated depreciation 19,629,986 11,849,558
-------------------------
34,178,997 42,336,350
-------------------------
Total assets $46,146,450 $55,878,322
=========================
See accompanying notes
2
DECEMBER 31
1996 1995
---------------------------
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,018,514 $ 2,000,905
Due to Norfolk Southern
Corporation (Note 2) 774,835 266,443
Due to affiliate (Note 8) 508,087 -
Accrued liabilities 2,531,445 2,182,213
Reserve for purchase
liabilities (Note 2) - 215,140
Reserve for freight and
casualty claims 2,972,813 3,133,767
Long-term debt due within
one year (Note 4) 10,091,413 10,250,623
--------------------------
Total current liabilities 18,897,107 18,049,091
Other long-term liabilities
(Note 2) - 704,835
Long-term debt (Note 4) 21,808,387 25,889,887
Deferred income taxes
(Note 6) 5,291,901 6,647,563
Commitments and
contingencies (Note 5)
Stockholder's equity
(Note 4):
Common stock, no par
value, 2,800 shares
authorized; 206 shares
issued and outstanding 6,123,000 6,123,000
Accumulated deficit (2,587,642) (319,813)
---------------------------
3,535,358 5,803,187
Less net due from
affiliates (Note 8) (3,386,303) (1,216,241)
Total stockholder's equity 149,055 4,586,946
---------------------------
Total liabilities and
stockholder's equity $46,146,450 $55,878,322
===========================
See accompanying notes
3
Tran-Star, Inc.
Consolidated Statements of Operations and Retained Earnings
(Accumulated Deficit)
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------
Operating revenue $68,475,522 $65,565,888 $60,338,842
Operating expenses:
Salaries, wages and
benefits 27,330,195 25,933,094 23,044,972
Operations and maintenance 23,705,631 20,362,481 17,765,193
Rents and purchased
transportation 3,818,140 3,638,185 4,646,227
Operating taxes and
licenses 2,213,706 2,159,769 2,128,425
Insurance and claims 3,123,186 3,919,911 3,186,646
Depreciation 8,044,477 6,739,192 5,700,368
Communications and
utilities 879,471 888,776 899,270
Miscellaneous operating
expenses 517,671 189,390 293,620
---------------------------------------
Total operating expenses 69,632,477 63,830,798 57,664,721
---------------------------------------
Income (loss) from (1,156,955) 1,735,090 2,674,121
operations
Other income (expense):
Interest expense, net (2,644,911) (2,319,634) (2,143,174)
Gain on sale of
equipment, net 13,900 38,311 45,346
---------------------------------------
Income (loss) before income
taxes (3,787,966) (546,233) 576,293
Income taxes (Note 6) (1,520,137) (158,443) 508,316
---------------------------------------
Net income (loss) (2,267,829) (387,790) 67,977
Retained earnings
(accumulated deficit),
beginning of year (319,813) 67,977 -
---------------------------------------
Retained earnings
(accumulated deficit), end
of year $(2,587,642) $ (319,813) $ 67,977
=========================================
See accompanying notes.
4
Tran-Star, Inc.
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $(2,267,829) $ (387,790) $ 67,977
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 8,044,477 6,739,192 5,700,368
Gain on sale of equipment, net (13,900) (38,311) (45,346)
Deferred income taxes (1,575,137) (212,966) 459,423
Reversal of reserve for purchase (215,140) - -
liabilities
Change in assets and liabilities:
Accounts receivable 262,367 (692,727) 1,552,088
Advances to drivers 74,003 (66,169) (62,033)
Deposits - - (112,500)
Prepaid expenses 1,017,708 (199,736) (735,925)
Tires, maintenance parts and supplies (95,298) 156,327 108,625
Other long-term assets - 390,148 65,853
Accounts payable 17,609 343,912 284,497
Accrued liabilities 349,232 289,847 720,495
Accrued acquisition costs and - (1,371) (111,516)
purchase liabilities
Reserve for freight and casualty
claims (160,954) 1,316,980 171,791
----------------------------------------
Net cash provided by operating
activities 5,437,138 7,637,336 8,063,797
INVESTING ACTIVITIES
Property and equipment additions (236,789) (20,035,406) (4,747,223)
Proceeds from sale of equipment, net 141,530 796,849 1,313,469
Payment of deferred expenses related to
lease receivables from drivers (70,839) - -
Proceeds from payment on lease 48,943 - -
receivables from drivers
Reimbursement from (payment to) Norfolk
Southern Corporation (203,712) 34,092 1,381,982
Net advances to affiliates (1,661,975) (166,341) (1,181,773)
Purchase of short-term investments - (1,800,000) -
----------------------------------------
Net cash used in investing activities (1,982,842) (21,170,806) (3,233,545)
FINANCING ACTIVITIES
Proceeds from borrowings on long-term
debt 1,284,342 18,794,553 5,279,313
Payments on long-term debt (5,525,052) (9,252,222) (7,881,134)
----------------------------------------
Net cash provided by (used in)
financing activities (4,240,710) 9,542,331 (2,601,821)
----------------------------------------
Net increase (decrease) in cash and
cash equivalents (786,414) (3,991,139) 2,228,431
Cash and cash equivalents at beginning
of year 888,317 4,879,456 2,651,025
----------------------------------------
Cash and cash equivalents at end of year $ 101,903 $ 888,317 $ 4,879,456
========================================
See accompanying notes.
