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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1997 or
| | Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
PST VANS, INC.
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(Exact name of registrant as specified in its charter)
Utah 0-25506 87-0411704
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1901 West 2100 South
Salt Lake City, Utah 84119
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (801) 975-2500
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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Common Stock, $.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 | |
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. | |
The aggregate market value of the Common Stock held by non-affiliates
of the Registrant, based upon the closing sale price of the Common Stock on the
NASDAQ National Market System on March 24, 1998, was approximately $12,000,000.
Shares of Common Stock held by each officer and director and by each person who
may be deemed to be an affiliate have been excluded.
As of March 24, 1998, the Registrant had 4,253,527 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A is incorporated
by reference in Part III of this report.
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TABLE OF CONTENTS
PART I .............................................................................................. 1
Item 1. Business...................................................................................... 1
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Item 2. Properties.................................................................................... 7
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Item 3. Legal Proceedings............................................................................. 7
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Item 4. Submission of Matters to a Vote of Security Holders........................................... 7
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PART II ............................................................................................... 9
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters........................... 9
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Item 6. Selected Financial Data....................................................................... 10
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 12
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Item 8. Financial Statements and Supplementary Data................................................... 17
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Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure............. 17
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PART III .............................................................................................. 18
Item 10, 11, 12 and 13................................................................................... 18
PART IV .............................................................................................. 19
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 19
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FINANCIAL STATEMENTS..................................................................................... F-1
i
Information contained in this Report contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward- looking terminology such as
"may", "will", "should", "expect", "anticipate", "estimate", or "continue" or
the negative thereof, or other variations thereon or comparable terminology.
These forward-looking statements are subject to risk and uncertainties that
include, but are not limited to, those identified in this report, described from
time to time in the Company's other Securities and Exchange Commission filings,
or discussed in the Company's press releases. Actual results may vary materially
from expectations.
PART I
Item 1. Business.
General
PST Vans, Inc. is a truckload carrier focused on serving three markets
in the United States: transcontinental, intrawest and midwest-southeast.
Management believes its three primary operating areas complement each other to
create a network which enhances equipment utilization and marketing of PST's
truckload carrier services. Approximately 63% of the Company's revenues during
1997 was from transcontinental traffic lanes with an average length of haul of
approximately 1,600 miles. The balance of revenues was generated in the
intrawest and midwest-southeast traffic lanes with an average length of haul of
approximately 750 miles. The Company transports a wide variety of freight, much
of which is time-sensitive, including paper products, retail products,
non-perishable food products, tires and electronic equipment. The Company was
incorporated in Utah in 1984 and its executive offices are located at 1901 West
2100 South, Salt Lake City, Utah 84119.
The Company operates exclusively a fleet of standardized, modern
tractors and 53-foot dry van trailers and to focuses its marketing efforts on
serving as a core carrier for high volume, service-sensitive customers. Major
shippers continue to reduce the number of authorized carriers they utilize and
are deciding to establish service-based, long-term relationships with a small
group of preferred partners or "core carriers" who can meet the service demands
required by these shippers, including quick response times, meeting of
just-in-time inventory scheduling needs, on-time pick up and delivery and
real-time load monitoring. The Company attempts to meet these needs by providing
a high level of service to its customers including on-time pick up and
appointment deliveries, a modern fleet of equipment that enhances on-time
deliveries, a fleet of 53-foot dry van trailers capable of handling high volumes
and high weight shipments and advanced information capabilities that provide
customers with access to information concerning the location and status of
shipments.
The Company maintained its fleet size during 1997 at an average of
approximately 1,150 tractors (including independent contractors). In December
1997, the Company reduced its fleet size by approximately 6% to 1,077 tractors
due to the maturity of operating leases on certain tractors. During January
1998, the Company further reduced its fleet size to approximately 977 tractors
with the maturity of other operating leases. The Company has replaced the
tractors that were under operating leases with independent contractors during
February and March of 1998 and believes the fleet can be increased by
approximately 10% during the remainder of 1998 with additional independent
contractors, as market conditions support. Company management believes that
utilizing independent contractors instead of Company-owned tractors allows the
Company to expand without using Company capital resources. Using independent
contractors also gives the Company greater flexibility to reduce fleet size
should business demand decrease in the future.
Operations
General. The Company operates a standardized, modern fleet of tractors
and 53-foot dry van trailers in its primary operating areas. The Company
operates its fleet with driver managers, logistics managers, and customer
service representatives who work from the Company's operations center in Salt
Lake City, Utah. The Company consolidated its Atlanta operations center into its
Salt Lake City facility in the fourth quarter of 1996 and the first quarter of
1997.
1
This was done in order to have more cohesive management of the Company's
customer service and dispatch functions, and to reduce operating expenses.
Customer service representatives are assigned to a particular
geographic area and work closely with customers and marketing personnel. The
Company's customer service representatives are responsible for soliciting and
accepting shipments from customers in accordance with prioritized traffic lanes
established by management. Logistics planners coordinate with the customer
service representatives to match customer needs with Company capacity and
location of revenue equipment. Once a load has been accepted by a customer
service representative, the logistics planner for the geographic area where the
load originates coordinates the assignment of the load to a truck with a driver
manager who is responsible for its proper and timely delivery. The driver
manager tracks the status and location of that load while in transit. In order
to enhance productivity among its operations group, the Company has an incentive
plan for its non-driver employees, under which a bonus is distributed monthly to
those employees that meet established performance criteria.
Technology. The Company's management information system provides
real-time, on-line management information, such as daily operating reports and
costing and location of loads, which assists management in tracking shipments
and performing long-range planning and trend analysis. Information concerning
the status and location of shipments in transit, together with information
concerning unassigned loads, is constantly updated on the system.
Computer-generated reports are used to meet delivery schedules, respond to
customer inquiries concerning loads in transit and match available equipment
with loads. The system has EDI capability to allow customers access to the
Company's computer data from which transit and delivery information can be
obtained. EDI also offers customers the ability to place orders for their
transportation needs directly into the computer system and allows the Company to
bill customers electronically.
In February 1998, the Company entered into a five-year agreement with
The Sabre Group to out-source the majority of its information technology
functions, including computer and telephone systems. In connection with the
agreement, the Company will be transitioning to new hardware and software for
its financial, accounting, operations and other management information systems
during the second quarter of 1998. The successful implementation of these new
systems is crucial to the efficient operation of the Company's business. There
can be no assurance that the Company will implement its new systems in an
efficient and timely manner or that the new systems will be adequate to support
the Company's operations. Problems with installation or initial operation of the
new systems could cause substantial difficulties in operations planning,
financial reporting and management and thus could have a material adverse effect
on the Company's business, financial condition and results of operation.
PST installed the QUALCOMM on-board communications system on all of its
tractors during the fourth quarter of 1997. This system assists the Company in
tracking loads, servicing customers, and communicating with drivers. QUALCOMM
utilizes satellite technology service to link the Company's drivers to its
operations center. The Company formerly used a cellular-based on-board
communications system from June 1994 to June 1997.
The Company also uses an optical disk imaging system that scans
documents such as bills of lading, driver logs and fuel receipts on to optical
disks. Management believes that this system substantially reduces clerical time
required to enter and retrieve documents, while enhancing the utilization of
data.
Fuel. The Company has established a nationwide fuel purchase program
which enables the Company's drivers to purchase fuel at specified fuel stops
throughout the United States at volume discounts. In order to reduce PST's
vulnerability to rapid price increases, the Company enters into purchase
contracts with fuel suppliers from time to time for a portion of its estimated
fuel requirements at a guaranteed price. As of December 31, 1997, the Company
had entered into agreements with fuel suppliers under which the Company may
purchase approximately 18% of its estimated fuel needs through December 31,
1998, at a guaranteed price. These agreements include an arrangement with a
national truckstop operator to store and pump this fuel at truckstops located
throughout the United States. The Company also has bulk fuel storage capacity at
one of its terminals and its Salt Lake City operations center. The Company
attempts to offset rapid increases in fuel prices with fuel surcharges to its
customers which are standard in the industry.
2
Marketing
The Company concentrates its marketing efforts on serving as a core
carrier for high volume, service-sensitive customers with "driver friendly"
freight for transportation in PST's targeted traffic lanes. The Company has
targeted the service-sensitive segment of the truckload market rather than the
segment which uses price as its primary consideration. The Company transports a
wide variety of freight, much of which is time sensitive, including paper
products, non-perishable food products, retail products, tires and electronic
products. The Company's largest 20 customers accounted for approximately 49% of
revenues in 1997, with the largest customer accounting for approximately 8% of
revenues.
The Company maintains marketing offices at its headquarters in Salt
Lake City. Senior management is directly involved in marketing and maintaining
relationships with customers. The Company fosters the concept of maintaining a
"transportation partnership" with each customer to respond to individual
customer requirements and become a core carrier for service-sensitive customers.
Once a customer relationship is established, the Company's customer service
representatives, working from the Company's operations center in Salt Lake City,
regularly contact that customer to solicit additional business on a load-by-load
basis, particularly when equipment will be available nearby following a
completed haul. In addition, a customer representative meets at least annually
with each customer at the customer's place of business. Each customer service
representative is assigned a particular geographic area and works with a driver
manager to monitor the overall transportation and service requirements of
shippers in the assigned area as well as movements of the shippers' freight
within that area. This personal and continuing customer contact is designed to
ensure a high level of customer satisfaction and enhance utilization of the
Company's equipment.
Drivers
The truckload segment of the industry continues to experience an acute
shortage of employee drivers and independent contractors, particularly in the
longer haul segments. As a result of the driver shortage, some truckload
carriers, including the Company, have been forced to idle tractors from time to
time. Management has designed a driver recruitment and retention program which
features: (i) maintaining a close working relationship with various independent
driver training schools, (ii) providing a positive training experience to all
new drivers, and (iii) providing a competitive, incentive-based compensation
package and other driver amenities. The Company believes that this program is
effectively meeting its driver requirements. However, because of the acute
shortage of drivers in the industry, the Company believes it is necessary to
constantly evaluate its driver retention and recruitment program and to make
changes as necessary in order to improve driver recruitment and retention, and
it may be forced to idle tractors from time to time.
Recruiting. PST employs full-time recruiters located throughout the
United States who make recruiting presentations at truck stops,
Company-sponsored job fairs and other locations frequented by drivers. The
Company also advertises for drivers on television, radio and in print media. The
Company carefully screens all new driver applicants on the basis of prior
driving and safety records. The Company also works closely with independent
driver training schools and community colleges to recruit and train prospective
drivers. Two of the independent driver training schools are conducted in PST's
facilities, one in Salt Lake City and the other in Atlanta. The Company provides
the facilities and equipment while the schools provide the instructors.
Training. All newly-hired drivers with limited over-the-road experience
must complete the Company's training program. The Company's training program,
which was recently modified, is intended to provide the trainee with a positive
training experience, ease the driver's transition from driving school to
full-time driving and improve safety. During the training, each new driver is
teamed up with an experienced driver trainer to gain over-the-road experience.
