SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
____________________
Date of Report (Date of earliest event reported): AUGUST 28, 1998
U.S. XPRESS ENTERPRISES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 0-24806 62-1378182
- -------------- --------------------- -------------------
(State of (Commission File No.) (IRS Employer
incorporation) Identification No.)
2931 SOUTH MARKET STREET, CHATTANOOGA, TENNESSEE 37410
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(423) 697-7377
----------------------------------------------------
(Registrant's telephone number, including area code)
AMENDMENT NO.1
The undersigned Registrant hereby amends Item 7 of its Current Report on Form
8-K dated September 14, 1998 and files such amended Item 7 herewith.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------ ------------------------------------
On August 28, 1998, U.S. Xpress Enterprises, Inc., a Nevada
corporation ("Enterprises"), completed the acquisition of PST Vans, Inc., a Utah
corporation ("PST"), pursuant to the Agreement and Plan of Merger dated as of
July 7, 1998 (the "Merger Agreement") by and among Enterprises, PST Acquisition
Corp., a Nevada corporation and a wholly owned subsidiary of Enterprises
("Merger Sub"), and PST. The acquisition was accomplished by means of a merger
of PST with and into Merger Sub (the "Merger"). As a result of the Merger, PST
became a wholly owned subsidiary of, and will be operated by existing management
of, Enterprises.
Holders of common stock of PST, par value $0.001 per share ("PST
Common Stock"), will be entitled to receive in exchange for each share of PST
Common Stock (i) 0.2381 shares of the common stock of Enterprises, par value
$0.01 per share ("Enterprises Common Stock") plus (ii) $2.71 in cash (the
"Merger Consideration").
The total consideration to be paid by Enterprises to the former PST
stockholders will consist of up to 1,100,000 shares of Enterprises Common Stock
and $12,500,000 in cash. The cash portion of the purchase price was financed
with the proceeds from an existing credit facility arranged through a syndicate
of banks and cash on hand at Enterprises.
BankBoston, N.A. will serve as the exchange agent (the "Exchange
Agent") for payment and issuance of the Merger Consideration. As soon as
reasonably practicable, the Exchange Agent will mail or deliver a letter of
transmittal to each person who was a holder of record of PST Common Stock at the
effective time of the Merger. The letter of transmittal will contain
instructions for surrendering certificates formerly representing shares of PST
Common Stock in exchange for the cash and shares of Enterprises Common Stock
that such holder has a right to receive.
The foregoing description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached hereto as Exhibit 2 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- ------ ---------------------------------
(a) Financial Statements of Business Acquired:
Report of independent public accountants
Balance Sheets as of June 30, 1998 (unaudited) and December 31,
1997 and 1996
Statements of Operations for the six month periods ended June 30, 1998
and 1997 (unaudited) and the years ended December 31, 1997, 1996 and
1995
Statements of Stockholders' Equity for the six month period ended
June 30, 1998 (unaudited) and the years ended December 31, 1997,
1996 and 1995
Statements of Cash Flows for the six month periods ended June 30,
1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995
Notes to Financial Statements
(b) Pro Forma Financial Information:
Pro forma condensed balance sheet as of June 30, 1998
Pro forma statements of operations for the year ended December 31,
1997 and the six months ended June 30, 1998
Notes to pro forma financial statements
2
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 Note 11 and the
first paragraph of Note 4 as to which
the date is July 13, 1998.)
3
PST VANS, INC.
