SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT - AMENDED
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 22, 2001
SIMON TRANSPORTATION SERVICES INC.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Nevada 0-27208 87-0545608
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
- --------------------------------------------------------------------------------
5175 West 2100 South, West Valley City, Utah 84123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 924-7000
N/A
(Former name or former address, if changed since last report.)
ITEM 2. Acquisition or Disposition of Assets
Simon Transportation Services Inc., a Nevada corporation ("Parent"), is
the reporting company under this Form 8-K/A. On January 22, 2001, Dick Simon
Trucking, Inc., a Utah corporation and wholly-owned subsidiary of Parent
("Simon"), completed its acquisition of a portion of the trucking assets of
Westway Express, Inc., an Indiana corporation ("Westway"), pursuant to that
certain Agreement dated December 15, 2000, by and among Simon, Westway,
WesternWay Holdings Co., a Colorado corporation and the sole stockholder of
Westway ("WesternWay"), and Jerry D. McMorris ("McMorris") (the "Agreement"), as
amended January 22, 2001, by the First Amendment to the Agreement (the "First
Amendment").
Westway's headquarters are located in Commerce City, Colorado, and it
has an additional major terminal facility in Albuquerque, New Mexico. During
2000, Westway operated approximately 375 company tractors, 76 tractors supplied
by independent contractors, and 705 53-foot temperature-controlled trailers.
Under the terms of the Agreement and First Amendment, Simon, at closing
and during the one year thereafter, will make aggregate payments to Westway of
approximately $1.7 million for Westway's services in assisting Simon in hiring
drivers, for 59 Qualcomm units, and miscellaneous assets. Simon will purchase up
to an additional 466 Qualcomm units at $1,200/unit post-closing if such units
have software upgrades and are functioning properly. Assuming 300 Qualcomm units
are upgraded and functioning properly, the total consideration would be
approximately $2.1 million. Simon refinanced with existing lessors approximately
234 tractors and 264 temperature-controlled trailers and assumed leases for
terminal facilities in Commerce City, Colorado through December 31, 2001;
Albuquerque, New Mexico through June 30, 2001; and Charlotte, North Carolina on
a month-to-month basis. The remaining tractors, trailers, terminal facilities,
and miscellaneous assets, as well as accounts receivable, were retained by
Westway.
Westway, WesternWay, and McMorris are prohibited for a period of five
years from the date of closing from competing in the interstate and/or
intrastate dry van and refrigerated transportation of freight, as well as those
brokerage, intermodal, logistics, and freight consolidation activities involving
refrigerated or dry van truckload or less-than-truckload transportation;
provided, however, McMorris has limited rights to own, operate, and dispose of
SLT Express, Inc. No consideration separate from the Agreement itself is
allocated to the noncompetition undertakings.
The assets acquired from Westway were used primarily for the interstate
temperature-controlled transportation of freight, and Simon intends to integrate
the acquired assets into its operations. Simon is a truckload carrier providing
nationwide, predominantly temperature-controlled transportation services for
major shippers.
Simon funded the acquisition consideration paid at closing, and will
fund the deferred payments, with working capital and borrowings under its
existing credit line with U.S. Bank National Association. The consideration
exchanged was determined through arms'-length negotiations. There is no material
relationship between Westway or its affiliates and Parent, Simon, or their
affiliates, any director or officer of Parent, or any associate of any such
director or officer.
The foregoing description does not purport to be complete and is
qualified in its entirety by reference to the Agreement and the First Amendment,
which are attached hereto as Exhibits 2.1 and 2.2, respectively, and are
incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(a) Financial Statements of Westway:
Report of Independent Accountants
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the years ended December 31, 1999 and 1998
Statements of Stockholders' Equity for the years ended December 31,
1999 and 1998
Statements of Cash Flows for the years ended December 31, 1999 and 1998
Notes to the Financial Statements
Unaudited Balance Sheet as of September 30, 2000
Unaudited Statements of Operations for the nine month periods ended
September 30, 2000 and 1999
Unaudited Statements of Cash Flows for the nine month periods ended
September 30, 2000 and 1999
Notes to the Unaudited Financial Statements
(b) Pro Forma Financial Information:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2000
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended September 30, 2000
Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations
Report of Independent Accountants
To the Board of Directors and Shareholder of
Westway Express, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, of shareholder's equity and of cash flows present fairly, in all
material respects, the financial position of Westway Express, Inc. (the
"Company") as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the years then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express as opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company incurred a net loss and negative operating cash flow in
1999. In addition, at December 31, 1999, the Company was in violation of certain
of its debt covenants. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As explained in Note 11, on January 22, 2001, Dick Simon Trucking, Inc.
("Simon") acquired a portion of the trucking assets of the Company, primarily
mobile communication equipment and miscellaneous assets. Simon entered into a
lease for the terminal owned by the Company, refinanced Company leases for
tractors and trailers, and assumed leases for terminals. Simon will also pay the
Company for assisting Simon in hiring drivers. The transaction included a five
year non-compete agreement.
/s/ PricewaterhouseCoopers LLP
January 12, 2001, except for Note 11, as to which the date is January 22, 2001
Denver, Colorado
Westway Express, Inc.