Upon meeting certain criteria, the driver may upgrade to a team or solo driver.
For a period of time, the driver is monitored as a trainee by the safety
department for service and safety performance.
All newly-hired drivers, regardless of experience, are required to pass
an examination and attend a two day orientation program which includes both
classroom and over-the-road training, emphasizing safety and proper operation of
Company tractors and trailers. The orientation program also trains drivers in
all aspects of the Company's operations, particularly customer service
requirements, fuel conservation and equipment maintenance. In addition, the
Company utilizes a training program for all of its drivers dealing with, among
other safety measures, maintaining a "space cushion" around their vehicle.
3
Compensation and Benefits. The Company compensates its drivers based on
miles driven, including an incentive program based on monthly miles production,
with base pay increasing with the driver's length of employment. Drivers also
participate in PST's 401(k) program, in Company-sponsored health, life and
dental plans and the employee stock purchase plan.
Driver Retention. Management believes that its competitive compensation
package, its policy to have each driver home at least once every 14 days or to
accrue time off at the rate of one day for each week on the road and its focus
on "driver friendly" freight have enhanced the Company's ability to retain
drivers. The Company also provides drivers with various amenities, including
modern, spacious conventional tractors that are designed for driver comfort and
safety, the QUALCOMM communication system that allows drivers to communicate
with their families and the Company's contract with truckstop operators that
allow drivers to use those facilities. In addition, all drivers are assigned to
a driver assistant who monitors up to 50 drivers from the Company's operations
center and is responsible for assisting assigned drivers in resolving
administrative or work-related problems. Management also believes that the
Company's career advancement opportunities for drivers, such as becoming a
driver trainer or an independent contractor, are important to driver retention.
Independent Contractors
During the last several years, the Company has utilized independent
contractors who, through a contract with the Company, supply one or more
tractors and drivers for Company use. Independent contractors are compensated on
the basis of a fixed rate per mile and are responsible for all expenses of
operating a tractor, including wages, benefits, fuel, maintenance, highway use
taxes and debt service. The contract between the independent contractor and the
Company generally is terminable by either party upon short notice. The Company's
use of tractors supplied by independent contractors was approximately 21% at
December 31, 1997 and approximately 36% at March 27, 1998. The Company expects
the number of tractors provided by independent contractors to increase relative
to the number of Company-operated tractors during 1998. Management believes that
any company-owned tractors that are retired during 1998 may be replaced with
independent-contractors as future market conditions dictate.
The Company believes that carefully selected independent contractors
allow the Company to expand its fleet while minimizing its capital investment
and fixed costs, improving its return on invested capital and reducing the cost
of financing revenue equipment. Utilizing independent contractors also allows
the Company to size its fleet according to the demand for freight services. In
addition, independent contractors generally have a lower turnover rate than
company drivers for the industry as a whole because of their ownership of their
equipment. The ratio of independent contractors to Company-operated equipment
varies from time to time based on such factors as the demand for freight, the
cost of obtaining and operating new revenue equipment, the availability of
qualified independent contractors and the rates being charged by them. By using
independent contractors, the Company seeks to improve its return on invested
capital and reduce the financing costs associated with owning its own fleet.
Revenue Equipment
The Company's equipment strategy is to (i) purchase both tractors and
trailers with uniform specifications to reduce parts and maintenance costs, (ii)
keep equipment covered by manufacturers' warranties (to the extent offered by
manufacturers), and (iii) operate a fleet of only modern, comfortable
driver-preferred tractors and 53-foot dry van trailers. The average age of the
Company's tractors was 2.7 years at December 31, 1997 compared to 1.8 years at
December 31, 1996. The Company's current policy is to replace its tractors
approximately every four years and its trailers approximately every seven years,
and to maintain an approximate 2.2 to one trailer-to-tractor ratio.
At December 31, 1997, the Company owned or held directly under lease
847 tractors and 2,369 trailers, all of which were 53-foot long x 102-inch wide
dry vans, capable of handling high volume and high weight shipments. The
Company's trailers are of sheet and post construction and can be used to haul
full loads of heavy freight, such as carpet and tires. The following table shows
the model years of the Company's tractors and trailers in service as of December
31, 1997.
4
Model Year Tractors Trailers
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1998................................................ 76 0
1997................................................ 0 0
1996................................................ 290 500
1995 ............................................... 439 500
1994................................................ 39 100
1993 ............................................... 0 448
1992 ............................................... 0 149
1991 ............................................... 1 598
1990 and prior ..................................... 2 74
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Total Company-owned ................................ 847 2,369
Total independent contractor ....................... 230 --
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Total ........................................ 1,077 2,369
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The Company fleet consists of 100% conventional tractors all equipped
with Detroit Diesel electronic engines, which management believes provides
increased fuel efficiency, performance improvements and reduced maintenance over
conventional engines. All of the tractors are equipped with air-ride suspension
and other modern features designed to enhance performance and driver comfort.
The Company currently has no tractor and 450 trailer production slots reserved
in 1998.
The Company has a comprehensive preventative maintenance program for
its Company-operated tractors and trailers to improve safety, minimize equipment
downtime and enhance resale value. Inspections, repairs and maintenance are
performed on a regular basis at Company facilities. Additional maintenance and
repair can be performed at independent contract maintenance facilities in the
Company's service territories when circumstances require. The Company also
obtains manufacturer extended warranties, including full engine and power train
coverage.
Safety and Risk Management
The Company is committed to the safe operation of its revenue
equipment. The Company regularly evaluates its safety program and makes changes
in order to improve the safe operation of its equipment. In order to help
emphasize safe driving, the Company performs on-the-road observations of drivers
and distributes safety recognition awards to drivers with exemplary driving and
productivity records. Driver assistants and dispatchers regularly communicate
with Company drivers to promote safety and safe work habits. In addition, the
Company's 1998 tractors are equipped with optional safety features such as speed
governors, daytime running lights, mirrors on each fender that provide improved
views and turning horns that activate when the turn signal on a tractor is
engaged. The Company is continuing the following safety programs implemented in
1996: 1) all drivers are required to take the Smith System Safety Cushion
course; 2) pass/fail testing criteria for all newly-hired drivers; and 3) prompt
accident counseling and training for all drivers involved in preventable
accidents. The Company has implemented a new safety program in 1997 wherein
approximately 10% of Company-owned tractors are equipped with fuel optimizer
engines that govern speed between 57 and 64 miles per hour. All other
Company-owned tractors are governed at 64 miles per hour.
The Company has an accident review committee that meets on a regular
basis to review accidents, examine trends and implement changes in procedures or
communications to address safety issues. The committee also works closely with
drivers who have been involved in accidents to improve their driving
performance.
The Company requires prospective drivers to meet higher qualifications
than those required by the Department of Transportation (the "DOT"). The DOT
requires the Company's drivers to obtain commercial drivers' licenses and also
requires that the employer implement a drug testing program in accordance with
the DOT regulations. The Company's program includes pre-employment, random,
post-accident and post-injury drug testing.
The primary insurance risks associated with the Company's business are
bodily injury and property damage, workers' compensation claims and cargo loss
5
and damage. The Company maintains insurance against these risks and is subject
to liability as a self insurer to the extent of its deductible. The Company
currently maintains liability insurance coverage for bodily injury and property
damage with a deductible of $2,500 per incident and carries cargo insurance
coverage with a $25,000 deductible per incident. The Company also has a $100,000
deductible for workers' compensation claims in those states that allow a
deductible. The Company currently maintains a $2,500 deductible per incident for
physical damage to Company-owned tractors and is effectively self insured for
physical damage to its trailers.
Employees
As of December 31, 1997, the Company employed 1,531 persons, 1,269 of
whom were drivers, 37 were mechanics and maintenance personnel and 225 were
support personnel, including management and administration. None of the
Company's employees is represented by a collective bargaining unit, and the
Company considers relations with its employees to be good.
Competition
The entire trucking industry is highly competitive and fragmented. PST
competes primarily with other truckload carriers and shippers' private fleets,
and, particularly in the longer haul segments with intermodal transportation,
railroads and providers of second day air freight service. Intermodal
transportation has increased in recent years as reductions in train crew sizes
and the development of new rail technologies have reduced the cost and improved
dependability of intermodal shipping.
Competition for the type of freight transported by PST is based, in the
long term, primarily on service and efficiency and, to a lesser degree, on
freight rates. The Company believes that its principal competitive strength is
its ability to consistently provide reliable service to its customers, including
on-time pick ups and deliveries. Several truckload carriers that compete with
PST have substantially greater financial resources, own more equipment and carry
a larger volume of freight than PST.
Regulation
The Company is a motor common and contract carrier and was previously
regulated by the Interstate Commerce Commission ("ICC") and various state
agencies. Effective as of December 31, 1995, the ICC was closed and its
remaining responsibilities were transferred to the DOT. The Company has not
realized any adverse impact as a result of this action. The DOT and state
agencies have broad powers, generally governing matters such as authority to
engage in motor carrier operations, rates and charges, accounting systems,
certain mergers, consolidations and acquisitions and periodic financial
reporting. The Motor Carrier Act of 1980 substantially increased competition
among motor carriers and reduced the level of regulation in the industry.
Motor carrier operations are also subject to safety requirements
governing interstate operations prescribed by the DOT. Such matters as weight
and dimension of equipment are also subject to federal and state regulations.
The failure of the Company to comply with the rules and regulations of the DOT
or state agencies could result in substantial fines or revocation of the
Company's operating licenses. The trucking industry is also subject to
regulatory and legislative changes which can affect the economics of the
industry by requiring changes in operating practices or influencing the demand
for, and the cost of providing services to shippers.
The Company currently has authority to carry freight on an intrastate
basis in 48 states. The Federal Aviation Administration Authorization Act of
1994 (the FAAA Act) amended sections of the Interstate Commerce Act to prevent
states from regulating rates, routes or service of motor carriers after January
1, 1995. The FAAA Act did not address state oversight of motor carrier safety
and financial responsibility, or state taxation of transportation.
The Company has underground storage tanks for diesel fuel at its
facilities in Salt Lake City, Utah and Bowling Green, Kentucky. As a result, the
Company is subject to regulations promulgated by the EPA in 1988 governing the
design, construction and operation of underground fuel storage tanks from
installation to closure. The Company believes all of its tanks are in
substantial compliance with EPA regulations. The Company's truckload carrier
operations are also subject to other environmental laws and regulations,
including laws and regulations dealing with the transportation of hazardous
materials. The Company believes that it is in compliance with all material
6
applicable environmental laws and regulations. In the event the Company should
fail to comply with applicable environmental laws and regulations, the Company
could be subject to substantial fines and/or penalties and to civil and criminal
liability.
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.
Item 2. Properties.
The Company's executive offices and operations center are located in
Salt Lake City, Utah. PST owns this property, subject to the property being
pledged to secure a payable in the amount of approximately $3,000,000 due to an
equipment vendor as of December 31, 1997. This payable was paid and the property
was released as security on March 16, 1998. The property has full maintenance
and shop capabilities with four maintenance bays for tractors and four
maintenance bays for trailers. The property also has approximately 15 acres for
tractor and trailer parking and contains an office building of approximately
36,000 square feet for the Company's executive offices and operations center.
