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, 1997
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 $0.001
per share, as of May 10, 1997, was 4,227,215 shares.
PST VANS, INC.
INDEX
PART I, FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) as of March 31, 1997
and December 31, 1996 1
Condensed Statements of Operations (unaudited) for the Three Months
Ended March 31, 1997 and 1996 2
Condensed Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 1997 and 1996 3
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II, OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 9
* No Information Submitted Under This Caption
PST VANS, INC.
CONDENSED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
--------------- -------------
(Unaudited)
CURRENT ASSETS:
Cash...............................................................$ 2,499,646 $ 4,098,361
Accounts receivable, net..............................................13,746,348............14,607,292
Deposits.................................................................327,535...............353,437
Prepaid expenses and other.............................................2,661,932.............3,258,670
Inventories and operating supplies........................ 622,093........ 689,875
Total current assets............................................ 19,857,554.......... 23,007,635
------------ ------------
PROPERTY AND EQUIPMENT, net.............................................. 56,976,229.......... 58,116,763
------------ ------------
GOODWILL, net........................................................... 8,544,159 .... 8,612,150
------------- -------------
OTHER ASSETS, net...................................................... 302,805........ 523,538
..........................................................................$85,680,747...........$90,260,086
LIABILITIES AND STOCKHOLDERS= EQUITY
CURRENT LIABILITIES:
Line of credit..................................................... $ 396,022 $ -
Current portion of long-term obligations............................... 707,270........... 1,388,581
Current portion of capitalized lease obligations......................18,029,418............18,708,615
Accounts payable.......................................................4,378,237.............4,140,985
Current portion of accrued claims payable..............................5,740,539.............5,456,316
Accrued liabilities................................................ 2,977,245........ 2,469,914
Total current liabilities....................................... 32,228,731......... 32,164,411
------------ -------------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion............................................. 1,295,891........ 1,429,227
------------- --------------
LONG-TERM OBLIGATIONS, net of current portion........................... 1,681,886........ 1,986,214
------------- --------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion..................................................... 30,783,416......... 32,907,995
------------ -------------
STOCKHOLDERS= EQUITY:
Common stock...............................................................4,227................4,217
Additional paid-in capital............................................49,786,888...........49,759,238
Accumulated deficit.................................................(30,100,292).........(27,991,216)
Total stockholders= equity...................................... 19,690,823......... 21,772,239
.........................................................................$85,680,747 ..........$90,260,086
See accompanying notes to condensed financial statements
1
PST VANS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
----------- -----------
REVENUES.................................................................$ 34,522,609.........$ 38,236,024
COSTS AND EXPENSES:
Salaries, wages and benefits..........................................10,865,745...........11,014,236
Purchased transportation...............................................6,832,845............9,130,993
Fuel and fuel taxes....................................................5,373,628............5,588,489
Revenue equipment lease expense........................................1,842,548............2,153,701
Maintenance............................................................1,826,916............1,893,735
Insurance and claims...................................................2,871,458............2,721,486
General supplies and expenses..........................................1,261,423............1,312,115
Taxes and licenses.......................................................719,259..............903,949
Communications and utilities.............................................895,038..............917,725
Depreciation and amortization..........................................3,032,285............3,355,957
Amortization of goodwill..................................................67,991...............67,991
(Gain) on disposition of assets.................................... (54,187)..........(1,009,044)
.......................................................................... 35,534,949.......... 38,051,333
OPERATING INCOME (LOSS)................................................ (1,012,340)........ 184,691
OTHER INCOME (EXPENSE):
Interest expense.....................................................(1,126,224)...........(1,364,732)
Other, net........................................................ 29,488....... 42,885
..........................................................................(1,096,736).......... (1,321,847)
Loss before provision for
income taxes.....................................................(2,109,076)...........(1,137,156)
PROVISION FOR INCOME TAXES........................................ - ... -
NET LOSS ...............................................................$ (2,109,076).........$ (1,137,156)
NET LOSS PER SHARE.................................................. $(0.50).... $(0.27)
================ =================
WEIGHTED AVERAGE SHARES OUTSTANDING.................................... 4,226,544....... 4,209,409
============== ==============
See accompanying notes to condensed financial statements
2
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 ...... 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..........................................................$ (2,109,076)........$ (1,137,156)
Adjustments to reconcile net loss to net
cash provided by operating activities -
Depreciation and amortization......................................3,100,276............3,423,948
Provision for losses on accounts receivable..........................(2,915)..............239,427
Gain on sale of property and equipment..............................(54,187)..........(1,009,044)