Balance Sheets
December 31, 1999 and 1998
Assets 1999 1998
Current Assets
Cash and cash equivalents $ 262,046 $ 9,933
Accounts receivable, net of allowance for doubtful
accounts of $125,163 and $63,108 in 1999 and 1998,
respectively 9,011,981 7,534,064
Prepaid expenses and other current assets 2,074,763 1,898,032
Receivable from related parties 768,706 48,700
------------------- ----------------
Total current assets 12,117,496 9,490,729
Property and equipment, at cost, net of accumulated
depreciation and amortization 1,654,222 1,925,456
Other assets 145,518 71,469
------------------ -----------------
$13,917,236 $11,487,654
================== =================
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable $ 3,257,797 $ 2,426,678
Accrued wages and bonuses 618,672 678,741
Accrued taxes and other expenses 937,135 909,999
Current portion of accrued workers' compensation charge 365,345 --
Line of credit 6,661,553 3,285,272
Current portion of long-term debt 87,825 123,768
Payable to Predecessor Company 168,557 --
------------------ -----------------
Total current liabilities 12,096,884 7,424,458
Long-term debt -- 87,825
Accrued workers' compensation charge 1,731,050 --
------------------ -----------------
Total liabilities 13,827,934 7,512,283
Commitments and contingencies (Note 9)
Shareholder's equity:
Common stock, $1.00 par value, 1,000,000 shares
authorized, 625,000 shares issued and outstanding 625,000 625,000
Retained (deficit) earnings (535,698) 3,350,371
------------------ -----------------
Total shareholder's equity 89,302 3,975,371
------------------ -----------------
$13,917,236 $11,487,654
================== =================
The accompanying notes are an integral part of these financial statements.
Westway Express Inc.
Statements of Operations
For the years ended December 31, 1999 and 1998
1999 1998
Operating revenues $ 69,310,921 $ 68,904,299
-------------------- ------------------
Operating expenses:
Salaries and wages 15,489,446 14,988,880
Employee benefits 2,200,176 2,358,345
Operating supplies 18,959,328 17,929,789
Revenue equipment rents 23,950,988 22,954,437
General supplies 2,556,937 2,602,601
Depreciation and amortization 397,349 376,456
Accrued workers' compensation charge 2,096,395 --
Other 5,651,684 5,515,870
-------------------- ------------------
71,302,303 66,726,378
-------------------- ------------------
Operating income (1,991,382) 2,177,921
Interest expense 551,171 400,225
-------------------- ------------------
Net (loss) income $ (2,542,553) $ 1,777,696
==================== ==================
The accompanying notes are an integral part of these financial statements.
Westway Express, Inc.
Statement of Shareholder's Equity
For the years ended December 31, 1999 and 1998
Retained Total
Common Earnings Shareholder's
Stock (Deficit) Equity
Balance at December 31, 1997 $ 625,000 $ 3,775,248 $ 4,400,248
Net income for the year -- 1,777,696 1,777,696
Distributions to Parent Company -- (2,202,573) (2,202,573)
---------------------- ---------------------- ----------------------
Balance at December 31, 1998 625,000 3,350,371 3,975,371
Net loss for the year -- (2,542,553) (2,542,553)
Distributions to Parent Company -- (1,343,516) (1,343,516)
---------------------- ---------------------- ----------------------
Balance at December 31, 1999 $ 625,000 $ (535,698) $ 89,302
====================== ====================== ======================
The accompanying notes are an integral part of these financial statements.
Westway Express, Inc.
Statements of Cash Flows
For the years ended December 31, 1999 and 1998
1999 1998
Operating activities:
Net (loss) income $(2,542,553) $ 1,777,696
Adjustments to reconcile net (loss) income to net cash
used in operating activities
Depreciation and amortization 397,349 376,456
Net gain on sale of property and equipment (17,794) (856)
Accrued workers' compensation charge 2,096,395 --
Changes in operating assets and liabilities:
Accounts receivable (1,477,917) 164,784
Receivable from related parties (720,006) (1,699,738)
Prepaid expenses and other current assets (176,731) 16,877
Other assets (74,049) 193,174
Accounts payable (35,536) (1,360,341)
Accrued wages and bonuses (60,069) (106,890)
Accrued taxes and other expenses 27,136 (527,746)
Payable to Predecessor Company 168,557 --
-------------------- ------------------
Net cash used in operating activities (2,415,218) (1,166,584)
-------------------- ------------------
Investing activities:
Acquisition of property and equipment (153,321) (337,412)
Proceeds from sale of property and equipment 45,000 13,500
-------------------- ------------------
Net cash used in investing activities (108,321) (323,912)
-------------------- ------------------
Financing activities:
Net proceeds from line of credit 3,376,281 885,244
Bank overdrafts 866,655 498,493
Proceeds from long-term debt -- 250,000
Repayment of debt (123,768) (38,407)
Distributions to Parent Company (1,343,516) (545,000)
-------------------- ------------------
Net cash provided by financing activities 2,775,652 1,050,330
-------------------- ------------------
Increase (decrease) in cash 252,113 (440,166)
Cash and cash equivalents, beginning of year 9,933 450,099
-------------------- ------------------
Cash and cash equivalents, end of year $ 262,046 $ 9,933
==================== ==================
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 551,171 $ 394,974
==================== ==================
Supplemental Disclosure of Noncash Activities
Distribution of receivables to Parent Company $ -- $ 1,657,573
==================== ==================
The accompanying notes are an integral part of these financial statements.
Westway Express, Inc.