Management believes that this facility is suitable for PST's present and future
needs.
The Company also operates terminals in Atlanta, Georgia; Bowling Green,
Kentucky; Fontana, California; Mt. Vernon, Texas; Green Cove , Florida;
Knoxville, Tennessee; and Valdosta, Georgia. The Atlanta terminal includes
tractor and trailer maintenance facilities, office space and driver lounges. All
of the terminals are used for driver recruiting. The Atlanta facility is located
on approximately 17 acres. The Bowling Green terminal is located on
approximately two acres. These properties are leased for terms ranging from
month-to-month to five years, with renewal options. The Company bears the costs
of insurance, maintenance and repairs, taxes, special assessments and utilities
on most of its leased facilities. The Company does not anticipate any
difficulties renewing or continuing these leases or obtaining leases on
replacement or additional properties, if necessary. Management estimates that
its Salt Lake facility and its other terminals are being utilized to
approximately 60% to 75% of their capacity.
Item 3. Legal Proceedings.
The Company is a party to routine litigation incidental to its
business, primarily involving claims for personal injury and property damage
incurred in the transport of freight. Management does not believe that any
pending litigation will have a materially adverse effect on the Company's
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders at
an annual meeting of shareholders held on December 19, 1997, with the results of
the vote as noted:
(1) To elect one member of the Board of Directors.
Votes for James E Otto - 3,019,893
In addition, the following directors continued to serve
following the meeting: Kenneth R. Norton, Robert D. Hill,
Charles Lynch and James Redfern
(2) To ratify the appointment of Arthur Andersen LLP as
independent public accountants for the year ending December
31, 1997.
Votes for - 3,036,604
Votes against - 44,839
Abstentions - 9,000
7
A total of 3,090,443 shares were present at the meeting, either in
person or by proxy.
8
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters.
The Company's Common Stock is listed and traded on The NASDAQ Stock
Market (National Market System) under the symbol "PSTV." The following table
sets forth, for the periods indicated, the high and low sale prices for the
Company's Common Stock, as reported on The NASDAQ Stock Market for the years
ended December 31, 1997 and 1996.
High Low
---- ---
Year Ended December 31, 1997:
First Quarter................................... $3.375 $2.438
Second Quarter.................................. 3.750 1.875
Third Quarter................................... 4.000 3.000
Fourth Quarter.................................. 4.938 3.000
High Low
---- ---
Year Ended December 31, 1996:
First Quarter................................... $4.625 $3.125
Second Quarter.................................. 4.625 3.750
Third Quarter................................... 4.250 2.875
Fourth Quarter.................................. 3.750 2.375
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The Company did not pay or declare dividends on its Common Stock during
the years ended December 31, 1996 and 1997. The Company currently anticipates
that it will retain all available funds to finance its operations. The Company
does not presently intend to pay cash dividends in the foreseeable future. The
Company's revolving loan agreements with The Bank of New York and Congress
Financial Corporation (Northwest) prohibit the Company from paying dividends
without the consent of The Bank of New York and Congress Financial Corporation
(Northwest).
As of March 24, 1998, the Company had 4,253,527 shares of its Common
Stock outstanding, held by 20 shareholders of record, which does not include
shareholders whose shares are held in securities position listings.
9
Item 6. Selected Financial Data and Operating Data.
The following selected financial data of the Company for the five years
ended December 31, 1997, has been derived from the Company's Financial
Statements which have been audited by Arthur Andersen LLP, independent public
accountants. This selected financial data should be read in conjunction with the
Financial Statements and accompanying Notes included elsewhere in this report.
Operating data has been derived from the Company's books and records. All
amounts are expressed in thousands, except per share amounts and operating data.
Year Ended December 31,
1997 1996 1995(5) 1994(5) 1993(5)
---------- ---------- ---------- ---------- -----------
Statements of Operations Data:
Revenues........................................$ 143,737 $ 147,419 $ 164,794 $ 136,541 $ 125,591
---------- ---------- ---------- ---------- ---------
Costs and expenses:
Salaries, wages and benefits.................. 44,360 43,848 45,208 35,935 40,693
Purchased transportation...................... 25,578 32,393 41,281 33,842 20,273
Fuel and fuel taxes........................... 22,533 20,555 21,245 17,615 20,556
Revenue equipment lease expense............... 7,576 8,022 12,224 14,904 17,991
Maintenance................................... 8,663 7,491 8,822 8,584 7,078
Insurance and claims.......................... 11,384 11,942 9,315 6,854 6,662
General supplies and expenses................. 5,930 5,558 5,996 4,364 5,909
Taxes and licenses............................ 2,776 3,309 3,445 2,677 3,360
Communications and utilities.................. 2,802 3,430 3,562 1,870 2,021
Depreciation and amortization................. 11,911 13,175 8,804 2,078 1,772
(Gain) loss on sale of equipment.............. 13 (1,614) (151) 302 595
Amortization of goodwill...................... 272 272 272 272 272
---------- ---------- ---------- ---------- -----------
Total costs and expenses.................. 143,798 148,381 160,023 129,297 127,182
---------- ---------- ---------- ---------- -----------
Operating income (loss)......................... (61) (962) 4,771 7,244 (1,591)
---------- ---------- ---------- ---------- -----------
Other income (expense):
Interest expense.............................. (4,360) (5,080) (4,283) (2,595) (2,069)
Reorganization expense items.................. -- -- -- (338) (2,928)
Other, net.................................... 105 182 147 119 116
---------- ---------- ---------- ---------- -----------
Income (loss) before provision for income
taxes and extraordinary gains................. (4,316) (5,860) 635 4,430 (6,472)
Provision for income taxes...................... -- -- 251 120 36
---------- ---------- ---------- ---------- -----------
Income (loss) before extraordinary gains........ (4,316) (5,860) 384 4,310 (6,508)
Extraordinary gains from debt
restructuring(1).............................. -- -- -- 6,206 --
---------- ---------- ---------- ---------- -----------
Net income (loss)...............................$ (4,316) $ (5,860) $ 384 $ 10,516 $ (6,508)
========== ========= ========= ========== ===========
Net income per common share:
Income (loss) before extraordinary gain - basi
and diluted...................................$ (1.02) $ (1.39) $ .10 $ 1.6(2)
Extraordinary gain from debt
restructuring - basic and diluted........... -- -- -- 2.38(2)
---------- --------- --------- ------------
Net income (loss) per common
share - basic and diluted...................$ (1.02) $ (1.39) $ .10 $ 4.04(2)
========== ========= ========= ============
Weighted average shares
outstanding - basic........................... 4.233 4,212 3,950 3,888(2)
========== ========= ========= ============
Weighted average shares
outstanding - diluted......................... 4.233 4,212 3,950 3,950(2)
========== ========= ========= ============
10
Year Ended December 31,
-----------------------------------------------------------------
1997 1996 1995(5) 1994(5) 1993(5)
---------- ---------- ---------- ---------- -----------
Operating Data:
Average revenue per tractor per week..................... $ 2,408 $ 2,297 $ 2,363 $ 2,465 $ 2,318
Average miles per trip .................................. 1,181 1,204 1,133 1,110 944
Average revenue per total mile........................... $ 1.065 $ 1.053 $ 1.062 $ 1.087 $ 1.046
Empty miles percentage .................................. 8.8% 9.2% 9.0% 7.8% 10.1%
Average number of tractors during the year:
Company-operated ...................................... 888 915 911 721 820
Independent contractor ................................ 257 322 430 341 218
--- --- --- --- ---
Total tractors .................................... 1,145 1,237 1,341 1,062 1,038
Average number of trailers during the year .............. 2,501 2,931 2,713 2,204 2,412
Pre-tax margin (loss)(3) ................................ (3.0)% (4.0)% .4% 3.2% (5.2)%
Balance Sheet Data:
Working capital (deficit)................................ $(23,431) $ (9,157) $ 2,935 $ (8,377) $ (5,071)
Total assets ............................................ 79,476 90,260 108,882 48,664 37,341
Long-term and capitalized lease
obligations, net of current portion(4) ................ 14,739 34,894 55,687 17,124 4,181
Stockholders' equity (deficit) .......................... 17,511 21,772 27,605 5,473 (12,816)
- ----------------------
(1) The Company recognized an extraordinary gain of $6.2 million in 1994
from reduction of indebtedness accomplished through the Company's Plan
of Reorganization.
(2) Pro forma per share amounts in 1994 reflect cancellation of all
previously outstanding shares of Common Stock of PST and the issuance
of shares to the current shareholders of the Company pursuant to the
Plan of Reorganization as if these transactions had occurred on January
1, 1994. The per share amounts in 1997, 1996 and 1995 reflect the
actual weighted average shares and earnings per share.
(3) The Company finances the acquisition of some of its revenue equipment
under operating leases rather than through debt financing or
capitalized leases. As a result, the Company believes that its pre-tax
margin (loss) (earnings (loss) before income taxes and extraordinary
gains as a percentage of revenues) is a more appropriate measure of its
operating efficiency than its operating ratio (operating costs and
expenses as a percentage of revenues).
(4) Long-term and capitalized lease obligations do not include $9.9 million
of obligations under operating leases of revenue equipment at December
31, 1997.
(5) From 1989 through 1993, the Company incurred substantial net losses
(before extraordinary gains). In June 1993, after the Company was
unsuccessful in voluntarily restructuring its existing indebtedness,
the Company filed for protection under Chapter 11 of the United States
Bankruptcy Code in order to improve its capital structure and reduce
its debt service requirements and overall indebtedness. The Company's
Plan of Reorganization was confirmed in February 1994 and significantly
improved the Company's capital structure by reducing the Company's debt
and lowering lease and interest payments. In March 1995, the Company
paid the remaining balance owing to its unsecured creditors under the
Plan of Reorganization with the exception of a few contested unsecured
claims. The Company is still making payment on its priority tax claims
in accordance with its Plan of Reorganization.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
11
Overview
The trucking industry experienced significant overcapacity in 1995 as a
result of carriers expanding fleets based on very strong customer demand in 1994
coupled with an economic slowdown in the second half of 1995. This overcapacity
resulted in significant downward pressure on pricing in the industry during
1995, 1996, and the first nine months of 1997, and adversely affected the
Company's operations which resulted in a lower average rate per mile and lower
equipment utilization in 1996, 1995 and 1997 compared to 1994, and an operating
loss in 1996 and 1997.
During the fourth quarter of 1997, the profitability of the Company
improved significantly. While the Company traditionally experiences a stronger
demand for freight services in the fourth quarter of each year, the increased
demand in the fourth quarter of 1997 combined with better systems for managing
revenue equipment produced an approximate 8% improvement in utilization of the
Company's revenue equipment (as measured by miles per tractor per day) in the
three months ended December 31, 1997 as compared to the nine months ended
September 30, 1997. In addition, insurance and claims expense reduced from 8.5%
of revenue for the nine month ended September 30, 1997 to 6.3% of revenue for
the three months ended December 31, 1997. The fourth quarter net income of
approximately $511,000 was the Company' first significantly profitable quarter
in over 2 years.
