1
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, 1996
Commission File No. 0-25506
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
PST VANS, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0411704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No).
1901 West 2100 South
Salt Lake City, UT 84119
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: 801-975-2500
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 _____
The number of shares outstanding of Registrant's Common Stock, par
value $0.001 per share, as of May 10, 1996, was 4,209,409 shares.
2
PST VANS, INC.
INDEX
PART I, FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Condensed Balance Sheets as of
March 31, 1996 (unaudited) and December 31, 1995 1
Condensed Statements of Income (unaudited) for the
Three Months Ended March 31, 1996 and 1995 2
Condensed Statements of Cash Flows (unaudited) for
the Three Months Ended March 31, 1996 and 1995 3
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II, OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 12
* No Information Submitted Under This Caption
2
PST VANS, INC.
CONDENSED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
CURRENT ASSETS: (Unaudited)
Cash $104,776,871 $104,249,981
Accounts receivable, net 15,377,528 16,235,574
Receivables from sale of equipment 939,649 -
Deposits 880,012 985,952
Prepaid expenses and other 3,376,451 4,088,996
Inventories and operating supplies 636,058 642,730
-------------- --------------
Total current assets 25,986,569 26,203,233
-------------- --------------
PROPERTY AND EQUIPMENT, net 69,690,186 73,253,423
-------------- --------------
GOODWILL, net 8,816,122 8,884,112
-------------- --------------
OTHER ASSETS, net 370,897 541,362
-------------- --------------
$104,863,774 $108,882,130
============== ==============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $141,730,509 $141,109,337
Current portion of capitalized lease obligations 10,906,653 10,736,025
Accounts payable 4,629,875 4,509,834
Current portion of accrued claims payable 4,136,287 3,656,381
Accrued liabilities 3,235,813 3,256,896
------------ ------------
Total current liabilities 24,639,137 23,268,473
------------ ------------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion 2,362,139 2,321,686
------------ ------------
LONG-TERM OBLIGATIONS, net of current portion 2,532,959 4,031,690
------------ ------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion 48,861,661 51,655,247
------------ ------------
STOCKHOLDERS EQUITY:
Common stock 4,209 4,209
Additional paid-in capital 49,731,276 49,731,276
Accumulated deficit (23,267,607) (22,130,451)
-------------- -------------
Total stockholders equity 26,467,878 27,605,034
-------------- -------------
$104,863,774 $108,882,130
============== ==============
See accompanying notes to condensed financial statements
3
PST VANS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,
1996 1995
REVENUES $ 38,236,024 $ 36,291,779
------------------------------
COSTS AND EXPENSES:
Salaries, wages and benefits 11,014,236 9,906,495
Purchased transportation 9,130,993 9,075,585
Fuel and fuel taxes 5,588,489 4,552,790
Revenue equipment lease expense 2,153,701 3,515,974
Maintenance 1,893,735 2,019,522
Insurance and claims 2,721,486 1,681,972
General supplies and expenses 1,312,115 1,432,291
Taxes and licenses 903,949 710,453
Communications and utilities 917,725 656,506
Depreciation and amortization 3,355,957 1,130,398
Amortization of goodwill 67,991 67,991
(Gain) loss on disposition of assets (1,009,044) 37,314
------------- ------------
38,051,333 34,787,291
------------- -------------
OPERATING INCOME 184,691 1,504,488
------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (1,364,732) (1,113,157)
Other, net 42,885 52,910
------------- --------------
(1,321,847) (1,060,247)
------------- --------------
(Loss) income before provision for
income taxes (1,137,156) 444,241
PROVISION FOR INCOME TAXES - (88,848)
------------- ---------------
NET (LOSS) INCOME $ (1,137,156) $ 355,393
============== ================
NET (LOSS) INCOME PER SHARE $(0.27) $0.12
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 4,209,409 2,904,051
=============== =============
See accompanying notes to condensed financial statements
4
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (1,137,156) $ 355,393
Adjustments to reconcile net (loss) income to net
cash provided by operating activities -
Depreciation and amortization 3,423,948 1,198,389
Provision for losses on accounts receivable 239,427 236,716
(Gain) loss on sale of property and equipment (1,009,044) 37,314
(Increase) decrease in receivables 321,029 (1,303,809)
Decrease in deposits 105,940 1,905,076
Decrease in prepaid expenses and other 712,545 391,430
(Increase) decrease in inventories and
operating supplies 6,672 (139,200)
(Increase) decrease in other assets, net 170,465 (8,002)
Increase (decrease) in accounts payable 120,041 (443,417)
Increase (decrease) in accrued claims payable 745,883 (260,683)
Decrease in accrued liabilities (21,083) (990,476)
------------ -----------
Total adjustments 4,173,765 623,338
------------ -----------
Net cash flows provided by operating activities 3,036,609 978,731
