UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000, Commission File No. 0-30880
McCLENDON TRANSPORTATION GROUP, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 22 - 3714235
---------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
121 South LaFayette Street, Lafayette, Alabama 36362
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (334) 864-9311
Not Applicable
(Former name, address or fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes____________________ No _________X________
The total number of common shares outstanding of the issuer's common
shares, par value $ .001, as of the date of this report, follow:
16,100,000
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
2000 1999
ASSETS
Cash and cash equivalents $ 118,108 $ 757,322
Restricted investments 101,548 125,000
Accounts receivable - trade 4,104,307 4,349,539
Accounts receivable - other 97,787 499,209
Inventories 196,467 245,071
Prepaid expenses 1,733,662 2,911,644
--------- ---------
6,351,879 8,887,785
FIXED ASSETS(Net of accumulated depreciation
and amortization) 6,093,021 10,043,651
OTHER ASSETS 219,515 387,868
--------- ----------
$12,664,415 $19,319,304
========== ==========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 921,773 $ 1,039,399
Short-term borrowings 8,297,599 4,813,049
Accounts payable 1,872,382 2,671,997
Accrued taxes 146,470 44,469
Other accrued charges 2,210,122 2,709,505
Income taxes payable -estimated 204,388 262,505
Current portion of long-term debt 6,183 4,666,059
---------- ----------
13,658,917 16,206,983
LONG TERM DEBT(less: current portion) 7,369,150 9,219,520
DEFERRED INCOME TAXES 2,426,351 2,806,852
---------- ----------
23,454,418 28,233,355
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $ 1 each, authorized
35,000,000
issued and outstanding - 16,100,000(1999-10,000,000) 16,100 10,000
Additional paid-in capital 138,783 94,833
Deficit (10,944,866) (9,018,884)
----------- ----------
(10,790,003) (8,914,051)
----------- ----------
$12,664,415 $19,319,304
=========== ==========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
TOTAL
STOCKHOLDER
NUMBER PAID-IN ACCUMULATED EQUITY
OF SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
Balance - January 1,
2000 16,100,000 $ 16,100 $88,783 $(10,037,000) $(9,932,117)
Issuance of common
stock - - 50,000 - 50,000
Net loss for the
period - - - (907,886) (907,886)
---------- ------- -------- ----------- ----------
Balance - September 30,
2000 16,100,000 $ 16,100 $138,783 $(10,944,886) $(10,790,003)
========== ======= ======= =========== ===========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
2000 1999
REVENUE
Freight $29,950,176 $37,051,131
Other freight related 184,489 124,628
---------- ----------
30,134,665 37,175,759
---------- ----------
OPERATING EXPENSES
Rent and purchased transportation 14,563,557 15,129,103
Salaries, wages and benefits 8,512,185 10,080,345
Operations and maintenance 5,426,372 6,027,750
Insurance and claims 1,824,135 2,167,669
Taxes and licences 515,819 706,650
Communications and utilities 442,417 481,156
Depreciation and amortization 1,616,684 2,650,000
---------- ----------
32,901,169 37,242,673
---------- ----------
OPERATING INCOME(LOSS) (2,766,504) (66,914)
---------- ----------
OTHER ITEMS
Gain on sale of fixed assets and other 213,606 623,788
Interest income 269,746 179,034
Interest expense 1,494,896 (1,390,913)
Miscellaneous expenses (119,630) (55,080)
---------- ----------
1,858,618 (643,171)
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS (907,886) (710,085)
EXTRAORDINARY ITEMS - 1,106,952
---------- ----------
NET INCOME(LOSS) FOR THE PERIOD $ (907,886) $ 396,867
========== =========
Number of Shares Outstanding 16,100,000 10,000,000
========== ==========
Earnings per Share $ (0.06) $ .04
========= =========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
2000 1999
CASH FLOW FROM OPERATING ACTIVITIES
Net income(loss) for the period $ (907,886) $ 396,867
---------- ----------
Adjustments to reconcile net loss to net cash provided
from operating activities:
Depreciation and amortization 1,616,684 2,650,000
Deferred income taxes 20,351 15,152
Gain on sale of fixed assets (213,606) (623,788)
Changes in current assets and liabilities
Accounts receivable 490,112 279,851
Inventories 14,130 47,811
Prepaid expenses 1,288,074 228,440
Accounts payable (270,060) 233,450
Other current liabilities 187,892 (1,072,215)