The Company finances the acquisition of some of its revenue equipment
through operating leases. Under generally accepted accounting principles, the
interest component of an operating lease is not treated as interest expense.
Because of the Company's use of operating leases, the Company's operating ratio
(operating costs and expenses as a percentage of revenues) is higher than it
would be if it utilized only debt and/or capital leases. As a result, the
Company believes that its pre-tax margin (earnings before income taxes and
extraordinary gains as a percentage of revenues) is a more appropriate measure
of its operating efficiency than its operating ratio.
At December 31, 1997, the Company operated a revenue equipment fleet
comprised of 1,077 tractors, including 230 operated by independent contractors,
and 2,369 trailers. Because of the current increased demand for freight
services, the Company intends to increase the number of independent contractors
to approximately 350 and maintain the Company tractors at approximately 850
during 1998.
In February 1998, the Company entered into a five-year agreement with
The Sabre Group to out-source the majority of its information technology
functions, including computer and telephone systems. In connection with the
agreement, the Company will be transitioning to new hardware and software for
its financial, accounting, operations and other management information systems
during the second quarter of 1998. The successful implementation of these new
systems is crucial to the efficient operation of the Company's business. There
can be no assurance that the Company will implement its new systems in an
efficient and timely manner or that the new systems will be adequate to support
the Company's operations. Problems with installation or initial operation of the
new systems could cause substantial difficulties in operations planning,
financial reporting and management and thus could have a material adverse effect
on the Company's business, financial condition and results of operation.
The Company is in the process of identifying anticipated costs,
problems and uncertainties associated with making the Company's software
applications Year 2000 compliant. The Sabre Group has certified that the
software they will be providing to the Company is Year 2000 ready. The Company
expects to resolve Year 2000 issues with other internal-use software through
planned replacement or upgrades. Although management does not anticipate Year
2000 issues to have a material affect on its business or future results of
operations, there can be no assurance that there will not be interruptions of
operations or other limitations of system functionality or that the Company will
not incur significant costs to avoid such interruptions or limitations.
12
The following table sets forth the percentage relationship of expense
items to revenues for the years indicated.
Percentage of Revenues
---------------------------
Year Ended December 31,
1997 1996 1995
------ ------- ------
Revenues: 100.0% 100.0% 100.0%
Costs and expenses:
Salaries, wages and benefits..................................... 30.9 29.7 27.4
Purchased transportation......................................... 17.8 22.0 25.0
Fuel and fuel taxes.............................................. 15.7 13.9 12.9
Revenue equipment lease expense.................................. 5.3 5.4 7.4
Maintenance...................................................... 6.0 5.1 5.4
Insurance and claims............................................. 7.9 8.1 5.7
General supplies and expenses.................................... 4.1 4.0 3.6
Taxes and licenses............................................... 1.9 2.2 2.1
Communications and utilities..................................... 1.9 2.3 2.2
(Gain) loss on sale of equipment................................. * (1.1) (0.1)
Depreciation and amortization.................................... 8.3 8.9 5.3
Amortization of goodwill......................................... 0.2 0.2 0.2
Total operating costs and expenses....................... 100.0 100.7 97.1
Operating income (loss).......................................... 0.0 (0.7) 2.9
Other income (expense):
Interest expense................................................. (3.0) (3.2) (2.6)
Other, net....................................................... * (0.1) 0.1
Income (loss) before income taxes and extraordinary gain........... (3.0)% (4.0)% 0.4%
- ----------------------
* Less than 0.1%.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues decreased by 2.5% in 1997 to $143.7 million compared to $147.4
million in 1996. Revenues decreased primarily as a result of a 7.4% decrease in
revenue equipment as the average number of tractors decreased to 1,145 compared
to 1,237 in 1996. The decrease in revenue equipment was offset by a 3.7%
increase in equipment utilization (as measured by average miles per tractor) and
a 1.1% increase in average revenue per total mile. Management believes the
increased utilization is a result of a greater demand for the freight services
created by a decrease in equipment overcapacity in the transportation industry
in 1997 and the Company's ability to better manage revenue equipment with new
communication systems. Management expects the demand for freight services to
increase modestly in 1998 and plans to increase fleet size by up to
approximately 10% with additional independent contractors, depending on economic
conditions and operating results, while continuing to emphasize increased
productivity and utilization of equipment.
Operating costs and expenses were 100.0% of revenues in 1997 compared
to 100.7% in 1996. Operating costs and expenses, as a percent of revenue, were
positively affected primarily by increased utilization, and a reduction in
communication and utilities expense as a result of discontinued use of a
cellular mobile communications system. Operating costs and expenses, as a
percent of revenue were adversely affected primarily by increased fuel and fuel
tax expenses, increased maintenance expenses related to an older fleet of
equipment, and a reduction in gain realized from the sale of equipment, as
further described later in this report. While a smaller percentage of revenues
13
in 1997 as compared to 1996, adverse developments in insurance claims continued
to have a negative affect on operating costs and expenses in 1997.
Salaries, wages and benefits increased to 30.9% of revenues in 1997
compared to 29.7% in 1996, and purchased transportation decreased to 17.8% of
revenues in 1997 compared to 22.0% of revenues in 1996 primarily as a result of
a 20% reduction in independent contractor tractors in 1997 and a pay increase
given to Company drivers in August 1997. The Company also implemented a mileage
incentive program for Company drivers in October 1997, the cost of which was
more than offset by increased utilization of equipment realized as a result of
this program. 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 15.7% of revenues for the year ended
December 31, 1997, compared to 13.9% of revenues for the year ended December 31,
1996, as a result of a higher percentage of miles driven with Company tractors,
higher fuel prices, and the Company having no fuel secured under guaranteed
price contracts during the last six months of 1997. In order to reduce the
vulnerability of the Company 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. During 1996, future fuel prices were at levels too high to make
guaranteed price contracts for 1997 fuel viable. As of December 31, 1997, the
Company had entered into various agreements with fuel suppliers to purchase
approximately 18% of its estimated fuel needs through December 31, 1998 at a
guaranteed price. The Company has also implemented fuel surcharges to many of
its customers. 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.
Depreciation and amortization decreased to 8.3% of revenue in 1997
compared to 8.9% in 1996, revenue equipment lease expense decreased to 5.3% of
revenues in 1997 compared to 5.4% in 1996, and interest expense decreased to
3.0% of revenue in 1997 compared to 3.2% in 1996 as a result of the Company
refinancing tractors at the end of their initial lease term onto financing
contracts that reduce the monthly financing cost of a tractor by approximately
$600.
In 1997, maintenance expense increased to 6.0% of revenues, compared to
5.1% of revenues in 1996 as a result of increased maintenance costs associated
with an older fleet (tractor age 2.7 years at December 31, 1997 compared to 1.8
years at December 31, 1996) and the expiration of certain manufacturer's
warrantees.
Insurance and claims expense decreased to 7.9% of revenues in 1997
compared to 8.1% of revenues in 1996. Insurance and claims expense continues to
be higher than industry standards due to adverse developments in 1997 in
insurance claims incurred when the Company carried deductibles ranging from
$300,000 to $500,000. A significant number of these older claims were settled in
1997. The Company implemented several changes to its insurance program in 1997
that management believes will reduce overall insurance costs. These changes
include significantly lower deductibles on liability and workers' compensation
coverage, and low deductible physical damage coverage on Company-owned tractors.
While the premiums on these insurance policies are increased, based on recent
claims experience, managements expects that the overall cost of insurance and
claims should decrease.
Communications and utilities decreased to 1.9% of revenues in 1997
compared to 2.3% of revenues in 1996 as a result of the Company discontinuing
use of a cellular-based on-board communications system in June 1997. The Company
installed the QUALCOMM on-board communications system on all of its tractors
during the fourth quarter of 1997. This system assists the Company in tracking
loads, servicing customers, and communicating with drivers. QUALCOMM utilizes
satellite technology service to link the Company's drivers to its operations
center. Management believes that the QUALCOMM system will not significantly
increase expenses in 1998.
(Gain) loss on sale of equipment decreased to 0.0% of revenue from
(1.1)% as a result of the Company's decision to dispose of fewer of its older
trailers in 1997 than in 1996.
During 1997, the Company's effective tax rate was 0% because of its
pre-tax losses that exceeded any available carrybacks and an increase in the
valuation for the net operating loss generated in 1997.
14
As a consequence of the items discussed above, loss before
extraordinary gain in 1997 was $4,316,000 compared to $5,860,000 in 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues decreased by 11% in 1996 to $147.4 million compared to $164.8
million in 1995. This revenue reduction resulted primarily from a decrease in
revenue equipment as the average number of tractors decreased to 1,237 in 1996
compared to 1,341 in 1995. Revenues in 1996 were also adversely affected by a 1%
decrease in the average revenue per total mile. This decrease resulted from a
combination of an increase in empty miles percentage and a decrease in revenue
per loaded mile. In addition, equipment utilization (as measured by average
miles per tractor) decreased 2% between the two periods. Management believes the
decrease in average revenue per total mile and equipment utilization was a
result of slower than anticipated economic conditions and overcapacity in the
trucking industry in 1996.
Operating costs and expenses were 100.7% of revenues in 1996 compared
to 97.1% in 1995. Operating costs and expenses, as a percent of revenue, were
adversely affected primarily by a 1% reduction in average revenue per total mile
as well as a 2% decrease in utilization between the two periods, an acute
shortage of drivers in the first half of 1996, and adverse developments in a
number of insurance claims.
Salaries, wages and benefits increased to 29.7% of revenues in 1996
compared to 27.4% in 1995. This increase resulted primarily from driver pay
increases in October, 1995 and January 1996, and a decrease in independent
contractor tractors in 1996. In addition, non-driver payroll increased .5% of
revenue as a result of an increase in other support and marketing personnel,
which was partially offset by a reduction in maintenance personnel. Purchased
transportation decreased to 22.0% of revenue in 1996 compared to 25.0% in 1995.
This decrease was a result of a reduction in the mileage incentive pay for
independent contractors and a 25% reduction in independent contractor tractors
in 1996 from 1995.
Fuel and fuel taxes increased to 13.9% of revenue in 1996 compared to
12.9% in 1995. Diesel fuel prices at the pump increased by approximately 12.8%
from December 31, 1995, to December 31, 1996 (according to the Department of
Energy), while the Company's fuel expense increased by approximately 7.8%. This
smaller increase was because of the Company's utilization of guaranteed price
purchase contracts with fuel suppliers, in addition to surcharges to customers.
Depreciation and amortization increased to 8.9% of revenue in 1996
compared to 5.3% in 1995, and revenue equipment lease expense decreased to 5.4%
of revenues in 1996 compared to 7.4% in 1995, as a result of the Company's new
revenue equipment being financed through capitalized leases versus operating
leases. Also, interest expense increased to 3.2% of revenue in 1996 compared to
2.6% in 1995 as a result of the majority of the Company's new revenue equipment
being financed through capitalized leases and notes payable.