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (364,500) (108,590)
Proceeds from sale of property and equipment 1,355,299 7,000
------------ -----------
Net cash flows provided by (used in) investing
activities 990,799 (101,590)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (877,559) (1,535,819)
Principal payments on capitalized lease obligations (2,622,959) (805,641)
Decrease in advances from factor - (5,336,289)
Purchase of accounts receivable from factor - (9,063,711)
Proceeds from issuance of common stock, net - 21,678,648
------------ -------------
Net cash flows (used in) provided by
financing activities (3,500,518) 4,937,188
------------- ------------
NET INCREASE IN CASH 526,890 5,814,329
CASH AT BEGINNING OF PERIOD 4,249,981 765,200
------------- ------------
CASH AT END OF PERIOD $ 4,776,871 $ 6,579,529
============ ===========
5
See accompanying notes to condensed financial statements
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1996 1995
------------- ------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for - Interest $ 1,371,136 $ 1,140,479
Income taxes 62,391 670,515
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through capitalized
leases obligations - 2,860,831
Common stock issued as payment of
long-term debt - 112,905
See accompanying notes to condensed financial statements
6
PST VANS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. Financial Information:
The accompanying condensed financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
the Company believes the following disclosures are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Results of operations
for interim periods are not necessarily indicative of results for a full year.
These condensed financial statements and notes thereto should be read in
conjunction with the Company's financial statements and notes thereto,
included in the Company's Form 10-K for the year ended December 31, 1995.
Note 2. Income Taxes:
Income taxes for the interim periods are based upon the Company's
estimated effective annual tax rates. The Company's effective tax rate
(income tax expense divided by income before income taxes) decreased to
zero for the three months ended March 31, 1996, compared to approximately 20%
for the three months ended March 31, 1995, as a result of the Company not
recording any benefit on its pre-tax loss.
PST Vans, Inc.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues increased by 5.4% to $38.2 million for the three months ended
March 31, 1996 compared to $36.3 million for the three months ended
March 31, 1995. This revenue growth resulted primarily from an increase
in revenue equipment as the average number of tractors increased to 1379
for the three months ended March 31, 1996 compared to 1195 for the three
months ended March 31, 1995. Revenues for the three months ended March 31,
1996, however, were adversely affected by a 2.5% decrease in the average
revenue per loaded mile. Empty miles also increased resulting in net average
revenue per total mile decreasing 2.6% for the three months ended March 31,
1996 compared to the three months ended March 31, 1995. In addition, average
miles per tractor decreased 6.5% between the two periods. Management believes
the decrease in average revenue per total mile and average miles per tractor
was a result of the extreme winter weather conditions in 1996 as well as slower
than anticipated economic conditions in the first quarter of 1996, and an over-
capacity of tractors, that affected the industry generally. As management does
not expect economic conditions and/or the overcapacity of tractors in the
industry to significantly change during the remainder of 1996, management is not
replacing 48 tractors which are at their normal retirement age of three years.
In addition, 172 older trailers have been sold to attain a more efficient
trailer to tractor ratio. Operating costs and expenses were 99.5% of revenues
for the three months ended March 31, 1996, compared to 95.9% of revenues for
the three months ended March 31, 1995. Operating costs and expenses, as a
percent of revenue, were adversely effected by the 2.6% reduction in average
revenue per total mile and the 6.5% decrease in utilization for the three
months ended March 31, 1996, as well as the factors discussed below.
Salaries, wages and benefits increased to 28.8% of revenues for the three
months ended March 31, 1996 compared to 27.3% of revenues for the three months
ended March 31, 1995, due primarily from driver pay changes in October, 1995
and an increase in the percent of total miles driven by Company drivers
compared to independent contractors during the two periods.
Purchased transportation decreased to 23.9% of revenues for the three
months ended March 31, 1996, compared to 25.0% for the three months
ended March 31, 1995, as result of a smaller percent of total miles driven
by independent contractors. Independent contractors are under contract
with the Company and are responsible for their own salaries, wages and
benefits, fuel, maintenance and depreciation. Independent contractor costs
are classified as purchased transportation expenses.