Notes to Financial Statements
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Westway Express, Inc. (the "Company") operates as an Interstate Class I carrier
of both temperature controlled and general commodities by truck, primarily
serving customers west of the Mississippi River. The Company was sold in October
1997 to WesternWay Holdings Co. ("WesternWay") by a company ("Predecessor
Company") whose majority shareholder wholly owns WesternWay. Because WesternWay
and the Predecessor Company were under common control, the Company's historical
basis of accounting has been retained.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Property and Equipment
The Company depreciates property and equipment and amortizes leasehold
improvements over their estimated useful lives to estimated salvage value using
the straight-line method. The cost of normal maintenance and repairs is charged
to operating expenses as incurred. Material expenditures which increase the life
of an asset are capitalized and depreciated over the estimated remaining useful
life of the asset. Upon retirement or disposition of assets, related gains or
loses are recognized in operations.
Impairment of Long-lived Assets
The Company periodically evaluates the recoverability of its long-lived assets
utilizing qualitative factors. At such time as an impairment in value is
identified, the impairment is quantitatively measured using a discounted cash
flow methodology and charged to expense.
Rental Expense
When it is economically advantageous to do so, the Company will purchase, then
sell trailers that it currently leases by exercising the purchase option
contained in the lease. Gains from this activity are recorded as a reduction in
rent expense. The Company recorded a gain of approximately $110,000 in 1998
related to the purchase and sale o f leased trailers. There were no associated
gains in 1999.
Income Taxes
As a subsidiary of an S Corporation which has elected for its subsidiaries to be
treated as Qualified Subchapter S Subsidiaries ("QSSS"), the taxable income
(loss) of the Company is passed through to the shareholder of WesternWay.
Accordingly, no provision for income taxes has been included in the financial
statements.
Revenue Recognition
Operating revenues and related carrier expenses are allocated pro rata between
reporting periods based on relative transit time.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Westway Express, Inc.
Notes to Financial Statements
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of cash and cash equivalents and accounts
receivable. As of December 31, 1999, the Company had $262,046 in cash in five
accounts in banks located in New Mexico and Colorado. During 1999, approximately
40% of the Company's revenue was derived from business conducted with five
customers in various industries throughout the western United States. To date,
these concentrations of credit risk have not had a material effect on the
Company's financial position, results of operations or liquidity.
2. Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the year ended December 31,
1999 the Company incurred a net loss of $2,542,553 and used cash in operating
activities of $2,415,218. As further discussed in Note 4, the Company has a
credit facility providing for borrowings through October 2002. The credit
facility contains covenants that, among other things, require that the Company
maintain certain financial performance and liquidity levels. The Company was in
violation of certain of these covenants during the year ended December 31, 1999.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.
Management funded the Company's operations during the year ended December 31,
1999, primarily through borrowings on its line of credit. The Company is
focusing its efforts on improving cash flow from operations and has entered into
negotiations with its existing lender regarding modifying the covenants
contained in its credit facility. There can be no assurance that the Company
will be successful in modifying its debt covenants or generating sufficient
resources to assure continuation of its operations. The reported amounts of
assets and liabilities may be impacted by this uncertainty. No adjustments have
been made to the accompanying consolidated financial statements that might
result from this uncertainty.
3. Property and Equipment
Property and equipment are summarized as follows as of December 31, 1999 and
1998:
Estimated
1999 1998 Useful Life
Land $ 460,000 $ 460,000
Buildings 651,941 651,941 10 - 20 years
Leasehold improvements 1,135,850 1,111,265 5 - 7 years
Tractors 351,436 302,140 5 years
Trailers 526,739 625,689 5 - 7 years
Service equipment 144,036 141,253 3 - 5 years
Furniture and fixtures 1,572,221 1,508,148 3 - 5 years
--------- ---------
4,842,223 4,800,436
Less accumulated depreciation
and amortization (3,188,001) (2,874,980)
--------- ---------
$ 1,654,222 $ 1,925,456
========= =========
The Company had approximately $l,767,855 and $1,599,424 in property and
equipment at December 31, 1999 and 1998, respectively, that is fully depreciated
but still in use. Depreciation expense was $384,765 and $363,872 for 1999 and
1998, respectively.
Westway Express, Inc.
Notes to Financial Statements
4. Line of Credit
In October 1997, the Company entered into a credit agreement with a bank that
provides a revolving line of credit ("Line of Credit") for working capital
purposes. Interest accrues at the greater of 1% above the bank's reference rate
(8.50% at December 31, 1999) or 8.0%. Further, if the Company were to issue
letters of credit it would pay fees equal to 2.0% per annum times the aggregate
undrawn amount of such letters. The agreement provides for a borrowing base in
an amount generally equal to the lesser of 80% of eligible accounts receivable,
as defined, or an amount equal to the Company's collections with respect to
accounts for the immediately preceding 45-day period. During November 1999, the
credit agreement was amended to allow a maximum borrowing balance of $6,000,000,
however, during the period from November 22, 1999 through February 22, 2000, the
maximum borrowing balance was $7,000,000. The agreement is collateralized by
accounts receivable of the Company. At December 31, 1999, advances of $6,661,553
had been made against the Line of Credit. The Line of Credit is upon demand and
is scheduled to expire October 2002.
The agreement includes various restrictive covenants, the most restrictive of
which require the maintenance of certain financial performance and liquidity
levels and limit the Company's capacity to declare dividends or incur additional
indebtedness. The Company was in violation of these covenants as of December 31,
1999.
5. Long-Term Debt
The Company had an operating lease for communications equipment which included a
purchase option. The purchase option was at a price representing the fair value
of the equipment at the expiration of the lease term. The lease expired during
1999 and the Company borrowed $250,000 from a bank at a rate of 9.25% in order
to exercise the purchase option. Monthly payments are due on the note, which is
collateralized by the communications equipment, through August 2000. The total
amount due on the note as of December 31, 1999 and 1998 was $87,825 and
$211,593, respectively.