Non cash expense related to issuance of common stock...................4,124...... -
Decrease (increase) in receivables...................................863,859............(321,029)
Decrease in deposits..................................................25,902..............105,940
Decrease in prepaid expenses and other...............................596,738..............712,545
Decrease in inventories and operating supplies........................67,782................6,672
Decrease in other assets, net........................................220,733..............170,465
Increase in accounts payable.........................................237,252..............120,041
Increase in accrued claims payable...................................150,887..............745,883
Increase (decrease) in accrued liabilities.................... 529,752....... (21,083)
Total adjustments.................................................. 5,740,203........ 4,173,765
------------- -------------
Net cash flows provided by operating activities................... 3,631,127 .... 3,036,609
-------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................(2,128,685).............(364,500)
Proceeds from sale of property and equipment...................... 288,698 1,355,299
Net cash flows provided by (used in) investing
activities..................................................... (1,839,987) ......... 990,799
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line of credit........................................11,022,396...... -
Principal payments on line of credit................................(10,626,374)...... -
Proceeds from issuance of long-term debt..................................54,602...... -
Principal payments on long-term debt.................................(1,060,240).............(877,559)
Principal payments on capitalized lease obligations..................(2,803,775)...........(2,622,959)
Proceeds from issuance of common stock, net....................... 23,536 -
Net cash flows (used in) by
financing activities...............................................(3,389,855)....... (3,500,518)
----------- --------------
NET (DECREASE) INCREASE IN CASH...........................................(1,598,715)..............526,890
CASH AT BEGINNING OF PERIOD.............................................. 4,098,361....... 4,249,981
------------ --------------
CASH AT END OF PERIOD...................................................$ 2,499,646........$ 4,776,871
============= =============
See accompanying notes to condensed financial statements
3
PST VANS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for -
Interest......................................................$ 1,162,766........$ 1,371,136
Income taxes........................................................ - ................62,391
See accompanying notes to condensed financial statements
4
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, 1996.
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) was zero for the three months ended March
31, 1997 and 1996, as a result of the Company not recording any benefit on its
pre-tax loss.
Note 3 Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). This
statement specifies the computation, presentation, and disclosure requirements
for earnings per share (EPS) for financial statements issued for all periods
ending after December 15, 1997. SFAS 128 simplifies the standards for computing
EPS previously found in APB Opinion No. 15 and replaces the presentation for
Primary EPS and Fully Diluted EPS. When the Company incurs a loss, common stock
equivalents are not included in the calculation of the weighted average number
of shares outstanding as they would be anti-dilutive. The adoption of SFAS 128
is not expected to have a significant impact on the Company's calculation of its
net loss per common share.
5
PST Vans, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Revenues decreased by 9.7% to $34.5 million for the three months ended March 31,
1997 compared to $38.2 million for the three months ended March 31, 1996. This
revenue reduction resulted primarily from a decrease in revenue equipment as the
average number of tractors decreased to 1171 for the three months ended March
31, 1997 compared to 1364 for the three months ended March 31, 1996. Revenues
for the three months ended March 31, 1997, however, were positively affected by
a 5.9% increase in average miles per tractor and a reduction in empty miles of
2.8%. Management believes that reducing revenue equipment was prudent in light
of an overcapacity of equipment that has affected the industry generally. As
management does not expect the overcapacity of equipment in the industry to
significantly change during the remainder of 1997, management is selling
approximately 500 older trailers in order to attain a more efficient trailer to
tractor ratio.
Operating costs and expenses were 102.9% of revenues for the three months ended
March 31, 1997, compared to 99.5% of revenues for the three months ended March
31, 1996. Operating costs and expenses in the first quarter of 1997, as a
percent of revenue, were adversely effected primarily by increased insurance and
claims expense and a $954,857 decrease in gain on disposition of assets.
Salaries, wages and benefits increased to 31.5% of revenues for the three months
ended March 31, 1997 compared to 28.8% of revenues for the three months ended
March 31, 1996, due primarily to an increase in the percent of total miles
driven by Company drivers compared to independent contractors during the two
periods. Purchased transportation decreased to 19.8% of revenues for the three
months ended March 31, 1997, compared to 23.9% for the three months ended March
31, 1996, for the same reason. 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 15.6% of
revenues for the three months ended March 31, 1997, compared to 14.6% of
revenues for the three months ended March 31, 1996, as a result of a higher
percentage of miles driven with Company tractors and increased fuel prices.
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 surcharges will help offset some of the
increase in the cost of fuel.
Insurance and claims increased to 8.3% of revenues for the three months ended
March 31, 1997, from 7.1% of revenues for the three months ended March 31, 1996
as a result of an increase in the amount of the losses per accident during the
three months ended March 31, 1997 compared to the three months ended March 31,
1996. In February, 1997, management implemented examinations for new drivers and
training requirements for all drivers. Management continues to review accidents
to determine what actions may be taken to reduce future claims costs.