Fuel and fuel taxes increased to 14.6% of revenues for the three months
ended March 31, 1996, compared to 12.5% of revenues for the three
months ended March 31, 1995, as a result of a higher percentage of miles
driven with Company tractors, more adverse winter weather conditions in
1996 and an increase in the cost of fuel. This was offset slightly by an
increase in the fuel efficiency of Company tractors as the Company has
modernized its fleet of tractors. Management expects the cost of fuel to
remain high through the second quarter. In order to reduce the Company's
vulnerability to rapid increases in the price of fuel, the Company has
historically entered into purchase contracts with fuel suppliers from time to
time for a portion of its estimated fuel requirements at guaranteed prices.
(See liquidity and capital resources).
The Company has also implemented fuel surcharges to many of its customers.
Management anticipates that the purchase contracts and fuel surcharge will
help offset some of the increase in the cost of fuel. Revenue equipment lease
expense decreased to 5.6% of revenues for the three months ended March 31,
1996, compared to 9.7% of revenues for the three months ended March 31, 1995,
primarily as a result of the Company reducing the percentage of its tractor
fleet financed through operating leases to 29.1% for the three months ended
March 31, 1996, compared to 62.3% for the three months ended March 31, 1995.
Maintenance decreased to 5.0% of revenues for the three months ended
March 31, 1996, compared to 5.6% of revenues for the three months
ended March 31, 1995, as a result of reduced maintenance costs associated
with a newer tractor fleet. The average age of Company owned tractors
decreased to 1.2 years during the three months ended March 31, 1996 compared
to 1.9 years for the three months ended March 31, 1995.
Insurance and claims increased to 7.1% of revenues for the three months
ended March 31, 1996, from 4.6% of revenues for the three months ended
March 31, 1995 as a result of an increase in the amount of the losses per
accident during the three months ended March 31, 1996 and the number of
small losses compared to the three months ended March 31, 1995.
Also, the Company had favorable claims experience during the three
months ended March 31, 1995. On October 1, 1995, management
increased the training requirements of new drivers and has changed the
driver pay to attract more experienced drivers which management
believes are less accident prone. Management continues to review
accidents to determine what actions may be taken to reduce future claims
costs.
General supplies and expenses decreased to 3.4% of revenues for the three
months ended March 31, 1996 compared to 4.0% of revenues for the three
months ended March 31, 1995 as a result of decreased costs associated
with driver recruiting. In addition, a new computer upgrade was leased
through an operating lease while the previous computer lease was
capitalized and therefore expensed through depreciation and interest costs.
Taxes and licenses increased to 2.4% of revenues for the three months
ended March 31, 1996, compared to 2.0% of revenues for the three
months ended March 31, 1995, primarily as a result of increased costs
associated with a higher trailer to tractor ratio in addition to licensing
equipment with a higher cost.
Communications and utilities increased to 2.4% of revenues for the three
months ended March 31, 1996, compared to 1.8% of revenues for the
three months ended March 31, 1995, primarily as a result of the Company
utilizing "Highway Master" on board communication systems in a larger
portion of its fleet of tractors. The Company began installation of
"Highway Master" systems in June, 1994. The use of the "Highway
Master" system generally enhances the Company's ability to track loads,
service customers and communicate with and monitor drivers.
Gain on disposition of assets increased to 2.6% of revenues for the three
months ended March 31, 1996, compared to a loss of $37,314 for the three
months ended March 31, 1995, as a result of the Company selling 172 of
its older trailers in the first quarter of 1996. The Company anticipates
selling more of its older trailers during the second quarter of 1996 as a
result of the Company reducing the size of its fleet to better meet the
freight demands during 1996, and reducing the trailer to tractor ratio to
attain better efficiency of assets.
Depreciation and amortization increased to 8.8% of revenues for the three
months ended March 31, 1996, compared to 3.1% of revenues for the
three months ended March 31, 1995, as a result of the majority of the
Company's new revenue equipment being financed with capitalized leases.
Interest expense increased to 3.6% of revenues for the three months ended
March 31, 1996, compared to 3.1% of revenues for the three months
ended March 31, 1995 as a result of the majority of the Company's new
revenue equipment being financed with capitalized leases. This increase in
interest expense was offset by a 1.6% decrease in interest expense as a
result of the Company ceasing to discount its accounts receivable to a
factor following its initial public offering of its common stock in March,
1995.