BALANCE SHEETS
DECEMBER 31,
JUNE 30, -------------------------
1998 1997 1996
------------ ------------ -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash........................... $ 531,522 $ 1,282,255 $ 4,098,361
Receivables, net of allowance
for doubtful accounts of
$919,000, $908,000 and
$806,000, respectively........ 18,530,380 17,087,038 14,607,292
Deposits....................... 475,867 343,867 353,437
Prepaid expenses and other..... 508,056 3,097,538 3,258,669
Inventories and operating
supplies...................... 1,201,343 726,853 689,875
------------ ------------ -----------
TOTAL CURRENT ASSETS......... 21,247,168 22,537,551 23,007,634
------------ ------------ -----------
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
and amortization of $26,726,155,
$26,399,259 and $23,282,064,
respectively.................... 51,250,744 48,265,324 58,116,763
------------ ------------ -----------
GOODWILL, net of accumulated
amortization of $3,681,614,
$3,568,297 and $3,296,334,
respectively.................... 8,204,205 8,340,187 8,612,150
------------ ------------ -----------
OTHER ASSETS, net................ 306,405 332,632 523,539
------------ ------------ -----------
TOTAL ASSETS................. $ 81,008,522 $ 79,475,694 $90,260,086
============ ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Revolving line of credit....... $ 7,691,880 $ 4,762,493 $ --
Current portion of long-term
obligations................... 7,002,587 3,037,018 1,388,581
Current portion of capitalized
lease obligations............. 16,278,324 23,599,973 18,708,614
Accounts payable............... 3,346,328 7,306,459 4,140,985
Current portion of accrued
claims payable................ 2,964,494 3,990,958 5,456,316
Accrued liabilities............ 2,689,710 3,271,718 2,469,915
------------ ------------ -----------
TOTAL CURRENT LIABILITIES.... 39,973,323 45,968,619 32,164,411
------------ ------------ -----------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion.......... 901,486 1,257,429 1,429,227
------------ ------------ -----------
LONG-TERM OBLIGATIONS, net of
current portion................. 8,295,726 3,985,909 1,986,214
------------ ------------ -----------
CAPITALIZED LEASE OBLIGATIONS,
net of current portion.......... 13,661,598 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,
4,253,152, 4,239,945 and
4,217,157 shares issued,
respectively.................. 4,254 4,240 4,217
Additional paid-in capital..... 49,847,277 49,812,539 49,759,238
Accumulated deficit............ (31,675,143) (32,305,763) (27,991,216)
------------ ------------ -----------
TOTAL STOCKHOLDERS' EQUITY... 18,176,389 17,511,016 21,772,239
------------ ------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........ $ 81,008,522 $ 79,475,694 $90,260,086
============ ============ ===========
4
PST VANS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ----------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ ------------
(UNAUDITED)
REVENUES................ $70,880,355 $69,836,519 $143,737,430 $147,418,904 $164,794,366
----------- ----------- ------------ ------------ ------------
COSTS AND EXPENSES:
Salaries, wages and
benefits............. 19,624,992 21,500,462 44,360,224 43,847,942 45,208,090
Purchased transporta-
tion................. 17,424,498 12,850,590 25,578,176 32,393,331 41,280,895
Fuel and fuel taxes... 8,575,997 10,894,659 22,532,582 20,555,431 21,245,011
Revenue equipment
lease expense........ 1,218,907 3,586,087 7,576,456 8,021,676 12,224,340
Maintenance........... 5,342,102 3,820,623 8,662,947 7,491,155 8,822,454
Insurance and claims.. 4,563,277 5,034,696 11,384,315 11,942,008 9,315,173
General supplies and
expenses............. 3,151,865 2,703,089 5,930,058 5,558,052 5,995,821
Taxes and licenses.... 1,410,276 1,419,946 2,775,614 3,309,478 3,445,040
Communications and
utilities............ 809,471 1,522,326 2,801,757 3,429,699 3,561,698
Depreciation and amor-
tization............. 5,659,123 6,161,538 11,910,563 13,174,606 8,803,585
(Gain) loss on sale of
equipment............ (59,954) (30,361) 12,875 (1,613,842) (150,940)
Amortization of good-
will................. 135,983 135,981 271,963 271,963 271,963
----------- ----------- ------------ ------------ ------------
Total Operating Ex-
penses............. 67,856,537 69,599,636 143,797,530 148,381,499 160,023,130
----------- ----------- ------------ ------------ ------------
OPERATING INCOME
(LOSS)................. 3,023,818 236,883 (60,100) (962,595) 4,771,236
----------- ----------- ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense...... (2,399,123) (2,203,878) (4,359,888) (5,080,202) (4,283,463)
Other, net............ 30,925 41,649 105,441 182,032 147,408
----------- ----------- ------------ ------------ ------------
(2,368,198) (2,162,229) (4,254,447) (4,898,170) (4,136,055)
----------- ----------- ------------ ------------ ------------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES.................. 655,620 (1,925,346) (4,314,547) (5,860,765) 635,181
PROVISION FOR INCOME
TAXES.................. (25,000) -- -- -- 251,532
----------- ----------- ------------ ------------ ------------