5
Tran-Star, Inc.
Consolidated Statements of Cash FLows (continued)
YEAR ENDED DECEMBER 31
1996 1995 1994
---------------------------------------
Cash paid during the year
for:
Interest $2,696,349 $2,626,805 $2,331,788
Income taxes 62,359 69,331 103,702
Significant non-cash transactions are as
follows:
During 1996, as discussed in Note 3,
the net book value of $222,035 of
certain tractors was accounted for
as sold to drivers pursuant to
capital leases; and
During 1994, prepaid messaging units
of $716,750 were received from
Norfolk Southern pursuant to the
Transtar Agreement, as discussed
in Note 2.
6
Tran-Star, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tran-Star, Inc.
(Tran-Star or the Company) and its wholly owned subsidiary Pro-Trans Services,
Inc. (Pro-Trans). All significant intercompany accounts and transactions have
been eliminated in consolidation.
ORGANIZATION
On December 31, 1993, Allways Services, Inc. (Allways) purchased all of the
issued and outstanding common stock of Transtar Services, Inc. (Transtar
Services), which owned Tran-Star, Inc., from Norfolk Southern (NS) pursuant to a
stock purchase agreement (the Transtar Agreement) (see Note 2).
After the acquisition, Transtar Services was a wholly owned subsidiary of
Allways, and Tran-Star was a wholly owned subsidiary of Transtar Services. On
December 31, 1994, Transtar Services declared a stock dividend transferring the
shares of Tran-Star to Allways. After the dividend, Tran-Star was a wholly owned
subsidiary of Allways.
NATURE OF OPERATIONS
The Company is a motor carrier operating throughout the United States and
certain Canadian provinces, specializing in time and temperature sensitive
services. The CompanyOs corporate office and main terminal is located in
Waupaca, Wisconsin.
The Company's revenues are generated primarily in the United States. The Company
performs periodic credit evaluations of its customersO financial condition and
generally does not require collateral.
Approximately 15%, 16% and 20% of the CompanyOs 1996, 1995 and 1994 consolidated
operating revenue, respectively, were from one customer.
7
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. These investments are
carried at cost which approximates market.
SHORT-TERM INVESTMENTS
Short-term investments are classified as available-for-sale securities and are
highly liquid debt instruments. These securities have a put option feature that
allows the Company to liquidate the investments at its discretion and are backed
by a letter of credit from the financial institution. These investments are
carried at cost which approximates market.
LICENSES AND PERMITS
Licenses and permits are amortized to expense over the term (generally one year)
of the applicable license or permit.
PREPAID MESSAGING SERVICES
The Company prepaid the cost of certain messaging services that were amortized
over the term of the agreement which expired in 1996.
TIRES, MAINTENANCE PARTS AND SUPPLIES
Tires, maintenance parts and supplies are recorded at cost and expensed when
used.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the following useful lives (in years):
Buildings and improvements 5 - 35
Tractors and trailers 2 - 7
Systems and communication equipment 1 - 5
Office and garage equipment 1 - 5
Automobiles 1 - 4
In calculating depreciation for tractors and trailers, a 20% salvage factor is
utilized.