6. Operating Leases
The Company has long-term noncancelable operating leases on certain vehicles,
terminal buildings and equipment. The leases on certain of these terminal
buildings have renewal options for additional lease terms. In addition, certain
leases are guaranteed by WesternWay. Total minimum future rental payments under
all noncancelable operating leases having terms in excess of one year are as
follows:
Year Ending December 31:
2000 $ 9,522,765
2001 7,291,913
2002 4,460,837
2003 1,221,221
2004 748,315
---------------
$ 23,245,051
Rent expense under operating leases was $10,255,628 and $9,403,262 in
1999 and l998, respectively.
Westway Express, Inc.
Notes to Financial Statements
7. Benefit Plan
The Company administers a 401(k) Retirement Plan (the "Plan") covering qualified
employees. The Company matches 50% of the first 6% of a participant's
contributions up to a maximum of 3% of compensation, as defined by the Plan.
Company matching contributions were $108,352 and $59,065 in 1999 and 1998,
respectively.
8. Related Party Transactions
The Company rents equipment to and performs management functions on behalf of
SLT Express, Inc. ("SLT Express"), a subsidiary of WesternWay. The Company
recorded revenue of $127,449 and $120,000 for the management functions and
$86,100 and $48,700 for equipment rental in 1999 and 1998, respectively. In
addition, the Company adopted a policy in 1999 to allow SLT Express to use
Company vendors for insurance, fuel, maintenance, and other business related
functions. The Company paid these fees on behalf of SLT Express and charged SLT
Express monthly for the actual costs incurred. Insurance functions provided to
SLT Express relate to workers' compensation, group health insurance, and risk
related vehicle coverage. The premiums for workers' compensation and group
health insurance policies paid on behalf of SLT Express and charged to SLT
Express during 1999 amounted to $13,861. Risk related vehicle coverage costs
paid on behalf of SLT Express and charged to SLT Express during 1999 amounted to
$117,138. Fuel, maintenance, and other support functions paid on behalf of SLT
Express and charged to SLT Express during 1999 amounted to $721,383. The Company
received cash of $297,225 from SLT Express for these charges during 1999. At
December 31, 1999, $652,831 was receivable from SLT Express from the above
activities. The remaining $115,875 of Receivable from related parties relates
primarily to fuel tax credits that will be received when the return is filed by
the consolidated group.
In 1998, the Predecessor Company maintained workers' compensation and group
health insurance policies on behalf of the Company. For these services, the
Predecessor Company charged the Company a premium per participating employee per
month. The Predecessor Company paid all workers' compensation claims and
allocated the cost to the Company based on actual experience. The Predecessor
Company used a discounted approach of accounting for loss contingencies
associated with self insured workers' compensation liabilities. The discount
rate used in determining the workers' compensation liability was 5% at December
31, 1998. The Predecessor Company also provided third party liability coverage
and charged premiums based on a percentage of revenue. The Company incurred
expense of $1,969,895 related to these services in 1998. As a result of the
bankruptcy filing of the Predecessor Company, the Company became liable for its
employees in Colorado that were self-insured under the Predecessor Company's
insurance coverage. The Company estimates payments related to ongoing claims for
these employees will total approximately $2,096,395. This amount has been
recorded as accrued workers' compensation charge on the balance sheet and
statement of operations in 1999.
During l999 coverage on these insurers policies was changed to third-party
insurance providers.
In satisfaction of amounts owed to the Predecessor Company, the Company
performed freight hauling services on behalf of the Predecessor Company.
Billings for these services were directly offset against amounts owed to the
Predecessor Company. The Company recognized revenues of $3,760,800 for these
services in 1998. The Company did not provide freight hauling services on behalf
of the Predecessor Company during the year ended December 31, 1999.
Westway Express, Inc.
Notes to Financial Statement
9. Commitments and Contingencies
The Company is not aware of any events of noncompliance in its operations with
any environmental laws or regulations nor of any potential contingencies related
to environmental issues. The exact nature of environmental control problems, if
any, which the Company may encounter in the future cannot be predicted,
primarily because of the changing character of environmental requirements that
may be enacted with applicable jurisdictions.
The Company is a co-obligor of a Senior Note agreement entered into by
WesternWay. In October 1997, WesternWay entered into a note in the amount of
$31,902,649 that matures in October 2000. No scheduled principal payments are
due before that date. However, payments must be made with the proceeds of asset
sales and with certain excess cash as defined by the agreement. At December 31,
1999 and 1998, $29,143,250 and $28,643,250, respectively, were outstanding on
the note. Interest accrues at 1% above the bank's reference rate, 8.5% at
December 31, 1999, payable monthly. The note agreement includes various
restrictive covenants, the most restrictive of which require maintenance of
certain financial requirements and limit WesternWay's capacity to declare
dividends or incur additional indebtedness. From time to time, as cash flow
permits, the Company makes discretionary payments to WesternWay to assist with
debt service. WesternWay was it violation of those covenants as of December 31,
1999.