In 1996, maintenance expense decreased to 5.1% of revenues, compared to
5.4% of revenues in 1995 as a result of reduced maintenance costs associated
with a newer fleet.
Insurance and claims increased to 8.1% of revenues in 1996 compared to
5.7% in 1995 as a result of an increase in insurance claims and losses in 1996
mainly involving new, less experienced drivers and increases in insurance claims
reserves of approximately $2.2 million following adverse developments in a
number of claims.
During 1996, the Company's effective tax rate was 0% because of its
pre-tax losses that exceeded any available carrybacks and an increase in the
valuation for the net operating loss generated in 1996.
As a consequence of the items discussed above, income (loss) before
extraordinary gain in 1996 was $(5,861,000) compared to $384,000 in 1995.
Liquidity and Capital Resources
15
The Company's sources of liquidity have been funds provided by
operations, leases on revenue equipment, a revolving line of credit and an
accounts receivable financing facility.
Net cash provided by operating activities totaled approximately $8.0
million for the twelve months ended December 31, 1997. Net cash used in
investing activities (primarily acquisition of equipment) amounted to $2.2
million in 1997. The Company made cash payments on debt and capitalized lease
obligations of $8.7 million in 1997.
Working capital (deficit) increased from $(9,156,777) to $(23,431,608)
primarily because of the maturity of several capitalized lease contracts in
1998, aggregating approximately $7 million at maturity, and the purchase of
equipment out of working capital aggregating approximately $6 million. The
capitalized lease contracts are secured by revenue equipment which the vendor
has agreed to accept in full payment of the leases upon maturity. In February
1998, the Company secured long-term financing for $3 million of the equipment
purchased out of working capital.
As a result of the Company making contractual debt payments,
capitalized lease and long-term obligations have decreased from $55.0 million at
December 31, 1996, to $41.4 million at December 31, 1997.
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
December 31, 1997 the Company has utilized $10.4 million of this line of credit,
$5.6 million for insurance related letters of credit, and $4.8 million of short
term cash borrowings. The Congress Agreement restricts the payment of dividends
and is secured by accounts receivable.
The Company also has a credit facility with the Bank of New York for
issuance of letters of credit up to $4.8 million which expires May 15, 1998. As
of December 31, 1997, the Company had used $4.8 million of this facility 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. 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, add
covenants requiring certain levels of tangible net worth for periods through and
including December 31, 1997, and shorten the expiration date of the credit
facility from December 31, 1998 to December 31, 1997. On March 31, 1998, the
Agreement was extended effective December 31, 1997, to May 15, 1998. 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.
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 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.
The Company's net accounts receivable balance increased by approximately
$2.5 million between December 31, 1996 and 1997, as a result of increased
business levels in the fourth quarter of 1997.
The Company expects capital expenditures to be approximately $2 million in
1998 primarily for additions to the Company's communications system. In 1997,
the Company acquired 76 new tractors and no new trailers. The Company purchased
approximately $7.5 million of formerly leased revenue equipment during 1997.
Management anticipates that future expansion of the fleet or the replacement of
retired company-owned tractors will be accomplished with additional independent
contractors 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 1998 However , 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. The Company's ability to obtain
such financing could be affected by its operating results to the extent the
Company continues to operate at a loss. In addition, the Company's need for
additional equity or debt financing to meet its operational needs will be
accelerated if the Company continues to operate at a loss. Whether such capital
will be available on favorable terms, or at all, will depend on the Company's
16
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 increases 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 December 31, 1997, the Company had entered into various agreements with
fuel suppliers to purchase approximately 18% of its estimated fuel needs through
December 31, 1998 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.
Factors Affecting Future Results
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 the 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.
Item 8. Financial Statements and Supplementary Data.
The Company's financial statements and notes are included herewith
beginning on page F-1. The supplementary data is included herein immediately
following the signature page of this report on Form 10-K.
Item 9. Changes and Disagreements with Accountants on Accounting and Financial
Disclosure.
There has been no Form 8-K filed reporting a change of accountants or
reporting disagreements on any matter of accounting principle, practice,
financial statement disclosure or auditing scope or procedure.
17
PART III
Item 10, 11, 12 and 13.
These items are incorporated by reference to the Company's definitive
Proxy Statement in the future.
18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents Filed as Part of this Report:
(1) Financial Statements. The following financial statements
are filed hereunder as provided in Item 8 of this report:
-- Report of Independent Public Accountants
-- Balance Sheets as of December 31, 1997 and 1996
-- Statements of Operations for the Years Ended December
31, 1997, 1996 and 1995
-- Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 1997, 1996 and 1995
-- Statements of Cash Flows for the Years Ended December
31, 1997, 1996 and 1995
-- Notes to Financial Statements
(2) Financial Statement Schedule. The following financial
statement schedule for the years ended December 31, 1997, 1996 and 1995
is included herein immediately following the signature page to this
report:
-- Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because the information
required therein is not present in amounts sufficient to require submission of
the schedule or because the information required is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
The following exhibits required by Item 601 of Regulation S-K are
filed herewith or have been filed previously with the Commission as indicated
below:
Regulation
S-K Sequential
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------------------------------------
2.1 First Amended Plan of Reorganization of the Company as confirmed [Exhibit 2.1]
by the Bankruptcy Court on February 22, 1994.*
2.2 Agreement and Plan of Reorganization of Norton Enterprises,
Inc., a Delaware corporation, Great Western Leasing, Inc., a
Utah corporation, and the Company dated March 7, 1994.* [Exhibit 2.2]
3.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
3.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
4.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.3 Specimen Certificate.* [Exhibit 4.3]
19
Regulation
S-K Sequential
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------------------------------------
10.1 $9,500,000 Revolving Loan Agreement with Letter of Credit Facility [Exhibit 10.1]
between The Bank of New York and the Company dated March 7, 1994, as
amended.*
10.2 Fifth Amendment to $9,500,000 Revolving Loan Agreement with Letter of [Exhibit 10.1]
Credit Facility.***
10.3 Sixth through Ninth Amendments to $9,500,000 Revolving Loan Agreement. [Exhibit 10.1]
10.4 Employment Term Sheet -- Robert Hill.** [Exhibit 10.3]
10.5 PST Vans, Inc. Stock Incentive Plan dated December 6, 1994.* [Exhibit 10.2]
10.6 Amendments No. 1 and No. 2 to PST Vans, Inc. Stock Incentive Plan.** [Exhibit 10.2]
10.7 Executive Incentive Program for Kenneth R. Norton and Robert D. Hill.* [Exhibit 10.3]
10.8 Registration Rights Agreement dated as of March 7, 1994 between the [Exhibit 10.5]
Company, The Bank of New York and Kenneth R. Norton.*
10.9 Loan and Security Agreement with Congress Financial Corporation [Exhibit 10.1]
(Northwest).****
10.10First Amendment to Congress Financial Corp. (Northwest) Credit [Exhibit 10.1]
Facility.*****
10.11Amendment No.3 to PST Vans, Inc. Stock Incentive Plan.*** [Exhibit 10.2]
10.12Tenth Amendment to $9,500,000 Revolving Loan Agreement. Filed herewith
10.13Agreement for Outsourcing Services between The Sabre Group and the Filed herewith
Company
23.1 Consent of Arthur Andersen LLP, independent public accountants. Filed herewith
- ----------------------
* Incorporated by reference to the indicated exhibits in the Company
Registration Statement on Form S-1 (File No. 33-87212)
** Incorporated by reference to the indicated exhibits in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996.
**** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended September
30, 1996.
***** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended March 31,
1997.
(d) Financial Statement Schedules:
See Item 14(a)(2) of this report.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 28, 1996.
PST VANS, INC.
By:
Kenneth R. Norton
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 28, 1996.
Signature Capacity in Which Signed
- ------------------------ Chairman of the Board and Chief Executive Officer
Kenneth R. Norton (principal executive officer)
- ------------------------ President, Chief Operating Officer and Director
Robert D. Hill
- ------------------------ Chief Financial Officer and Secretary/Treasurer
Neil R. Vos (principal financial and accounting officer)
- ------------------------ Director
James F. Redfern
- ------------------------ Director
Charles A. Lynch
- ------------------------ Director
James E. Otto
21
EXHIBIT INDEX
Regulation
S-K Sequential
Exhibit No. Description Page No.
----------- ----------- --------
2.1 First Amended Plan of Reorganization of the Company as confirmed [Exhibit 2.1]
by the Bankruptcy Court on February 22, 1994.*
2.2 Agreement and Plan of Reorganization of Norton Enterprises, Inc., a [Exhibit 2.2]
Delaware corporation, Great Western Leasing, Inc., a Utah corporation, and
the Company dated March 7, 1994.*
3.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
3.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.1 Revised Articles of Incorporation of the Company.* [Exhibit 3.1]
4.2 Amended and Restated Bylaws of the Company.* [Exhibit 3.2]
4.3 Specimen Certificate.* [Exhibit 4.3]
10.1 $9,500,000 Revolving Loan Agreement with Letter of Credit Facility [Exhibit 10.1]
between The Bank of New York and the Company dated March 7, 1994, as
amended.*
10.2 Fifth Amendment to $9,500,000 Revolving Loan Agreement with Letter of [Exhibit 10.1]
Credit Facility.***
10.3 Sixth through Ninth Amendments to $9,500,000 Revolving Loan Agreement. [Exhibit 10.1]
10.4 Employment Term Sheet -- Robert Hill.** [Exhibit 10.3]
10.5 PST Vans, Inc. Stock Incentive Plan dated December 6, 1994.* [Exhibit 10.2]
10.6 Amendments No. 1 and No. 2 to PST Vans, Inc. Stock Incentive Plan.** [Exhibit 10.2]
10.7 Executive Incentive Program for Kenneth R. Norton and Robert D. Hill.* [Exhibit 10.3]
10.8 Registration Rights Agreement dated as of March 7, 1994 between the [Exhibit 10.5]
Company, The Bank of New York and Kenneth R. Norton.*
10.9 Loan and Security Agreement with Congress Financial Corporation [Exhibit 10.1]
(Northwest).****
10.10First Amendment to Congress Financial Corp. (Northwest) Credit [Exhibit 10.1]
Facility.*****
10.11Amendment No.3 to PST Vans, Inc. Stock Incentive Plan.*** [Exhibit 10.2]
10.12Agreement for Outsourcing Services between The Sabre Group and the Filed herewith
Company
10.13Tenth Amendment to $9,500,000 Revolving Loan Agreement. Filed herewith
23.1 Consent of Arthur Andersen LLP, independent public accountants. Filed herewith
- ----------------------
* Incorporated by reference to the indicated exhibits in the Company
Registration Statement on Form S-1 (File No. 33-87212)
** Incorporated by reference to the indicated exhibits in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996.
**** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended September
30, 1996.