As a consequence of the items discussed above, the Company incurred a
loss before provision for income taxes for the three months ended March
31, 1996 of $1,137,156 compared to income before provision for income
taxes of $444,241 for the three months ended March 31, 1995.
The Company's effective tax rate (income tax expense divided by income
before income taxes) decreased to zero for the three months ended March
31, 1996, compared to 20% for the three months ended March 31, 1995,
as a result of the Company not recording any benefit on its pre-tax loss.
Liquidity and Capital Resources
The Company's sources of liquidity have been funds provided by
operations, leases on revenue equipment and revolving lines of credit.
The Company has a credit facility with the Bank of New York for issuance
of letters of credit up to $9.3 million. As of March 31, 1996, the Company
had used $9.3 million of this facility, principally for letters of credit in
favor of the Company's insurance carrier. As outstanding letters of credit
issued under this credit facility are not renewed, the maximum commitment
available under this credit facility will be reduced by the amount of the
letters of credit that are not renewed. In May, 1995 the Company obtained
an additional $8.0 million working capital line of credit. This line of credit
provides the Company with additional working capital resources. The
Company anticipates that use of the line will be primarily for insurance
related letters of credit as well as providing any short term cash
requirements. As of March 31, 1996 the Company has utilized $3.0 million
of this line of credit for an insurance related letters of credit. Both of the
credit facilities have loan covenants which obligate the Company to
maintain a required level of profitability and cash flow. The Bank
of New York has amended these covenants for periods through and
including December 31,1996, and the Company's other lender waived
these requirements through the maturity of the working capital line of
credit. The Company may be required to seek additional amendments or
waivers in the future based on actual operating results. The Company is in
the process of negotiating an extension of its $8.0 million working capital
line of credit which expired on May 12, 1996. Management believes that
an extension will be obtained with similar terms and conditions.
Net cash provided by operating activities totaled approximately $3.0
million for the three months ended March 31, 1996. Net cash provided by
investing activities (primarily selling of equipment) amounted to $1.0
million for the three months ended March 31, 1996. Net cash
used in financing activities was $3.5 million for the three months ended
March 31, 1996. Payments on debt and capitalized lease obligations was
$3.5 million for the three months ended March 31, 1996.
The Company expects capital expenditures to be approximately $3.0
million in 1996 primarilyfor a computer system and software replacement
and upgrade. For the first three months of 1996, the Company acquired
$0.4 million of new equipment. Future expansion of the fleet will be made
as future economic conditions dictate. Management believes that
commitments available under the Company's lines of credit will be
sufficient to meet the Company's capital requirements through 1996. The
Company's business is capital intensive and will require the Company to
seek additional debt and possibly equity capital to enable the Company to
maintain a modern fleet. Whether such capital will be available on
favorable terms, or at all, will depend on the Company's future operating
results, prevailing economic and industry conditions and other factors over
which the Company has little or no control.
Fuel is one of the Company's most substantial operating expenses. In order
to reduce the Company's vulnerability to rapid increased in the price of
fuel, the Company enters into purchase contracts with fuel suppliers from
time to time for a portion of its estimated fuel requirements at guaranteed
prices. As of March 31, 1996, the Company had entered into various
agreements with fuel suppliers to purchase approximately 48% of its
estimated fuel needs through 1996 at a guaranteed price. Although
this arrangement helps reduce the Company's vulnerability to rapid increases
in the price of fuel, the Company will not benefit from a decrease in the
price of fuel to the extent of its commitment to purchase fuel under
these contracts.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern as
customers reduce shipments during and after the winter holiday season and
its attendant weather variations. Operating expenses also tend to be higher
during the cold weather months, primarily due to poorer fuel economy and
increased maintenance costs.
Inflation
Inflation can be expected to have an impact on the Company's operations.
The effect of inflation has been minimal over the past three years.
PART II, OTHER INFORMATION
INDEX
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment to Bank of New York Credit Facility
10.2 Amendments to Stock Incentive Plan
10.3 Employment Term Sheet -Robert D. Hill
10.4 Employment Term Sheet -Jeffrey L. Theurer
(b) Reports on Form 8-K
None
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 thereto duly authorized.
PST Vans, Inc.
Date: May 14, 1996 By: /s/ Kenneth R. Norton
--------------------------
Kenneth R. Norton
Chief Executive Officer
Date: May 14, 1996 By: /s/ Jeffrey L. Theurer
---------------------------
Jeffrey L. Theurer
Chief Financial Officer and
Principal Financial Officer