The Company has entered into limited recourse guarantee agreements, stock pledge
and other security agreements related to the junior long term debt of the
Predecessor Company in the amount of $12,000,000, which agreements are
enforceable against the Company only upon the payment in full (or cash
collateralization) of all amounts outstanding under both the Senior Note and the
Line of Credit referred to above and thereafter only upon a failure of the
Company to comply with its non-financial covenants under such guarantee
agreements. The junior long-tern debt is collateralized primarily by a second
security interest in the rolling stock, other equipment, accounts receivable and
real estate of the Predecessor Company. The Predecessor Company filed for
Chapter 11 Bankruptcy in May 1999. The impact, if any, of this bankruptcy on the
Company has not been determined.
As a result of the Predecessor Company's filing for Chapter 11 Bankruptcy, the
Central States Southeast and Southwest Area's Pension Plan has sued the Company
and other related entities for the recovery of withdrawal liability obligations
of the Predecessor Company totaling $7,337,890. The Company believes it has
adequate legal defense and is defending such assertion vigorously; therefore, no
charge has been recorded by the Company
10. Subsequent event - refinancing of WesternWay Senior Note
In September 2000, WesternWay refinanced the Senior Note referred to in Note 9
above. At September 28, 2000, $27,356,600 was outstanding on the note, which has
a maturity date of September 30, 2001. The maturity date may be extended if
certain conditions are met. Interest accrues at Prime plus 2%, 11.5% at
September 28, 2000, payable monthly. The note agreement includes various
restrictive covenants, but no financial covenants. The Company remains a
co-obligor on the Senior Note.
11. Subsequent event - Transaction with Dick Simon Trucking, Inc.
On January 22, 2001, Dick Simon Trucking, Inc. ("Simon") acquired a portion of
the trucking assets of the Company, primarily mobile communication equipment and
miscellaneous assets. Simon entered into leases for terminals owned by the
Company, refinanced Company leases for tractors and trailers, and assumed leases
for terminals. Simon will also pay the Company for assisting Simon in hiring
drivers. Total consideration to the Company is approximately $2.1 million,
excluding future lease payments. The transaction included a five year
non-compete agreement. The financial statements as of December 31, 1999 have not
been adjusted as a result of this transaction.
Westway Express Inc.
Unaudited Balance Sheet
As of September 30, 2000
Assets 2000
Current Assets
Cash and cash equivalents $ 327,195
Accounts receivable, net of allowance for doubtful accounts
of $49,425 7,666,633
Prepaid expenses and other current assets 2,116,024
Receivable from related parties --
-------------------
Total current assets 10,109,852
Property and equipment, at cost, net of accumulated
depreciation and amortization 1,601,743
Other assets 143,086
-------------------
$ 11,854,680
===================
Liabilities and Shareholder's Deficit
Current Liabilities
Accounts payable $ 4,562,359
Accrued wages and bonuses 516,814
Accrued taxes and other expenses 776,164
Current portion of accrued workers' compensation charge 365,345
Line of credit 5,251,996
Current portion of long-term debt --
Due to Parent Company 698,187
Payable to Predecessor Company --
-------------------
Total current liabilities 12,170,865
Long-term debt --
Accrued workers' compensation charge 1,281,050
-------------------
Total liabilities 13,451,965
-------------------
Shareholder's deficit:
Common stock, $1.00 par value, 1,000,000 shares authorized,
authorized, 625,000 shares issued and outstanding 625,000
Accumulated deficit (2,222,235)
-------------------
Total shareholder's deficit (1,597,235)
-------------------
Total liabilities and shareholder's deficit $ 11,854,680
===================
See accompanying notes to unaudited financial statements.
Westway Express Inc.
Unaudtied Statements of Operations
For the nine months ended September 30, 2000 and 1999
2000 1999
Operating revenues $ 48,172,505 $ 51,155,025
-------------------- --------------------
Operating expenses:
Salaries and wages 10,732,195 11,102,814
Employee benefits 1,896,724 1,799,311
Operating supplies 15,747,879 13,764,404
Revenue equipment rents 15,258,186 17,800,208
General supplies 1,730,362 1,674,747
Depreciation and amortization 236,085 298,109
Other 3,770,341 4,011,837
-------------------- --------------------
49,371,771 50,451,430
-------------------- --------------------
Operating (loss) income (1,199,266) 703,594
Interest expense (487,271) (380,403)
-------------------- --------------------
Net (loss) income $ (1,686,537) $ 323,190
==================== ====================
See accompanying notes to unaudited financial statements.
Westway Express, Inc.
Unaudited Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999
2000 1999
Operating activities:
Net (loss) income $ (1,686,537) $ 323,189
Adjustments to reconcile net (loss) income to net cash
used in operating activities
Depreciation and amortization 335,326 298,109
Accrued workers' compensation charge (450,000) --
Changes in operating assets and liabilities:
Accounts receivable 1,345,348 (1,330,028)
Receivable from related parties 768,706 48,700
Prepaid expenses and other current assets (41,216) (259,168)
Other assets 2,432 (1,498,725)
Accounts payable 1,304,562 296,934
Accrued wages and bonuses (101,858) (108,889)
Accrued taxes and other expenses (160,971) 125,090
Payable to Predecessor Company 529,630 --
-------------------- --------------------
Net cash provided by (used in) operating activities 1,845,377 (2,104,788)
-------------------- --------------------
Investing activities:
Acquisition of property and equipment (282,846) (73,759)
-------------------- --------------------
Financing activities:
Net proceeds (borrowings) from line of credit (1,409,557) 2,524,751
Repayment of debt (87,825) (211,593)
-------------------- --------------------
Net cash (used in) provided by financing activities (1,497,382) 2,313,158
-------------------- --------------------
Increase in cash 65,149 134,611
Cash and cash equivalents, beginning of period 262,046 9,933
-------------------- --------------------
Cash and cash equivalents, end of period $ 327,195 $ 144,544
==================== ====================
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 487,271 $ 380,403
==================== ====================
See accompanying note to unaudited financial statements.