NET INCOME (LOSS)....... $ 630,620 $(1,925,346) $ (4,314,547) $ (5,860,765) $ 383,649
=========== =========== ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE--BASIC.... $ 0.15 $ (0.46) $ (1.02) $ (1.39) $ 0.10
=========== =========== ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE--DILUTED.. $ 0.14 $ (0.46) $ (1.02) $ (1.39) $ 0.10
=========== =========== ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING--
BASIC.................. 4,253,152 4,226,880 4,233,467 4,212,211 3,877,528
=========== =========== ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING--
DILUTED................ 4,360,602 4,226,880 4,233,467 4,212,211 3,949,526
=========== =========== ============ ============ ============
5
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 offer-
ing, net.................... 1,600 21,633,753 -- 21,635,353
Issuance of 9,409 shares of
common stock as satisfaction
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 com-
mon 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 22,788 shares of com-
mon 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
Sale of 13,582 shares of com-
mon stock to employees (un-
audited).................... 14 34,739 -- 34,753
Net income (unaudited)....... -- -- 630,620 630,620
------ ----------- ------------ -----------
BALANCE, June 30, 1998 (unau-
dited)....................... $4,254 $49,847,278 $(31,675,143) $18,176,389
====== =========== ============ ===========
6
PST VANS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ -----------
(UNAUDITED)
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net (loss) income...... $ 630,620 $(1,925,346) $ (4,314,547) $ (5,860,765) $ 383,649
----------- ----------- ------------ ------------ -----------
Adjustments to
reconcile net (loss)
income to net cash
provided by operating
activities--
Depreciation and amor-
tization.............. 5,659,123 6,161,538 11,910,563 13,174,605 8,803,585
Provision for losses on
accounts receivable... 73,243 235,652 936,697 1,280,634 1,097,890
Amortization of good-
will.................. 135,983 135,981 271,963 271,963 271,963
(Gain) loss on sale of
equipment............. (59,954) (30,361) 12,875 (1,613,842) (150,940)
(Increase) decrease in
receivables........... (1,516,585) (560,036) (3,416,443) 347,648 (1,722,103)
Decrease in deposits... (132,000) 32,955 9,570 632,515 2,876,942
(Increase) decrease in
prepaid expenses and
other................. 1,896,195 930,025 161,132 830,326 (1,361,156)
(Increase) decrease in
inventories and oper-
ating supplies........ 218,797 36,155 (36,978) (47,145) (77,773)
Decrease in other as-
sets, net............. 26,227 236,792 190,907 17,823 2,265,931
Increase (decrease) in
accounts payable...... (3,960,131) (476,804) 3,165,474 (368,849) (285,119)
Increase (decrease) in
accrued claims pay-
able.................. (1,382,407) (98,552) (1,637,156) 1,148,468 717,283
Increase (decrease) in
accrued liabilities... (582,007) 236,344 801,808 (786,981) (1,525,566)
----------- ----------- ------------ ------------ -----------
Total adjustments..... 376,484 6,839,689 12,370,412 14,887,165 10,910,937
----------- ----------- ------------ ------------ -----------
Net cash flows pro-
vided by operating
activities........... 1,007,104 4,914,343 8,055,865 9,026,400 11,294,586
----------- ----------- ------------ ------------ -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
equipment............. 203,388 1,400,038 3,194,556 4,323,495 1,163,436
Acquisition of property
and equipment......... (8,787,978) (2,367,673) (5,349,216) (988,590) (9,480,079)
----------- ----------- ------------ ------------ -----------
Net cash flows
provided by (used in)
investing
activities........... (8,584,590) (967,635) (2,154,660) 3,334,905 (8,316,643)
----------- ----------- ------------ ------------ -----------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Proceeds from revolving
line of credit, net... 2,929,387 1,661,634 4,762,493 -- --
Principal payments on
capitalized lease ob-
ligations............. (4,412,772) (6,413,176) (11,568,432) (10,774,663) (6,478,232)
Principal payments on
long-term obliga-
tions................. (2,481,198) (1,276,953) (2,039,296) (1,766,232) (2,234,107)
Proceeds from sale of
common stock to em-
ployees............... -- -- 53,324 27,970 --
Proceeds from sale of
common stock, net..... 34,752 27,660 -- -- 21,635,353
Purchase of accounts
receivable from fac-
tor................... -- -- -- -- (9,063,711)
Decrease in advanced
from factor........... -- -- -- -- (5,336,289)
Proceeds from long-term
obligations........... 10,756,584 74,601 74,600 -- 1,983,824
----------- ----------- ------------ ------------ -----------
Net cash flows (used
in) provided by fi-
nancing activities... 6,826,753 (5,926,234) (8,717,311) (12,512,925) 506,838
----------- ----------- ------------ ------------ -----------
NET INCREASE (DECREASE)
IN CASH................ (750,733) (1,979,526) (2,816,106) (151,620) 3,484,781
----------- ----------- ------------ ------------ -----------
CASH AT BEGINNING OF PE-
RIOD................... 1,282,255 4,098,361 4,098,361 4,249,981 765,200