8
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenue and related transportation costs upon delivery.
INCOME TAXES
The Company is part of the consolidated income tax return of Allways. The
provision for income taxes recorded in the consolidated statements of operations
and retained earnings (accumulated deficit) reflects the provision for income
taxes of the Company on a stand-alone basis. Also, reported net operating loss
carryforwards and the related deferred tax assets represent those net operating
loss carryforwards created by the Company.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. ACQUISITION OF TRAN-STAR
Allways accounted for its acquisition of Transtar Services and Tran-Star,
discussed in Note 1, under the purchase method. The $33,554,873 purchase price
consisted of $27,131,873 in cash and a $6,423,000 subordinated note due NS and
has been allocated based on the fair value of the assets acquired and
liabilities assumed and pushed down into the Company's consolidated financial
statements as follows:
Cash $ 451,025
Accounts receivable 7,799,090
Due from NS 2,110,750
Other assets 1,899,446
Fixed assets 31,824,192
Accounts payable (751,098)
Accrued liabilities (2,086,396)
Reserve for purchase liabilities (234,900)
Reserve for freight and casualty claims (2,594,200)
Deferred income taxes, net (4,863,036)
-------------
Total purchase price $33,554,873
=============
9
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
2. ACQUISITION OF TRAN-STAR (CONTINUED)
The Transtar Agreement had a base working capital provision which provided that,
to the extent the December 31, 1993 working capital, as defined, varied from the
agreed-upon amount, Allways or NS would be required to reimburse the other for
the difference. Accordingly, because the working capital was below the specified
amount at December 31, 1993, the Company established a receivable from NS
totaling $1,300,000, which was received in August 1994.
In addition, due to a shortfall in the number of tractors and trailers acquired
at December 31, 1993, the Company established a receivable from NS totaling
$810,750. This receivable was settled through a payment of $94,000 in cash and
$716,750 of messaging units in 1994.
The Transtar Agreement has cross-indemnification provisions relating to tax and
claim matters providing that, to the extent the actual payments are more or less
than the liabilities in place at December 31, 1993, NS will pay Allways or
Allways will pay NS, as the case may be, for any resulting difference. On
January 12, 1996, the Company signed an agreement with NS to settle the claim
payment matter (Claims Agreement). Pursuant to the Claims Agreement, all the
related claims will be settled by NS, which retains all risks related thereto.
The Claims Agreement provided for monthly payments of the recorded balance
through June 1998. On June 27, 1997, the Company and Allways entered into a
settlement agreement with NS, amending the payment terms of the Claims
Agreement, pursuant to which Tran-Star paid the remaining liability.
During 1996, management determined that the remaining reserve for purchase
liabilities, which was originally established at the time of the acquisition,
was unnecessary and reversed the remaining amount recorded. Accordingly,
$215,140 of income is included in insurance and claims expenses in the 1996
consolidated results of operations related to this reversal.
3. LEASE RECEIVABLES FROM DRIVERS
During 1996, the Company leased certain of its tractors to independent operators
under sales-type leases. The net gain generated upon sale and any interest
subsequently earned on the receivable balance have been deferred as an allowance
against the related lease
10
3. LEASE RECEIVABLES FROM DRIVERS (CONTINUED)
receivables. The leases bear interest at 10% to 13% and are secured by the
respective tractor units. Future minimum lease payments under these leases
subsequent to December 31, 1996 are as follows:
Year Lease Payments Allowance Net Balance
--- ------------------------------------------------------
1997 $ 161,678
1998 170,907
1999 118,747
-----------
Total 451,332 $ 207,401 $ 243,931
Less current portion 161,678 74,250 87,428
-----------------------------------------------------
Long-term portion $ 289,654 $ 133,151 $ 156,503
=====================================================
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1996 1995
---------------------------------
Notes due in monthly principal and interest payments, at
various interest rates ranging from 6.52% to 10% per
annum, through various dates through January 2001 $31,899,800 $36,140,510
Less current maturities 10,091,413 10,250,623
----------- -----------
$21,808,387 $25,889,887
At December 31, 1996, all of the above notes were guaranteed by Allways and
secured by specific fleet assets, which, in total, comprise the majority of the
CompanyOs fleet. Over 75% of the Company's outstanding debt is also secured by
the Company's accounts receivable, contract rights, chattel paper and general
intangibles. The Company, pursuant to covenants in the loan and security
agreement covering various notes, may not pay dividends or make certain
investments, except as provided for in the Transtar Agreement or as approved by
the lender.