Notes to Unaudited Financial Statements
Basis of Presentation
The financial statements have been prepared, without audit, in accordance with
accounting principles generally accepted in the United States of America,
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, the accompanying financial statements include all
adjustments which are necessary for a fair presentation of the results for the
interim periods presented, such adjustments being of a normal recurring nature.
Certain information and footnote disclosures have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these condensed
consolidated financial statements and notes thereto be read in conjunction with
the financial statements and notes thereto of Westway Express, Inc. as of
December 31, 1999 and 1998 and for the years then ended, included in this Form
8-K/A. Results of operations in interim periods are not necessarily indicative
of results to be expected for a full year.
Subsequent event
On January 22, 2001, Dick Simon Trucking, Inc. ("Simon") acquired a portion of
the trucking assets of the Company, primarily mobile communication equipment and
miscellaneous assets. Simon entered into leases for terminals owned by the
Company, refinanced Company leases for tractors and trailers, and assumed leases
for terminals. Simon will also pay the Company for assisting Simon in hiring
drivers. Total consideration to the Company is approximately $2.1 million,
excluding future lease payments. The transaction included a five year
non-compete agreement. The financial statements as of December 31, 1999 have not
been adjusted as a result of this transaction.
SIMON TRANSPORTATION SERVICES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial statements
are presented to give effect to the acquisition of a portion of the assets of
Westway Express Inc. ("Westway") completed on January 22, 2001. The Unaudited
Condensed Consolidated Balance Sheet as of September 30, 2000 has been adjusted
to give pro forma effect to the Westway acquisition as if it had occurred on
September 30, 2000. The Unaudited Condensed Consolidated Statement of Operations
for the year ended September 30, 2000 has been adjusted to give pro forma effect
to the Westway acquisition as if it had occurred on October 1, 1999.
During 2000, Westway operated approximately 375 company tractors, 76 tractors
supplied by independent contractors and 705 temperature-controlled trailers. In
connection with the acquisition, Simon Transportation Services Inc., through its
wholly-owned subidiary Dick Simon Trucking, Inc. ("Simon"), refinanced with
Westway's existing lessors approximately 234 tractors and 264 trailers.
Additionally, Simon expects to hire approximately 291 of Westway's drivers.
Accordingly, in order to more fairly present the impact of the acquisition, for
purposes of the pro forma condensed consolidated statement of operations, based
on the percentage of tractors acquired, 52% of the historical operations of
Westway have been included in the pro forma combined results.
The unaudited pro forma condensed consolidated financial information does not
purport to be indicative of the financial position or results of operations of
future periods or indicative of results that would have occurred had the
transactions referred to above been consummated on the dates indicated. The
unaudited pro forma adjustments are based on available information and certain
assumptions that management of Simon believes are reasonable. The total purchase
price for Westway has been allocated to the tangible and intangible assets based
on the results of an estimated valuation of their respective fair values. Simon
is in the process of completing the valuation of the acquired assets, and as
result, the allocation of the purchase price may change.
The pro forma financial information should be read in conjunction with Simon's
consolidated financial statements and notes thereto included in Simon's Annual
Report on Form 10-K and Westway's financial statements and notes thereto
included herein.
SIMON TRANSPORTATION SERVICES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
Historical Historical Pro Forma
Simon Westway Adjustments(1) Pro Forma
----------------- ----------------- -------------------- -----------------
Assets
Current assets
Cash $ 3,331,119 $ 327,195 $ (1,007,916) (2) $ 2,650,398
Receivables, net 29,932,630 7,666,633 (7,666,633) (7) 29,932,630
Operating supplies 1,330,462 -- 1,330,462
Prepaid expenses and other 6,657,644 2,116,024 (2,017,613) (3) 6,756,055
----------------- ----------------- -------------------- -----------------
Total current assets 41,251,855 10,109,852 (10,692,162) 40,669,545
Property and equipment at cost 73,788,102 5,023,953 (4,608,643) (4) 74,203,412
Less: Accumulated depreciation (24,384,568) (3,422,211) 3,422,211 (7) (24,384,568)
----------------- ----------------- -------------------- -----------------
49,403,534 1,601,742 (1,186,432) 49,818,844
Other Assets 451,603 143,086 1,916,914 (5) 2,511,603
----------------- ----------------- -------------------- -----------------
$ 91,106,992 $ 11,854,680 $ (9,961,680) $ 92,999,992
================= ================= ==================== =================
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 17,841,735 $ 5,251,996 $ (5,251,996) (7) $ 17,841,735
Current portion of capitalized 1,595,385 -- -- 1,595,385
Accounts payable 7,721,099 4,562,359 (4,562,359) (7) 7,721,099
Accrued liabilities 5,242,894 1,292,978 (814,178) (6) 5,721,694
Due to parent company and affiliate 698,187 (698,187) (7) --
Payments due to Westway for
asset purchase -- 1,414,200 (1) 1,414,200
Accrued workers' compensation charge 365,345 (365,345) (7) --
Accrued claims payable 8,880,638 -- -- 8,880,638
----------------- ----------------- -------------------- -----------------
Total current liabilities 41,281,751 12,170,865 (10,277,865) 43,174,751
Accrued workers' compensation charge
long-term 1,281,050 (1,281,050) (7) --
Long-term debt, net of current portion 376,791 -- -- 376,791
Deferred income taxes 4,604,318 -- -- 4,604,318
----------------- ----------------- -------------------- -----------------
Total liabilities 46,262,860 13,451,915 11,558,915 48,155,860
----------------- ----------------- -------------------- -----------------
Preferred stock -- -- -- --
Common stock 62,877 625,000 (625,000) (8) 62,877
Treasury stock, at cost (1,053,147) -- -- (1,053,147)
Additional paid-in capital 48,285,578 -- -- 48,285,578
Accumulated deficit (2,451,176) (2,222,235) 2,222,235 (8) (2,451,176)
----------------- ----------------- -------------------- -----------------
Total stockholders' equity 44,844,132 (1,597,235) 1,597,235 44,844,132
----------------- ----------------- -------------------- -----------------
$ 91,106,992 $ 11,854,680 $ (9,961,680) $ 92,999,992
================= ================= ==================== =================
See accompanying notes to unaudited pro forma condensed consolidated
balance sheet.