----------- ----------- ------------ ------------ -----------
CASH AT END OF PERIOD... $ 531,522 $ 2,118,835 $ 1,282,255 $ 4,098,361 $ 4,249,981
=========== =========== ============ ============ ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMA-
TION:
Cash paid for --
Interest............... $ 2,418,024 $ 2,261,248 $ 4,438,378 $ 5,115,442 $ 4,106,793
=========== =========== ============ ============ ===========
Income taxes........... $ 17,840 $ 17,434 $ 31,040 $ 90,659 $ 1,691,615
=========== =========== ============ ============ ===========
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired
through capitalized
lease obligations..... $ -- $ -- $ -- $ -- $51,475,706
=========== =========== ============ ============ ===========
7
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(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.
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.
8
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
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.
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
9
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
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 sheets.
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 equivalents 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
----------------- ------------- ----------
Six Months Ended June 30, 1998
Basic EPS........................ $ 630,620 4,253,152 $ 0.15
Effect of Stock Options.......... -- 107,450 --
----------- --------- ------
Diluted EPS...................... $ 630,620 4,360,602 $ 0.14
=========== ========= ======
Six Months Ended June 30, 1997
Basic EPS........................ $(1,925,346) 4,226,880 $(0.46)
Effect of Stock Options.......... -- -- --
----------- --------- ------
Diluted EPS...................... $(1,925,346) 4,226,880 $(0.46)
=========== ========= ======
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 $ 0.10
Effect of Stock Options.......... -- 61,998 --
----------- --------- ------
Diluted EPS...................... $ 383,649 3,949,526 $ 0.10
=========== ========= ======
10
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
As of June 30, 1998 and 1997 and December 31, 1997, 1996, and 1995, there
were outstanding options to purchase 49,400, 111,000, 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. As of July 13, 1998, the
Company is in default under the Agreement; however, the bank has allowed the
letters of credit to remain outstanding while the Company continues
negotiations with third parties to replace the facility.
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.
11
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(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 3.80 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 9.50
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 8.00 to 8.05 percent, payable in
monthly installments ranging from $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 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
==========
12
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(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 tax liability:
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
========== ========== ========
13
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
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 1.0 11.6
Change in valuation allowance......................... 35.4 36.8 (28.6)
----- ----- -----
Effective income tax rate............................. --% --% 39.6%
===== ===== =====
The Company has general business credit and alternative minimum tax credit
carryforwards 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 carryforward at December 31, 1997. The net operating loss
carryforward 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
14
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
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
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.
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. These arrangements are 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.
15
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(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.
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)
16
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
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 grant-
ed..................... $ 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 pro rata 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 for 1997, 1996 and 1995; expected volatility of
65.00%, 56.02% and 55.70%.
(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.
(11) SUBSEQUENT EVENT
On July 7, 1998 PST entered into an Agreement and Plan of Merger with U.S.
Xpress Enterprises, Inc. ("Enterprises") pursuant to which PST will be merged
with and into a wholly owned subsidiary of Enterprises. Subject to stockholder
approval, each outstanding share of PST common stock will be converted into
the right to receive 0.2381 shares of Enterprises Class A common stock plus
$2.71 in cash.