Gain on disposition of assets decreased to 0.2% of revenues for the three months
ended March 31, 1997, compared to 2.6% for the three months ended March 31,
1996, as a result of the Company selling 28 of its older trailers in the first
quarter of 1997 compared to 172 in the first quarter of 1996. The Company
6
anticipates selling more of its older trailers during the second quarter of 1997
as a result of the Company reducing the size of its fleet to better meet the
freight demands during 1997, and reducing the trailer to tractor ratio to attain
better utilization of assets.
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, 1997 of
$2,109,076 compared to a loss before provision for income taxes of $1,137,156
for the three months ended March 31, 1996.
The Company's effective tax rate (income tax expense divided by income before
income taxes) was zero for the three months ended March 31, 1997, and the three
months ended March 31, 1996, 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 $11.5 million working capital line of credit with Congress
Financial Corporation (Northwest) which expires August 1999. 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,
1997 the Company has utilized $4.1 million of this line of credit, $3.7 million
for insurance related letters of credit, and $400,000 of short term cash
borrowings. The Congress Agreement restricts the payment of dividends. On
February 28, 1997, this line of credit was increased to $11.5 million from $7
million.
The Company also has a credit facility with the Bank of New York for issuance of
letters of credit up to $7.25 million which expires December 31, 1997. As of
March 31, 1997, the Company had used $7.25 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 expiring letters of credit. Approximately $640,000 of letters
of credit expire on June 30, 1997. This credit facility had loan covenants which
obligated the Company to maintain a required level of profitability and cash
flow. On March 21, 1997, the Company and The Bank of New York entered into an
amendment to this credit facility to delete certain financial covenants and add
covenants requiring certain levels of tangible net worth for periods through and
including December 31, 1997. The Company may be required to seek additional
amendments of the revolving credit facility with The Bank of New York in the
future based on actual operating results. The amendment also shortened the
expiration date of the credit facility from December 31, 1998 to December 31,
1997. Management believes that following the expiration of the credit facility
with The Bank of New York, the Company will be able to satisfy its anticipated
insurance related letter of credit requirements, including the insurance related
letter of credit requirements which are currently being met with letters of
credit under the credit facility with The Bank of New York, under its working
capital line of credit with Congress Financial Corporation (Northwest) or new
credit facilities. There can be no assurance, however, that the Congress
Financial Corporation (Northwest) credit facility will be sufficient to satisfy
the Company's insurance related letter of credit requirements or that the
Company will be able to obtain additional or new credit facilities on terms
favorable to the Company, if at all.
Net cash provided by operating activities totaled approximately $3.6 million for
the three months ended March 31, 1997. Net cash used for investing activities
(primarily purchasing of equipment) amounted to $1.8 million for the three
months ended March 31, 1997. Net cash used in financing activities was $3.4
7
million for the three months ended March 31, 1997, primarily for principal
payments on debt and capitalized lease obligations.
The Company expects capital expenditures for the remainder of 1997 to be
approximately $10 million primarily for replacement tractors and an onboard
communication system. For the first three months of 1997, the Company acquired
$2.1 million of equipment that the Company was leasing. Future expansion of the
fleet will be made as future economic conditions dictate.
Management believes that it will be able to obtain adequate financing for its
planned capital expenditures through 1997. 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, 1997, the Company had entered into various agreements with fuel suppliers to
purchase approximately 21% of its estimated fuel needs through June 30, 1997 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.
This quarterly report on Form 10Q may be deemed to contain certain
forward-looking statements. These statements are subject to known and unknown
risks and uncertainties, including decreased demand for freight, slower than
anticipated economic conditions, shortages of drivers and such other risks as
are identified and discussed herein and in the Company's filings with Securities
and Exchange Commission. These known and unknown risks and uncertainties could
cause the Company's actual results in future periods to be materially different
from any future performance suggested herein.
8
PART II, OTHER INFORMATION
INDEX
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
-----------------------------------------------------------------------
10.1 Amendment to Congress Financial Corporation
Northwest) Credit Facility
27 Financial Data Schedule
(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.
................................................................................
Date: May 15, 1996 By: /s/ Kenneth R. Norton
---------------------------------
Kenneth R. Norton
Chief Executive Officer
Date: May 15, 1996 By: /s/ Neil R. Voss
---------------------------------
Neil R. Vos
Chief Financial Officer and
Principal Financial Officer
Signatures
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.
Date: May 15, 1996 By: /s/ Kenneth R. Norton
----------------------------------
Kenneth R. Norton
Chief Executive Officer
Date: May 15, 1996 By: /s/ Neil R. Vos
----------------------------------
Neil R. Vos
Chief Financial Officer and
Principal Financial Officer