SIMON TRANSPORTATION SERVICES INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) On January 22, 2001, Simon Transportation Services Inc., through
its wholly-owned subsidiary Dick Simon Trucking, Inc., completed
its acquisition of a portion of the trucking assets of Westway
Express, Inc. ("Westway") pursuant to an Agreement dated December
15, 2000, as amended January 22, 2001 by the First Amendment to
the Agreement. Under the terms of the Agreement and First
Amendment, Simon agreed to purchase up to 525 Qualcomm units,
provided such units have software upgrades and are functioning
properly, and other miscellaneous assets to be integrated into
Simon's temperature-controlled transportation of freight. Simon
also refinanced with existing lessors approximately 234 tractors
and 264 temperature-controlled trailers, and assumed leases for
terminal facilities in Commerce City, Colorado; Albuquerque, New
Mexico; and Charlotte, North Carolina. Simon also agreed to pay
Westway for its assistance in hiring drivers.
During 2000, Westway operated approximately 375 company tractors,
76 tractors supplied by independent contractors and 705 53-foot
temperature-controlled trailers. Westway retained all remaining
tractors, trailers, terminal facilities, and miscellaneous assets,
as well as accounts receivable, not purchased by Simon.
The following table details the total consideration paid to
Westway for the assets purchased.
Description Amount
----------- ------
Licensing and miscellaneous deposits $ 98,411
Qualcomm units (estimate 300 units) 360,000
Miscellaneous assets 55,310
Driver workforce 2,060,000
----------------
Total consideration 2,573,721
Less: Allowance for equipment repair (478,800)
Less: Amount paid at closing (680,721)
----------------
Amount due to Westway $1,414,200
================
(2) Reflects the cash paid by Simon at closing. Westway retained all
cash and cash equivalents at the time of closing.
Cash and cash equivalents at 9/30/00 - Westway $ 327,195
Cash paid by Simon to Westway at closing 680,721
----------
Net adjustment $1,007,916
==========
(3) Reflects the $98,411 of licensing and miscellaneous deposits
acquired from Westway. Westway retained all other prepaid items
reported on its September 30, 2000 balance sheet.
Prepaid expenses and other at 9/30/00 - Westway $ (2,116,024)
Prepaid licensing and miscellaneous deposits
purchased 98,411
---------------
Net adjustment $ (2,017,613)
============
(4) Reflects the value of Qualcomm units and miscellaneous assets
acquired from Westway. Simon agreed to acquire up to 525 Qualcomm
units from Westway at a purchase price of $1,200 per unit provided
that each unit is functioning properly and has a software upgrade.
Simon anticipates acquiring 300 upgraded and functioning units
from Westway. Westway retained all other property and equipment as
reported on its September 30, 2000 balance sheet.
Property and equipment at 9/30/00 - Westway $ (5,023,953)
Purchase of 300 Qualcomm units at $1,200 each 360,000
Purchase of miscellaneous assets 55,310
---------------
Net adjustment $ (4,608,643)
(5) Simon at the closing of the acquisition and during the year
thereafter agreed to make payments of $2,060,000 for Westway's
assistance in hiring drivers and independent contractors formerly
employed or engaged by Westway. This amount includes an estimate
that Simon will contract with 50 independent contractors formerly
associated with Westway. The total amount due for workforce in
place is adjusted up or down for each independent contractor in
excess or below the 50 independent contractor threshold. Westway
retained all items classified as Other Assets on its September 30,
2000 balance sheet.
Other assets at 9/30/00 - Westway $ (143,086)
Payments for driver workforce 2,060,000
---------
Net adjustment $1,916,914
=========
(6) Simon refinanced approximately 234 tractors and 264 trailers with
Westway's existing lessors. As part of the acquisition, Westway
granted to Simon an allowance for tractor and trailer repair. This
allowance represents the estimated cost of bringing equipment into
compliance with agreements with the lessors.
Accrued liabilites at 9/30/00 - Westway $ (1,292,978)
Allowance for equipment repair 478,800
--------------
Net adjustment $ (814,178)
============
(7) Simon did not acquire all assets and did not assume any
liabilities of Westway. Accordingly, the non-acquired assets and
the liabilities have been eliminated.
(8) To eliminate the net deficit of Westway.