17
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed financial statements (the "Pro Forma
Financial Statements") include the unaudited pro forma condensed balance sheet
as of June 30, 1998 (the "Pro Forma Balance Sheet") and the unaudited pro forma
condensed statements of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998 (the "Pro Forma Statements of Operations").
The Pro Forma Statements of Operations give effect to the Merger as if it had
been consummated on January 1, 1997. The Pro Forma Balance Sheet gives effect to
the Merger as if it had been consummated on June 30, 1998.
The Merger will be accounted for using the purchase method of accounting. The
aggregate purchase price for the Merger will be allocated to the tangible and
intangible assets and liabilities acquired based upon their respective fair
values.
The Pro Forma Financial Statements are based on the historical financial
statements of Enterprises and PST and the assumptions and adjustments described
in the accompanying notes. The Pro Forma Statement of Operations for the year
ended December 31, 1997 has also been adjusted to include the results of Victory
Express, Inc. ("Victory"), which was acquired by Enterprises in January 1998, as
if that acquisition had occurred on January 1, 1997. The Pro Forma Statement of
Operations for the six months ended June 30, 1998 has not been adjusted to
reflect the Victory acquisition as the results of Victory prior to its
acquisition are not material to the pro forma results of operations for that
period. The historical financial statements of Victory are included in Amendment
No. 1 on Form 8-K/A (dated April 14, 1998) to Enterprises' Form 8-K dated
January 29, 1998.
The Pro Forma Financial Statements do not purport to represent what the
company's results of operations or financial position actually would have been
had the Merger described herein in fact been consummated on the dates indicated
or to project the results of operations of financial positions for any future
period or date. The Pro Forma Financial Statements are based upon currently
available information and certain assumptions that management believes to be
reasonable and should be read in conjunction with the historical financial
statements and the accompanying notes thereto contained in the annual, quarterly
and other reports filed by Enterprises and PST with the SEC and those included
elsewhere in this filing or incorporated herein by reference.
18
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
June 30, 1998
Pro Forma
Enterprises PST (a) Adjustments Pro Forma
----------- --------- ------------- ---------
(dollars in thousands)
ASSETS
- -------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,607 532 (2,000)(b) $ 1,655
1,516 (d)
Customer receivables, net of allowance 70,796 18,530 89,326
Other receivables 5,021 - 5,021
Notes receivables
Prepaid insurance and licenses 4,350 1,201 5,551
Operating supplies 4,767 508 5,275
Deferred income taxes 3,717 - 1,400 (c) 5,117
Other current assets 2,532 476 3,008
-------- -------- -------- --------
Total current assets 92,790 21,247 916 114,953
-------- -------- -------- --------
PROPERTY AND EQUIPMENT, net 186,692 51,251 237,943
-------- -------- -------- --------
OTHER ASSETS:
Goodwill, net 38,798 8,204 (8,204)(f) 54,278
15,480 (h)
Other 6,283 307 6,590
-------- -------- -------- --------
Total other assets 45,081 8,511 7,276 60,868
-------- -------- -------- --------
TOTAL ASSETS $324,563 $ 81,009 $ 8,192 $413,764
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 11,619 3,346 14,965
Accrued wages and benefits 7,068 - 7,068
Claims and insurance accruals 4,781 2,964 7,745
Other accrued liabilities 4,735 2,690 7,425
Current maturities of long-term debt 263 30,973 (30,973)(g) 263
-------- -------- -------- --------
Total current liabilities 28,466 39,973 (30,973) 37,466
-------- -------- -------- --------
LONG-TERM DEBT, net of current maturities 128,655 21,958 12,500 (b) 194,086
30,973 (g)
-------- -------- -------- --------
DEFERRED INCOME TAXES 27,967 - (4,700)(c) 23,267
-------- -------- -------- --------
OTHER LONG-TERM LIABILITIES 1,634 902 2,536
-------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock 150 4 11 (b) 161
(4)(e)
Additional paid-in capital 86,324 49,847 18,557 (b) 104,881
1,516 (d)
(51,363)(e)
Retained earnings 51,600 (31,675) 31,675 (e) 51,600