Aggregate maturities of long-term debt outstanding as of December 31, 1996, are
as follows:
1997 $10,091,413
1998 9,717,140
1999 6,785,670
2000 5,015,675
2001 289,902
-----------
$31,899,800
===========
11
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
4. LONG-TERM DEBT (CONTINUED)
At December 31, 1996, the Company had $3,032,000 of letters of credit
outstanding to support certain insurance policies.
On February 28, 1997, the Company obtained a revolving credit facility (the
Credit Facility), with interest payable monthly at 2% above the Citibank, N.A.
base rate, expiring March 31, 1998. Amounts available are limited to the lesser
of $6,000,000 or the amount of eligible receivables, as defined. The Credit
Facility requires the Company to maintain a debt service coverage ratio, as
defined, places limitations on employee advances and executive compensation
increases and prohibits payment of dividends. Outstanding balances and letters
of credit are collateralized by the accounts receivable and general intangible
assets of the Company, as defined. Outstanding letters of credit may not exceed
$4,000,000 and reduce the amount available under the Credit Facility. A fee of
2% per annum is due monthly on the outstanding letters of credit.
It was not practicable to estimate the fair value of the CompanyOs long-term
debt securities because of a lack of quoted market prices and the inability to
estimate fair value without incurring excessive costs.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office space and parking facilities under noncancelable
operating leases expiring in 1999. The Company also rents office equipment under
cancelable operating leases. Certain leases provide for purchase or renewal
options. Rent expense charged to operations relating to all operating leases
totaled $65,068 in 1996, $84,847 in 1995 and $69,346 in 1994.
Future minimum payments, under noncancelable operating leases with remaining
terms in excess of one year, consisted of the following at December 31, 1996:
1997 $ 53,648
1998 33,914
1999 15,000
----------
$102,562
==========
The Company is involved in various litigation and legal proceedings, including
bodily injury and property damage claims. In the case of bodily injury and
property damage, the Company is partially self-insured and has accrued for all
claim exposure for which a loss is probable and reasonably estimable. Based on
current information, management
12
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
believes that any difference between the future costs and the amounts accrued,
if any, for all existing litigation will not be material to the CompanyOs
financial position or results of operations.
6. INCOME TAXES
At December 31, 1996, Tran-Star has federal and state net operating loss
carryforwards of $11,264,000 and $6,725,000, which begin to expire in 2009 and
1997, respectively.
The provision (benefit) for income taxes is comprised of the following:
YEARS ENDED DECEMBER 31
1996 1995 1994
---------------------------
(In Thousands)
Current -
State $ 55 $ 55 $ 49
Deferred:
Federal (1,339) (181) 390
State (236) (32) 69
(1,575) (213) 459
---------------------------
Provision (benefit) for income taxes $(1,520) $(158) $ 508
===========================
The differences between the provision (benefit) for income taxes and income
taxes (benefit) computed using the U.S. federal income tax rate (34%) for the
years ended December 31, 1996, 1995 and 1994, are as follows:
YEARS ENDED DECEMBER 31
1996 1995 1994
---------------------------
(In Thousands)
Provision (benefit) at statutory rate $(1,288) $(186) $ 196
State taxes (benefit), net
of federal benefit (123) 13 56
Effect of nondeductible
(nontaxable) items (22) 31 242
Other (87) (16) 14
---------------------------
Provision (benefit) for income taxes $(1,520) $(158) $ 508
===========================
13
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
At December 31, 1996 and 1995, the Company has the following net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes:
1996 1995
-------------------
(In Thousands)
Deferred tax liabilities:
Fixed assets $ 9,437 $ 8,657
Prepaid expenses 271 628
-------------------
Total deferred tax 9,708 9,285
liabilities
Deferred tax assets:
Accounts receivable 165 47
Freight, casualty,
health and worker's 1,572 1,706
compensation claims
Reserve for purchase - 82
liabilities
Revenue recognition-- 107 160
difference
inEaccounting methods
Vacation accrual 164 164
Net operating loss 4,145 2,009
carryforwards
Other 41 28
Total deferred tax assets 6,194 4,196
-------------------
Net deferred tax liability $ 3,514 $ 5,089
===================
The net current and noncurrent components of deferred taxes recognized at
December 31, 1996 and 1995 are as follows:
1996 1995
-------------------
(In Thousands)
Net current asset $ 1,778 $ 1,559
Net noncurrent liability (5,292) (6,648)
-----------------
$(3,514) $(5,089)
=================
7. PROFIT-SHARING PLAN
Tran-Star has a defined contribution profit-sharing plan covering substantially
all full-time employees (the Plan) that permits employees to make 401(k)
contributions. The Plan also provides for discretionary employer matching and
lump-sum contributions. The Company incurred expenses of approximately $45,000,
$32,000 and $23,000 related to the profit-sharing plan in 1996, 1995 and 1994,
respectively.