***** Incorporated by reference to the indicated exhibits in the Company's
quarterly report on Form 10-Q for the quarterly period ended March 31,
1997.
22
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants.......................................................................F-2
Balance Sheets at December 31, 1997 and 1996...................................................................F-3
Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995..................................F-4
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1997, 1996 and 1995..............F-5
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995..................................F-6
Notes to Financial Statements..................................................................................F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PST Vans, Inc.:
We have audited the accompanying balance sheets of PST Vans, Inc., (a
Utah corporation) as of December 31, 1997 and 1996, and the related statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's 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 financial position of PST Vans, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
February 11, 1998 (except with respect
to matters discussed in the first
paragraph of Note 4 as to which the
date is March 31, 1998.)
F-2
PST VANS, INC.
BALANCE SHEETS
ASSETS
December 31,
------------------------------------
1997 1996
-------------- --------------
CURRENT ASSETS:
Cash.............................................................$ 1,282,255 $ 4,098,361
Receivables, net of allowance for doubtful
accounts of $908,000 and $806,000, respectively............... 17,087,038 14,607,292
Deposits.......................................................... 343,867 353,437
Prepaid expenses and other........................................ 3,097,538 3,258,669
Inventories and operating supplies............................... 726,853 689,875
Total current assets......................................... 22,537,551 23,007,634
--------------- --------------
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization of
$26,399,259 and $23,282,064, respectively........................ 48,265,324 58,116,763
--------------- --------------
GOODWILL, net of accumulated amortization
of $3,568,297 and $3,296,334, respectively....................... 8,340,187 8,612,150
--------------- ---------------
OTHER ASSETS, net.................................................... 332,632 523,539
............................................................ $ 79,475,694 $ 90,260,086
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:...................................................
Revolving Line of Credit ......................................$ 4,762,493 $ ---
Current portion of long-term obligations ....................... 3,037,018 1,388,581
Current portion of capitalized lease obligations.................. 23,599,973 18,708,614
Accounts payable.................................................. 7,306,459 4,140,985
Current portion of accrued claims payable......................... 3,990,958 5,456,316
Accrued liabilities.............................................. 3,271,718 2,469,915
Total current liabilities..................................... 45,968,619 32,164,411
-------------- -------------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion.......................................... 1,257,429 1,429,227
---------------- --------------
LONG-TERM OBLIGATIONS, net of current portion........................ 3,985,909 1,986,214
---------------- --------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion.................................................. 10,752,721 32,907,995
--------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 7)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares
authorized, none issued..................................... --- ---
Common stock, $.001 par value, 20,000,000 shares
authorized, 4,239,945 and 4,217,157 shares issued,
respectively................................................ 4,240 4,217
Additional paid-in capital...........................................49,812,539 49,759,238
Accumulated deficit............................................... (32,305,763) (27,991,216)
Total stockholders' equity................................... 17,511,016 21,772,239
...............................................................$ 79,475,694 $ 90,260,086
The accompanying notes are an integral part of these balance sheets.
F-3
PST VANS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
REVENUES.........................................................$143,737,430 $147,418,904 $164,794,366
------------ ------------ ------------
COSTS AND EXPENSES:
Salaries, wages and benefits..................................44,360,224 43,847,942 45,208,090
Purchased transportation......................................25,578,176 32,393,331 41,280,895
Fuel and fuel taxes...........................................22,532,582 20,555,431 21,245,011
Revenue equipment lease expense................................7,576,456 8,021,676 12,224,340
Maintenance....................................................8,662,947 7,491,155 8,822,454
Insurance and claims..........................................11,384,315 11,942,008 9,315,173
General supplies and expenses..................................5,930,058 5,558,052 5,995,821
Taxes and licenses.............................................2,775,614 3,309,478 3,445,040
Communications and utilities...................................2,801,757 3,429,699 3,561,698
Depreciation and amortization.................................11,910,563 13,174,606 8,803,585
(Gain) loss on sale of equipment..................................12,875 (1,613,842) (150,940)
Amortization of goodwill.................................. 271,963 271,963 271,963
.........................................................143,797,530 148,381,499 160,023,130
OPERATING INCOME (LOSS)......................................... ( 60,100) (962,595) 4,771,236
OTHER INCOME (EXPENSE):
Interest expense..............................................(4,359,888) (5,080,202) (4,283,463)
Other, net................................................ 105,441 182,032 147,408
........................................................ (4,254,447) (4,898,170) (4,136,055)
------------- -------------- --------------
Income (loss) before provision for
income taxes..............................................(4,314,547) (5,860,765) 635,181
PROVISION FOR INCOME TAXES................................ --- --- 251,532
NET INCOME (LOSS)...............................................$ (4,314,547) $ (5,860,765) $ 383,649
============== ============== ===============
NET INCOME (LOSS) PER
COMMON SHARE - BASIC AND DILUTED.........................$ (1.02) $ (1.39) $ 0.10
================== =============== ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC........................................... 4,233,467 4,212,211 3,887,528
=============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-DILUTED....................................... 4,233,467 4,212,211 3,949,526
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
PST VANS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
----- ------- ------- ------
BALANCE,
December 31, 1994 $ 2,600 $ 27,984,629 $(22,514,100) $ 5,473,129
Sale of 1,600,000 shares
of common stock in
connection with initial
public offering, net 1,600 21,633,753 -- 21,635,353
Issuance of 9,409 shares of
common stock as satis-
faction of $112,903
general unsecured claims 9 112,894 -- 112,903
Net income -- -- 383,649 383,649
------------ ------------ ------------ ------------
BALANCE,
December 31, 1995 4,209 49,731,276 (22,130,451) 27,605,034
Sale of 7,748 shares
of common stock to
employees 8 27,962 -- 27,970
Net loss -- -- (5,860,765) (5,860,765)
------------ ------------ ------------ ------------
BALANCE,
December 31, 1996 4,217 49,759,238 (27,991,216) 21,772,239
Sale of common stock
to employees 23 53,301 -- 53,324
Net loss -- -- (4,314,547) (4,314,547)
------------ ------------ ------------ ------------
BALANCE,
December 31, 1997 $ 4,240 $ 49,812,539 $(32,305,763) $ 17,511,016
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
PST VANS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (4,314,547) $ (5,860,765) $ 383,649
-------------- -------------- ------------
Adjustments to reconcile net (loss) income to net
cash provided by operating activities -
Depreciation and amortization 11,910,563 13,174,605 8,803,585
Provision for losses on accounts receivable 936,697 1,280,634 1,097,890
Amortization of goodwill 271,963 271,963 271,963
(Gain) loss on sale of equipment 12,875 (1,613,842) (150,940)
(Increase) decrease in receivables (3,416,443) 347,648 (1,722,103)
Decrease in deposits 9,570 632,515 2,876,942
(Increase) decrease in prepaid expenses and other 161,132 830,326 (1,361,156)
Increase in inventories and operating supplies (36,978) (47,145) (77,773)
Decrease in other assets, net 190,907 17,823 2,265,931
Increase (decrease) in accounts payable 3,165,474 ( 368,849) (285,119)
Increase (decrease) in accrued claims payable (1,637,156) 1,148,468 717,283
Increase (decrease) in accrued liabilities 801,808 (786,981) (1,525,566)
Total adjustments 12,370,412 14,887,165 10,910,937
------------- ------------- -------------
Net cash flows provided by operating activities 8,055,865 9,026,400 11,294,586
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 3,194,556 4,323,495 1,163,436
Acquisition of property and equipment (5,349,216) (988,590) (9,480,079)
------------- ------------- -------------
Net cash flows provided by (used in) investing activities (2,154,660) 3,334,905 (8,316,643)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net 4,762,493 --- ---
Principal payments on capitalized lease obligations (11,568,432) (10,774,663) (6,478,232)
Principal payments on long-term obligations (2,039,296) (1,766,232) (2,234,107)
Proceeds from sale of common stock to employees 53,324 27,970 ---
Proceeds from sale of common stock, net --- --- 21,635,353
Purchase of accounts receivable from factor --- --- (9,063,711)
Decrease in advances from factor --- --- (5,336,289)
Proceeds from long-term obligations 74,600 --- 1,983,824
------------- ------------- -------------
Net cash flows (used in) provided by financing activities (8,717,311) (12,512,925) 506,838
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (2,816,106) (151,620) 3,484,781
CASH AT BEGINNING OF YEAR 4,098,361 4,249,981 765,200
------------- ------------- -------------
CASH AT END OF YEAR $1,282,255 $ 4,098,361 $ 4,249,981
============= ============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for -
Interest $4,438,378 $5,115,442 $4,106,793
Income taxes 31,040 90,659 1,691,615
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through capitalized lease obligations --- --- 51,475,706
The accompanying notes are an integral part of these financial statements.
F-7
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Business
PST Vans, Inc. ("PST") is a nationwide common motor carrier with 48-state
general commodity and contract operating authorities. PST provides dry van
truckload services focused on serving three markets in the United States;
transcontinental, intrawest and midwest-southeast. PST transports a wide variety
of freight, much of which is time sensitive, including paper products, retail
products, non-perishable food products, tires and electronic equipment.
Reorganization Under Chapter 11
On June 2, 1993, PST filed a voluntary petition in the United States Bankruptcy
Court for the District of Utah to reorganize under Chapter 11 of the United
States Bankruptcy Code. During the period from June 2, 1993 to March 7, 1994,
the Company operated as a debtor-in-possession under the supervision of the
Bankruptcy Court. As of December 31, 1997 and 1996, approximately $ 198,000 and
$ 334,000, respectively, of the estimated liabilities subject to compromise
remain outstanding and are included in long-term obligations. All other amounts
subject to compromise have been converted to equity, paid or forgiven.
The Plan of Reorganization (the" Plan") required the Company to pay any
remaining portion of general unsecured claims in the event of an initial public
offering (IPO) within the five year period subsequent to January 1, 1994. The
Plan allowed for each unsecured creditor to elect to: 1) receive cash equal to
the amount of the unpaid balance of its unsecured claim from the proceeds of the
IPO, or 2) use the unpaid balance of its unsecured claim to subscribe to stock
to be issued pursuant to the IPO, which stock was to be issued at a 20 percent
discount from the initial offering price. In connection with the IPO, the
Company paid approximately $1,150,000 to general unsecured creditors and issued
9,409 shares of common stock to its Chief Executive Officer and significant
stockholder.
(2) Summary of Significant Accounting Policies
Revenue Recognition
Revenue is recognized as services are performed. The Company allocates revenue
between reporting periods based on relative transit time in each reporting
period and recognizes direct expenses as incurred.
Receivables and Advances from Factor
Prior to the IPO of the Company's common stock in March 1995, PST sold and
factored a significant portion of its trade accounts receivable with a finance
company. The terms of the factoring agreement allowed for the sale of accounts
both with and without recourse depending upon the customer. Until March 31,
1995, substantially all of the Company's receivables were sold to the finance
company. The finance company also provided advances to the Company against
freight bills for which documentation was incomplete. As the Company supplied
all required documentation to the finance company, the completed freight bills
were sold.