Notes receivable from stockholders (233) - (233)
-------- -------- -------- --------
Total stockholders' equity 137,841 18,176 392 156,409
-------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $324,563 $ 81,009 $ 8,192 $413,764
======== ======== ======== ========
19
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
PRO FORMA PRO FORMA
ENTERPRISES(9) VICTORY(1) ADJUSTMENTS PRO FORMA PST ADJUSTMENTS PRO FORMA
-------------- ---------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING REVENUE................... $433,835 $65,251 $ $499,086 $143,737 $ $642,823
-------- ------- ------- -------- -------- ------ --------
OPERATING EXPENSES:
Salaries, Wages and Benefits..... 177,055 28,015 (588)(4) 204,482 44,360 248,842
Fuel and Fuel Taxes.............. 68,740 9,482 78,222 22,533 100,755
Vehicle Rents.................... 28,031 3,060 31,091 7,576 38,667
Depreciation & Amortization...... 11,584 7,592 725 (2) 19,901 12,183 127 (6) 32,211
Purchased Transportation......... 34,351 -- 34,351 25,578 59,929
Operating Expense & Supplies..... 27,872 4,633 32,505 8,663 41,168
Insurance Premiums & Claims...... 14,395 2,467 16,862 11,384 28,246
Operating Taxes & Licenses....... 6,734 1,324 8,058 2,776 10,834
Communications & Utilities....... 7,192 888 8,080 2,802 10,882
General & Other Operating........ 26,772 2,652 29,424 5,943 35,367
------- ------- ------- ------- -------- ------ --------
Total Operating Expenses...... 402,726 60,113 137 462,976 143,798 127 606,901
------- ------- ------- ------- -------- ------ --------
INCOME (LOSS) FROM OPERATIONS....... 31,109 5,138 (137) 36,110 (61) (127) 35,922
------- ------- ------- ------- -------- ------ --------
OTHER INCOME AND (EXPENSES):
Interest Expense................. (5,552) (787) (3,640)(3) (9,979) (4,360) 215 (7) (14,124)
Other Income (Expense)........... 35 6 41 105 146
------- ------- ------- ------- -------- ------ --------
(5,517) (781) (3,640) (9,938) (4,255) 215 (13,978)
Income (Loss) Before Provision For
Income Taxes....................... 25,592 4,357 (3,777) 26,172 (4,316) 88 21,944
(Provision) Benefit for Income
Taxes.............................. (10,230) (1,854) 1,401 (5) (10,683) -- 1,558 (8) (9,125)
------- ------- ------- -------- -------- ------ --------
NET INCOME (LOSS)................... $ 15,362 $ 2,503 $(2,376) $ 15,489 $ (4,316) $1,646 $ 12,819
======== ======= ======= ======== ======== ====== ========
Other financial data:
Earnings per share - basic......... $ 1.17 $ 0.90
Weighted average number of shares
outstanding - basic............. 13,126 14,226
Earnings per share - diluted....... $ 1.16 $ 0.89
Weighted average number of shares
outstanding - diluted........... 13,236 14,336
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
Pro Forma
Enterprises PST Adjustments Pro Forma
----------- -------- ----------- ---------
(dollars in thousands, except per share data)
OPERATING REVENUE $262,343 $70,880 $ $333,223
OPERATING EXPENSES:
Salaries, Wages and Benefits 108,170 19,625 127,795
Fuel and Fuel Taxes 37,131 8,576 45,707
Vehicle Rents 15,833 1,219 17,052
Depreciation & Amortization 11,184 5,795 64(6) 17,043
Purchased Transportation 23,662 17,425 41,087
Operating Expense & Supplies 16,318 5,342 21,660
Insurance Premiums & Claims 8,840 4,563 13,403
Operating Taxes & Licenses 4,312 1,410 5,722
Communications & Utilities 4,169 809 4,978
General & Other Operating 13,870 3,092 16,962
------- ------ ------ -------
Total Operating Expenses 243,489 67,856 64 311,409
------- ------ ------ -------
INCOME FROM OPERATIONS 18,854 3,024 (64) 21,814
------- ------ ------ -------
OTHER INCOME AND (EXPENSES):
Interest Expense (3,962) (2,399) 108(7) (6,253)
Other Income (Expense) 50 31 81
------- ------ ------ -------
(3,912) (2,368) 108 (6,172)
------- ------ ------ -------
Income Before Provision For
Income Taxes 14,942 656 44 15,642
Provision for Income Taxes (5,976) (25) (231)(8) (6,232)
------- ------ ------ -------
NET INCOME $ 8,966 $ 631 ($187) $ 9,410
======== ======= ====== ========
Earnings per share - basic $ 0.60 $ 0.58
Weighted average number of shares
outstanding - basic 15,043 16,143
Earnings per share - diluted $ 0.59 $ 0.58
Weighted average number of shares
outstanding - diluted 15,155 16,255
21
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) Certain historical balances for PST have been reclassified or condensed for
purposes of this pro forma presentation.