14
Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
8. RELATED-PARTY TRANSACTIONS
Effective January 1, 1995, the Company was charged a fee for management services
provided by Allways on behalf of the Company. For both 1996 and 1995, the charge
was $107,979, based on an allocation of specific management personnel salaries.
The Company rents a service terminal in Etters, Pennsylvania (Etters) from
Transtar Services under a month-to-month lease. Under the terms of the
agreement, in lieu of rental payments, the Company is responsible for payment of
property taxes and maintenance of the property. Total amounts expensed by the
Company relating to this property were $56,400, $54,052 and $52,522 for 1996,
1995 and 1994, respectively. Management believes these payments would
approximate rent to an unrelated third party for similar property.
Certain services, such as legal and accounting, are performed by third parties
for the benefit of both Tran-Star and Proline Carriers, Inc. (Proline), also a
wholly owned subsidiary of Allways. Where possible, these costs are allocated to
each entity based on actual services rendered. For expenses incurred benefiting
both Tran-Star and Proline, costs have been allocated 60% to Tran-Star and 40%
to Proline based upon an agreement between the companies.
The Company performed services, such as certain finance functions (e.g., credit
and collections, payroll, accounts payable and general ledger accounting and
reporting), on behalf of Proline and Proline-performed services, such as risk
management administration and driver recruitment, on behalf of the Company.
Costs for such services are determined from the salaries of the respective
employees performing these tasks, allocated based on the estimated time spent by
the employees serving the Company and Proline. Net amounts charged by Tran-Star
to Proline for these services totaled $536,000 and $372,000 for 1996 and 1995,
respectively. No amounts were charged for 1994.
The Company advances funds to certain entities owned by Allways. These advances
are reflected in the Due from Affiliates account in the accompanying
consolidated balance sheets. Interest is charged monthly based on the average
monthly outstanding balance at a rate approximating the Company's incremental
borrowing rate, which averaged 8.7%, 8.8% and 8.6% in 1996, 1995 and 1994,
respectively. The Company recorded interest income of $181,100, $71,400 and
$12,900 during 1996, 1995 and 1994, respectively, from these entities. On
February 18, 1997, the Board of Directors authorized, through
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Tran-Star, Inc.
Notes to Consolidated Financial Statements (continued)
8. RELATED-PARTY TRANSACTIONS (CONTINUED)
various intercompany transactions, the forgiveness of the Due from Affiliates.
Accordingly, these advances have been presented in the accompanying consolidated
balance sheets as reductions to stockholder's equity. This presentation is
reflective of the assumption that the advances are deemed dividends by the
Company to Allways and its affiliates.
On February 18, 1997, Allways and its wholly owned subsidiaries, including the
Company, entered into a Separation and Services Agreement (Separation Agreement)
effective January 1, 1997, confirming the 60/40 cost allocations described
above. Also, pursuant to the Separation Agreement, net cash collected or paid by
the Company on behalf of Proline from December 1, 1996, through and including
February 18, 1997, is to be remitted to Proline ($103,087 collected on behalf of
Proline through December 31, 1996). In addition, $405,000 is to be paid by the
Company to Proline as part of the Separation Agreement. At December 31, 1996,
management has recorded the amounts due Proline related to the Separation
Agreement of $508,087 as a current liability in the consolidated balance sheet.
9. SUBSEQUENT EVENT
On June 27, 1997, the Company was sold to AmeriTruck Distribution Corporation.
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