SIMON TRANSPORTATION SERVICES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
Historical Historical Pro Forma
Simon Westway Adjustments Pro Forma
---------------- ----------------- ----------------- -----------------
Operating Revenue $ 231,396,894 $ 66,328,401 $ (31,837,632) (1) $ 265,887,663
---------------- ----------------- ----------------- -----------------
Operating Expenses
Salaries, wages & benefits 94,240,163 17,416,416 (8,359,880) (1) 103,296,699
Operating supplies & expense 82,765,212 23,555,355 (11,306,570) (1) 95,013,997
Rent 37,947,272 21,408,966 (10,276,304) (1) 49,079,934
Depreciation & amortization 4,121,893 335,325 766,675 (2) 5,223,893
Accrued workers' compensation 2,096,395 (2,096,395) (3) --
Other 22,221,178 5,410,188 (2,596,890) (1) 25,034,476
---------------- ----------------- ----------------- -----------------
Total operating expenses 241,295,718 70,222,645 (33,869,364) 277,648,999
Operating loss (9,898,824) (3,894,244) 2,031,732 (11,761,636)
---------------- ----------------- ----------------- -----------------
Interest (1,422,508) (658,039) 538,339 (4) (1,542,208)
---------------- ----------------- ----------------- -----------------
Loss before benefit for income taxes (11,321,332) (4,552,283) 2,570,071 (13,303,544)
Benefit for income taxes 4,075,680 -- (5) 4,075,680
---------------- ----------------- ----------------- -----------------
Net loss before cumulative effect of
accounting change $ (7,245,652) $ (4,552,283) $ 2,570,071 $ (9,227,864)
================ ================= ================= =================
Basic and diluted net loss before
cumulative effect of accounting change
per common share $ (1.19) $ (1.51)
================ =================
Basic and diluted weighted average
common shares outstanding 6,110,213 6,110,213
================ =================
See accompanying notes to unaudited pro forma condensed
consolidated statements of operations.
SIMON TRANSPORTATION SERVICES INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(1) During 2000, Westway operated approximately 375 company tractors,
76 tractors supplied by independent contractors and 705
temperature-controlled trailers. In connection with the
acquisition, Simon Transportation Services Inc., through its
wholly-owned subidiary Dick Simon Trucking, Inc. ("Simon"),
refinanced with Westway's existing lessors approximately 234
tractors and 264 trailers. Additionally, Simon expects to hire
approximately 291 of Westway's drivers. Accordingly, in order to
more fairly present the impact of the acquisition, for purposes of
the pro forma condensed consolidated statement of operations,
based on the percentage of tractors acquired, 52% of the
historical operations of Westway have been included in the pro
forma combined results.
(2) At the date of acquisition, the average length of service with
Westway of drivers hired by Simon was approximately 2 years.
Drivers with that level of experience are expected to be replaced
at a rate not greater than 50% per year. Accordingly, the amount
paid to Westway for workforce in place is amortized over a two
year period.
Simon expects to acquire 300 Qualcomm units at a total cost of
$360,000. Management expects these units to have an estimated
useful life of 5 years. Accordingly, the amount paid for the
Qualcomm units is depreciated over five years.
Simon did not acquire any other depreciable assets from Westway.
Therefore, the depreciation and amortization included in Westway's
historical results of operations for the twelve months ended
September 30, 2000 is eliminated in its entirety.
Amortization of driver workforce $1,030,000
Depreciation of Qualcomm units purchased 72,000
Westway depreciation for the year ended 9/30/00 (335,325)
-----------
Net adjustment $ 766,675
===========
(3) Westway recorded this obligation in its results of operations as a
result of a bankruptcy filing of its predecessor company. This
charge was not attributable to the ongoing operations of Westway.
Accordingly, the charge has been eliminated for purposes of this
pro forma presentation.
(4) Simon will incur additional interest charges to finance the
acquisition of assets from Westway. Interest incurred by Westway
is therefore eliminated.
Westway interest for the year ended 9/30/00 $ (658,039)
Interest incurred to finance asset acquisition 119,700
------------
Net adjustment $ (538,339)
============
(5) Westway operated as a subsidiary of a qualified sub-chapter S
corporation and did not record any liability or benefit for income
taxes on its financial statements. Because of the loss reported on
the pro forma statement of operations, any further benefit
recorded by Simon would be properly offset by a valuation
allowance. Accordingly, no further benefit for income tax is
reported in the pro forma statement of operations.
(c) Exhibits.
------------------- --------------------------------------------------------------------------------------------
Exhibit Description
------------------- --------------------------------------------------------------------------------------------
------------------- --------------------------------------------------------------------------------------------
2.1 Agreement dated December 15, 2000, by and among Dick Simon Trucking, Inc., Westway
Express, Inc., WesternWay Holdings Co., and Jerry D. McMorris*
------------------- --------------------------------------------------------------------------------------------
------------------- --------------------------------------------------------------------------------------------
2.2 First Amendment to Asset Purchase Agreement dated January 22, 2001, by and among Dick
------------------- --------------------------------------------------------------------------------------------
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23 Consent of Independent Public Accountants
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99.1 Press Release issued by Parent dated December 18, 2000
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99.2 Press Release issued by Parent dated January 23, 2001
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* All of the schedules and exhibits have been omitted. Parent hereby
agrees to furnish supplementally to the Commission a copy of any
schedule or exhibit omitted upon the Commission's request.
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.
SIMON TRANSPORTATION SERVICES INC.
Date: February 13, 2001 By: /s/ Alban B. Lang
---------------------------------
Alban B. Lang, Chief Financial Officer,
Treasurer, and Secretary