F-8
Deposits and Other Assets, net
PST is required to keep certain amounts on deposit with various companies
related to insurance, fuel purchases and certain leasing agreements. The Company
had approximately $344,000 and $303,000 in deposits with insurance carriers at
December 31, 1997 and 1996, respectively and $50,000 with lessors and fuel
vendors at December 31, 1996.
Inventories and Operating Supplies
Inventories consist primarily of tires, fuel and maintenance parts for revenue
equipment. Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market value.
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized based
on the straight-line method over their estimated useful economic lives, taking
into consideration salvage values for purchased property and residual values for
equipment held under capital leases. Leasehold improvements are amortized over
the terms of the respective leases or the estimated economic useful lives of the
assets, whichever is shorter.
Expenditures for routine maintenance and repairs are charged to operating
expense as incurred. Major overhauls and betterments are capitalized and
depreciated over their estimated economic useful lives. Tires purchased as part
of revenue equipment are capitalized as a cost of equipment. Replacement tires
are expensed when placed in service. Upon the disposal of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in the determination of income or loss.
Property and equipment consists of the following:
Est. Useful
Lives (Years) 1997 1996
------------- ---- ----
Land $ 1,182,421 $ 1,182,421
Revenue equipment 2-10 66,443,716 73,453,974
Buildings and improvements 5-30 3,546,529 3,477,645
Furniture and fixtures 5-10 2,160,823 1,953,389
Other equipment 3-5 1,331,094 1,331,398
74,664,583 81,398,827
---------- ----------
Less Accumulated depreciation and amortization (26,399,259) (23,282,064)
----------- -----------
$48,265,324 $58,116,763
============ ===========
Goodwill
Goodwill is being amortized on a straight line basis over forty years. The
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining balance may not be recoverable. When factors
indicate goodwill should be evaluated for possible impairment, the Company uses
an estimate of the discounted future cash flows over the life of the goodwill
and comparable market information in measuring whether the amount is
recoverable.
Income Taxes
The Company recognizes a liability or asset for the deferred tax consequences of
all temporary differences between the tax bases of assets or liabilities and
their reported amounts in the financial statements. These temporary differences
will result in taxable or deductible amounts in future years when the reported
amounts of the assets or liabilities are recovered or settled. The deferred tax
assets are reviewed for recoverability and valuation allowances are provided as
necessary.
F-9
Insurance Coverage and Accrued Claims Payable
The Company maintains insurance for losses related to public liability, property
damage, cargo and worker's compensation claims in amounts it considers
sufficient. Nevertheless, the Company could be adversely affected if it incurred
a liability as a result of claims in excess of its policy limits or a
significant volume of claims below its deductible limits. The Company maintains
loss prevention programs in an effort to minimize this risk.
The Company estimates and accrues a liability for its share of ultimate
settlements using all available information including the services of a third
party insurance risk claims administrator to assist in establishing reserve
levels for each occurrence based on the facts and circumstances of the
occurrence coupled with the Company's past history of such claims. The Company
accrues for worker's compensation and automobile liabilities when reported,
typically the same day as the occurrence. Additionally, the Company accrues an
estimated liability for incurred but not reported claims. Expense depends upon
actual loss experience and changes in estimates of settlement amounts for open
claims which have not been fully resolved. The Company provides for adverse loss
developments in the period when new information so dictates. The amounts the
Company will ultimately pay on its claims outstanding as of December 31, 1997
could differ materially in the near term from amounts accrued in the
accompanying December 31, 1997 balance sheet.
Based upon historical and projected trends in claims payments, the Company has
classified the claims payable in current and long term components in the
accompanying balance sheet.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share ("Basic EPS") excludes dilution and is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the year. Diluted net income (loss) per common share
("Diluted EPS") reflects the potential dilution that could occur if stock
options or other common stock equivalent were exercised or converted into common
stock. The computation of Diluted EPS does not assume exercise or conversion of
securities that would have an anti-dilutive effect on net income (loss) per
common share. In periods where losses are recorded, common stock equivalents
would decrease the net loss per common share and are therefore not considered in
the calculation of weighted average common shares outstanding for Diluted EPS.
Net income (loss) per common share amounts and share data have been restated for
all years presented in the accompanying financial statements to reflect Basic
and Diluted EPS.
The following is a reconciliation of the numerator and denominator of Basic EPS
to the numerator and denominator of Diluted EPS for all years presented in the
accompanying financial statements
Net Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Year Ended December 31, 1997
Basic EPS $ (4,314,547) 4,233,467 $ (1.02)
Effect of Stock Options -- -- --
----------- ------------- ------
Diluted EPS $ (4,314,547) 4,233,467 $ (1.02)
============= ============== ================
Year Ended December 31, 1996
Basic EPS $ (5,860,765 4,212,211 $ (1.39)
Effect of Stock Options -- -- --
----------- ------------- ------
Diluted EPS $ (5,860,765) 4,212,211 $ (1.39)
============= ============== ================
Year Ended December 31, 1995
Balance EPS $ 383,649 3,887,528 $ .10
Effect of Stock Options -- 61,998 --
----------- ------------ ------
Diluted EPS $ 383,649 3,949,526 $ .10
============= ============= ===============
F-10
As of December 31, 1997, 1996, and 1995, there were outstanding options to
purchase 340,000, 111,000, and 99,002 shares of common stock, respectively, that
were not included in the computation of Diluted EPS because the options'
exercise prices were greater than the average market price of the common shares
or because their inclusion would have been anti-dilutive.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments for an
Enterprise and Related Information". This statement establishes new standards
for public companies to report information about operating segments, products
and services, geographic areas and major customers. This statement is effective
for periods beginning after December 15, 1997.
(4) Revolving Loan Agreements
The Bank of New York
On March 7, 1994, the Company signed a $9,500,000 Revolving Loan Agreement (the
"Agreement") with The Bank of New York. The Agreement contains a letter of
credit facility. The maximum principal amount of outstanding advances under the
Agreement cannot exceed the lesser of (1) $9,500,000 less the aggregate amount
outstanding with respect to letters of credit (whether drawn or undrawn), or (2)
$1,000,000. On March 21, 1997, the Agreement was amended such that certain
financial covenants were deleted. Additionally, the amendment changed the
expiration date to December 31, 1997, and required that all remaining letters of
credit be terminated according to a stipulated schedule, but no later than the
expiration of the Agreement. On March 31, 1998, the agreement was extended
effective December 31, 1997, to May 15, 1998. As of December 31, 1997, letters
of credit totaling $4,830,000 were outstanding under the Agreement. As
outstanding letters of credit issued under this credit facility expire, the
maximum commitment available under this credit facility will be reduced by the
amount of the expiring letters of credit. The amended Agreement requires the
Company to maintain specified levels of tangible net worth through the
expiration of the Agreement.
Congress Financial Corporation (Northwest)
The Company has an $11,500,000 Loan and Security Agreement (the "Congress
Agreement") with Congress Financial Corporation (Northwest). The Congress
Agreement contains a letter of credit facility supporting letters of credit up
to $7,000,000 and a revolving loan facility that is secured by eligible accounts
receivable. The letter of credit facility requires the Company to maintain a
pledged certificate of deposit of $1,000,000 for letters of credit outstanding
up to $3,500,000, unless the Company allows its cash receipts to flow through a
bank account designated by the Congress Agreement. The Congress Agreement
expires August 6, 1999. As of December 31, 1997, the balance under the line of
credit was $ 4,762,493 and letters of credit totaling $5,616,000 were
outstanding, leaving a balance available to the Company of $ 1,121,507 under the
Congress Agreement. Additionally, the Congress Agreement restricts the payment
of dividends.
F-11
(5) Long-Term Obligations
Long-term obligations consisted of the following:
December 31,
-----------------------
1997 1996
--------- -----------
Notes payable to finance companies, interest at the "1- month"
commercial paper rate plus 3.8 percent (9.29 percent
at December 31, 1997), payable in monthly installments of $134,220
through November 1999, secured by revenue equipment $ --- $ 2,899,950
Notes payable to a finance company, interest at 9.5 percent
payable in monthly installments of $249,849 through
January 2000, secured by revenue equipment 2,250,781 ---
Notes payable to finance companies, interest rates
ranging from 8 to 8.05 percent, payable in monthly
installments ranging fro $10,285 to $51,218 through
December 2003, secured by revenue equipment 1,357,767 1,844,230
Payables to tax creditors, interest at applicable statutory
rates, due in monthly principle installments of $11,576
through 2000 197,916 258,910
Notes payable to a bank, interest at 9 percent,
payable in monthly installments of $3,473 through March 2000,
secured by revenue equipment 42,296 ---
Mortgage payable to a bank, paid in full in January 1997 829,073 ---
Other 274,217 442,582
------- -------
7,022,927 3,374,795
--------- ---------
Less Current portion (3,037,018) (1,388,581)
$ 3,985,909 $ 1,986,214
=========== ===========
As of December 31, 1997, maturities of long-term obligations are as follows:
Year Ending December 31:
- ------------------------
1998 3,037,018
1999 2,793,133
2000 217,594
2001 202,303
2002 219,204
Thereafter 553,675
-------
$7,022,927
==========
F-12
(6) Income Taxes
The components of deferred taxes are as follows:
December 31,
--------------------------------
1997 1996
-------------- --------------
Deferred tax assets:
Allowance for doubtful accounts $ 412,279 $ 319,359
Accrued claims payable 1,828,806 1,889,956
General business credit carry forward 574,147 574,147
Workers compensation accrual 290,153 204,359
Alternative minimum tax credit carry forward 456,984 456,984
Depreciation and leases --- 422,001
Net operating loss carry forward 3,385,750 654,967
Other 256,999 291,808
------- -------
Total deferred tax assets 7,205,118 4,813,581
Valuation allowance (6,218,822) (4,689,624)
---------- ----------
Deferred assets, net of
Valuation allowance 986,296 123,957
Deferred taxability:
Depreciation and leases (862,339) ---
---------------- ---------------
Net deferred tax assets $ 123,957 $ 123,957
================= ===============
Management believes that, based upon the lack of cumulative profits in the
previous three years, sufficient uncertainty exists regarding the realizability
of the deferred tax asset such that a valuation allowance has been recorded.
Accordingly, the deferred tax assets have been reduced by an approximately
$6,219,000 valuation allowance at December 31, 1997. Realization of the net
deferred tax asset is dependent on generating sufficient taxable income in
future years to support the ability to use these deductions. Although the
realization of the net deferred tax assets are not assured, management believes
that it is more likely than not that all of the net deferred tax assets will be
realized. The amount of the net deferred tax assets considered realizable,
however, could be reduced in the near term based upon changing conditions.