(b) Reflects common stock issued and cash paid to acquire PST:
Common stock to be issued (1,100,000 shares at $16.88
per share, the closing price of Enterprises Class A
Common Stock at July 7, 1998)................................. $18,568
Cash to be paid:
Cash portion of purchase price (financed through
Enterprises' long-term credit facility).................. 12,500
Estimated acquisition and transaction expenses............ 2,000
-------
$33,068
=======
(c) To reverse PST's valuation allowance on deferred tax assets of
approximately $6,100, which are anticipated to be realized.
(d) Represents the expected proceeds of $1,516 from the exercise of the PST
stock options at the average price per share of $4.32 simultaneous with
change of control.
(e) Reflects the elimination of PST's equity balances, including the expected
proceeds from the stock options described in (d).
(f) To write off PST's historical goodwill.
(g) To reflect the refinancing of PST's debt through Enterprises' long-term
credit facility.
(h) The excess of cost over fair value of the net tangible assets acquired is
computed as follows:
Purchase price from (b) above............................... $33,068
-------
Historical net book value of PST............................ 18,176
Adjustments to historical value:
Write off of goodwill..................................... (8,204)
Reversal of PST valuation allowance on deferred tax assets,
which are expected to be realized........................ 6,100
Expected proceeds from stock options described in (d)..... 1,516
-------
17,588
-------
Excess of cost over fair value of net assets acquired....... $15,480
=======
22
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
VICTORY
(1) Reflects the results of operations of Victory Express for the year ended
December 31, 1997.
(2) To record the amortization of goodwill related to the acquisition and
adjust depreciation.
(3) To record the interest expense related to the debt incurred to finance
the acquisition.
(4) To record reduction in salary of majority shareholder of Victory Express
to $200.
(5) To record tax effect of Pro Forma Adjustments, (2) through (4) above.
PST
(6) Reflects the incremental amortization of goodwill related to the Merger
(7) Reflects the following:
YEAR ENDED SIX MONTHS
12/31/97 ENDED 6/30/98
---------- -------------
Savings from refinancing of PST debt at Enter-
prises' borrowing rates....................... $(1,073) $(538)
Additional incremental interest resulting from
borrowing of $12,500 to purchase PST.......... 858 430
------- -----
$ (215) $(108)
======= =====
(8) Reflects the net additional tax expense (benefit) as the result of the
Merger at an effective tax rate of 38% for the year ended December 31,
1997 and the six months ended June 30, 1998.
ENTERPRISES
(9) Effective December 31, 1997, Enterprises changed its year-end to
December 31 from March 31. As a result, its period-ending December 31,
1997 was a nine month period. For purposes of the Pro Forma Statement of
Operations for the year ended December 31, 1997, Enterprises has used
the results of operations for the twelve month period ended December 31,
1997.
23
(c) Exhibits:
Exhibit No. Description
- ----------- -----------
2* Agreement and Plan of Merger dated as of
July 7, 1998 among U.S. Xpress Enterprises,
Inc., PST Acquisition Corp. and PST Vans,
Inc.
23 Consent of independent public accountants
99** Press Release dated August 28, 1998
* Incorporated by reference to the Registration Statement of U.S. Xpress
Enterprises, Inc. on Form S-4 as filed on July 30, 1998 (Registration
No. 333-59377).
** Incorporated by reference from exhibit with the same number to the
Registrant's Current Report on Form 8-K, as filed with the Commission on
September 14, 1998.
24
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. XPRESS ENTERPRISES, INC.
September 18, 1998 By: /s/ Ray M. Harlin
-----------------------------------
Ray M. Harlin, Executive Vice President,
Chief Financial Officer
25