The provision (benefit) for income taxes for the years ended December 31, 1997,
1996, and 1995 consisted of the following:
1997 1996 1995
------------ -------------- ------------
Current:
Federal --- $ (590,588) $ 379,203
State (16,021) (86,582) 110,182
------------ -------------- ------------
(16,021) (677,170) 489,385
------------ ------------- -----------
Deferred:
Federal (1,319,704) (1,292,515) (43,609)
State (193,473) (189,487) (12,671)
Change in valuation allowance 1,529,198 2,159,172 (181,573)
--------- --------- --------
$ 16,021 $ 677,170 $ (237,853)
------------ ----------- ----------
$ --- $ --- $ 251,532
============ =========== ==========
The Company's effective income tax rate for the years ended December 31, 1997,
1996, and 1995 was different from the statutory federal income tax rate for the
following reasons:
1997 1996 1995
---- ---- ----
Statutory federal income tax rate (35.0) % (35.0)% 35.0%
State income taxes, net of federal benefit (4.6) (4.6) 4.6
Nondeductible items:
Amortization of goodwill 2.5 1.8 17.0
Other 1.7 0.9 11.6
Change in valuation allowance 35.4 36.8 (28.6)
-------- ------- -------
Effective income tax rate --- % ---- % 39.6%
======== ---==== ---====
F-13
The Company has general business credit and alternative minimum tax credit carry
forwards at December 31, 1997, of $574,147 and $456,984, respectively. For
income tax purposes, the Company had approximately $3,385,750 of net operating
loss carry forward at December 31, 1997. The net operating loss carry forward
expires in 2012. (7) Commitments and Contingencies
Capitalized Lease Obligation
Certain revenue equipment is leased under capital lease agreements. The
following is a summary of assets held under capital lease agreements:
December 31,
---------------------------
1997 1996
---------------------------
Revenue equipment.........................................$ 53,015,303 $ 67,438,725
Other ................................................ 1,325,504 1,325,504
--------- ---------
...................................................54,340,807 68,764,229
Less Accumulated amortization............................ (21,486,148) (18,910,825)
----------- -----------
.................................................$ 32,854,659 $ 49,853,404
============ ============
The following is a schedule by year of future minimum lease payments under the
capital leases together with the value of the net minimum lease payments at
December 31, 1997:
Year Ending December 31:
- ------------------------
1998 .................................................$ 25,488,538
1999 ....................................................2,823,867
2000 ....................................................2,638,099
2001 ....................................................2,638,099
2002 ............................................. 4,827,606
- ---- ---------
Total net minimum lease payments............................38,416,209
Less Amount representing interest......................... (4,063,515)
----------
Present value of net premium lease payments.................34,352,694
Less Current portion..................................... (23,599,973)
-----------
.................................................$ 10,752,721
============
Operating Leases
The Company is committed under noncancellable operating leases involving revenue
equipment and facilities. Rent expense for all operating leases was
approximately $7,548,000, $ 8,022,000 and $12,224,000 for the years ended
December 31, 1997, 1996, and 1995, respectively. The following is a schedule of
future lease commitments under noncancellable operating leases at December 31,
1997:
Year Ending December 31:
- ------------------------
1998 ..................................................$ 4,208,548
1999 ....................................................2,883,724
2000 ....................................................1,779,521
2001 .............................................. 992,944
------------
..................................................$ 9,864,737
===========
The Company's operating lease payments are made in arrears. At December 31, 1997
and 1996, the Company classified approximately $436,000 and $461,000 of accrued
operating lease payments in "Accrued Liabilities" in the accompanying balance
sheets.
Letters of Credit
F-14
The Company had outstanding letters of credit related to insurance coverage and
certain lease agreements totaling approximately $10,446,000 at December 31,
1997. These letters of credit mature at various times through June 30, 1998.
F-15
Fuel Purchase Commitments
As of December 31, 1997, the Company had entered into various fuel purchase
contracts totaling approximately $3,600,000. These contracts expire at various
times through December 31, 1998. This arrangement is intended to reduce the
Company's vulnerability to rapid increases in the price of fuel. In the event
fuel prices decline, the Company will not benefit from such reduced pricing to
the extent of its commitment to purchase fuel under these contracts. If fuel
prices decline materially below contracted prices, the Company records the loss
in the period of decline. As of December 31, 1997, contracted fuel prices were
lower than market fuel prices.
Registration Rights
Pursuant to a Registration Rights Agreement, the Company's two largest
stockholders each have the right, subject to certain terms and conditions, to
require the Company to register their shares under the Securities Act of 1933
for offer to sell to the public (including by way of an underwritten offering).
These stockholders each also have the right to join in any registration of
securities of the Company (subject to certain exceptions). The Company is
obligated to pay all expenses (except the stockholders legal counsel,
underwriting discounts, commissions, and transfer taxes, if any) related to
successful offerings requested by a stockholder under this agreement.
Other
The Company is the subject of various legal actions which it considers routine
to its transportation business activities. Management believes, after discussion
with legal counsel, that the ultimate liability of the Company under these
actions will not materially affect the accompanying financial statements.
The Company is subject to various restrictive covenants related to certain
outstanding debt and lease agreements. Certain lenders have reserved the right
to demand payment if, for any reason, they deem themselves insecure. Management
does not believe that these obligations will be called in advance of their
scheduled maturities. If they were to be called, management believes that these
amounts could be refinanced with other commercial lenders without adversely
impacting the Company's results of operations or liquidity.
(8) Stockholders' Equity
Initial Public Offering of Common Stock
In connection with its initial public offering, the Company sold 1,600,000
shares of common stock. The proceeds received from the offering, net of
underwriting commissions and offering costs, totaled approximately $21,635,000.
Employee Stock Purchase Plan
During December 1995, the Company implemented an Employee Stock Purchase Plan
("ESPP") entitling eligible employees of the Company to purchase 80,000 shares
of the Company's common stock through payroll deductions in an amount not to
exceed 15 percent of an employee's base pay. The purchase price of the common
stock is the lesser of 85 percent of the market value of the common stock at the
beginning or end of each of the one year offering periods. Employees can
terminate their participation in an offering under the ESPP at any time prior to
the end of the offering period. The ESPP allows for up to 26,666 shares of
common stock (plus unissued shares from prior years) to be offered in each of
the years ending December 31, 1996, 1997 and 1998. During the year ended
December 31, 1997 and December 31, 1996, employees purchased 22,788 and 7,748
shares, respectively, of common stock under the ESPP.
F-16
Stock Incentive Plan
During December 1994, the Company adopted the PST Vans, Inc., Stock Incentive
Plan ("SIP") with 170,000 shares of common stock reserved for issuance
thereunder. The number of shares reserved under the plan was subsequently
revised to 370,000 during 1996. The Compensation Committee of the Board of
Directors administers the SIP and has the discretion to determine the employees
and officers who receive awards (incentive stock options, non-qualified stock
options, stock appreciation rights or phantom stock awards) to be granted and
the term, vesting and exercise prices.
The Company accounts for this plan under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for the SIP been
determined consistent with FASB Statement No. 123, however, the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts:
1997 1996 1995
---- ---- ----
Net Income As reported $ (4,314,547) $(5,860,765) $ 383,649
Pro forma (4,519,433) (6,009,888) (286,372)
Basic EPS As reported $ (1.02) $ (1.39) $ 0.10
Pro forma (1.07) (1.43) (0.07)
Diluted EPS As reported $ (1.02) $ (1.39) $ 0.10
Pro forma (1.07) (1.43) (0.07)
A summary of the Company's SIP at December 31, 1997, 1996 and 1995 and changes
during the years then ended is presented in the table and narrative below.
1997 1996 1995
---------------------- ---------------------- ----------------------
Wtd.Avg Wtd.Avg. Wtd.Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- --------- --------- --------- -------- ---------
Outstanding at beginning of year 111,000 $5.89 161,000 $6.19 --- $ ---
Granted 233,000 3.50 14,000 3.63 161,000 6.19
Forfeited (4,000) 6.19 (64,000) 6.16 --- ---
------- ------- -------
Outstanding at end of year 340,000 4.25 111,000 5.89 161,000 6.19
======= ======= =======
Exercisable at end of year 40,000 6.03 33,950 6.06 21,783 6.08
======= ======= =======
Weighted average fair value
of options granted $2.59 $4.43 $4.69
The 340,000 outstanding shares at the end of 1997 have exercise prices ranging
between $3.38 and $7.38 per share, with a weighted average exercise price of
$4.25. The grants have a prorata vesting period of five years from the grant
date and an expiration date of ten years from grant date. At December 31, 1997,
40,000 options are exercisable at a weighted average exercise price of $6.03.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995 respectively: risk-free
interest rates of 6.18%, 6.82% and 6.53%; 0% expected dividend yields; expected
lives of 8.5 years for1997, 1996 and 1995; expected volatility of 65.00%, 56.02%
and 55.70%.
F-17
(9) Related Party Transactions
In March 1995, the Company issued 8,473 shares of common stock in satisfaction
of outstanding indebtedness in the amount of $101,680 to its Chief Executive
Officer and significant stockholder. This individual was an unsecured creditor
under the Plan and elected to take shares of common stock as payment of such
indebtedness as provided for under the Plan.
(10) Profit Sharing Plan
The Company adopted a Profit Sharing Plan (the "PSP") for the benefit of their
employees. Under the PSP, all employees who have reached the age 20 1/2 and who
have completed at least six months of service with the Company are eligible to
participate. The PSP allows participants to make contributions to the PSP from
their compensation. The Company, at its option, may make additional
contributions to the PSP on behalf of the participants. Under the PSP,
participants are fully vested in their own contributions. Participants become
100 percent vested in any contributions made by the Company after seven years of
service or upon reaching age 65. The Company did not make or accrue any
contributions to the PSP during 1997, 1996, and 1995.
F-18
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its
behalf by the undersigned thereto duly authorized.
PST Vans, Inc.
Date: March __, 1998
By: /s/ Kenneth R. Norton
-----------------------------
Kenneth R. Norton
Chief Executive Officer
Date: March __, 1998
By: /s/ Neil R. Vos
-----------------------------
Neil R. Vos
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PST Vans, Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements for each of the three years in the period
ended December 31, 1997 of PST Vans, Inc. (a Utah corporation) included in this
Annual Report on Form 10-K, and have issued our report thereon dated February
11, 1998 (except with respect to matters discussed in the first paragraph of
Note 4 as to which the date is March 31, 1998). Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Schedule II is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
February 11, 1998
S-1
PST VANS, INC.
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(in thousands)
Additions
-----------------------------
Balance at Charged to Charged Balance
Beginning Costs and to other At End
Description of Period Expenses Accounts(1) Deductions(2) Of Period
----------- --------- -------- ----------- ------------- ---------
For the year ended December 31, 1997:
Allowance for doubtful accounts $ 806 $ 937 $ --- $ ( 835) $ 908
=============== ============= ========== ============ ===========
For the year ended December 31, 1996:
Allowance for doubtful accounts $ 784 $ 1,427 $ --- $ (1,405) $ 806
=============== ============= ========== ============ ===========
For the year ended December 31, 1995:
Allowance for doubtful accounts $ 1,579 $ 1,098 $ --- $ (1,893) $ 784
=============== ============= ========== ============ ===========
(1) Recoveries on accounts written off.
(2) Accounts written off.
S-2