---------- ----------
3,133,577 1,758,701
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,225,691 2,155,568
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (15,132) (989,591)
Proceeds from sale of fixed assets 1,717,776 1,699,588
Decrease in other assets 12,225 14,591
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,714,869 724,588
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft - net (341,112) 369,463
Restricted investments - net 100,000 (24,787)
Short-term borrowings - net 2,495,737 (713,855)
Reduction in long-term debt - net (6,203,097) (2,106,924)
Issuance of common stock 50,000 -
Dividends paid - (159,029)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (3,898,472) (2,635,132)
--------- ---------
NET CHANGE IN CASH 42,088 245,024
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 76,020 512,298
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 118,108 $ 757,322
========= =========
See Notes to Interim Financial Statements.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1: Nature of Operations
The Company is a medium-haul, irregular route, truckload carrier of
general commodities which transports freight primarily throughout the
Southeastern and Eastern United States. The Company's top five
customers accounted for more than 40% of revenue for 2000. The top two
customers accounted for more than 23% of revenue for 2000.
On November 11, 1999, Glenn McClendon Trucking Company, Inc. (GMTC)
merged into "RDA Services, Inc. (RDA). GMTC was treated as the acquirer
and RDA as the acquiree. The resulting merged entity was them renamed
McClendon Transportation Group, Inc. for accounting purposes, the
acquisition has been treated as an acquisition with all costs in excess
of any cash received charged to expense.
NOTE 2: Summary of Significant Accounting Policies
Accounts Receivable - Trade
Trade receivables represent amounts due from various companies for
shipment services. Bad debts are normally accounted for using the
allowance method, based on the credit worthiness of its customers, as
well as general economic conditions.
Inventories
Inventories consist of fuel, tires, and repair parts and are valued at
the lower of cost or market, with cost being determined using the first-
in, first-out method.
Fixed Assets, Depreciation and Amortization
All fixed assets are stated at cost and are depreciated on the straight-
line method for financial statement purposes. For income tax reporting,
the Company uses accelerated methods. The cost of revenue equipment
includes items such as tires, air deflectors, and and communication
equipment used in or on the tractors and trailers. Maintenance, repairs
and minor renewals are expensed as incurred, while additions and major
renewals are capitalized. Revenue equipment is depreciated to a 20%
salvage value for trailers and a 15% salvage value for tractors. The
useful lives employed for computing depreciation on principal classes of
fixed assets for financial statement purposes are as follows:
Buildings and land improvements 10 - 40 years
Revenue equipment
Tractors 6 years
Trailers 8 years
Furniture and fixtures 5 - 10 years
Other fixed assets 5 - 20 years
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 2: Summary of Significant Accounting Policies(continued)
Revenue Recognition
Revenue is recognized when the shipment is completed and bills of lading
received.
Income Taxes
Deferred income taxes are provided for differences in the timing of
reporting income for financial statement and tax purposes, and results
primarily from differences in depreciation methods.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheet for cash,
receivables and short-term borrowings approximate their values due to
the short maturities. Management is unable to estimate the fair value
of its other financial instruments.
Use 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.
Loss per Share
Basic loss per common share is calculated by dividing the net loss by
the average number of common shares outstanding during the period.
Diluted loss per common share is calculated by adjusting outstanding
shares, assuming conversion of all potentially dilutive securities. The
Company has a simple capital structure with no potentially dilutive
securities.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 3: Accounts Receivable
Trade accounts receivable are summarized as follows:
2000 1999
---------- ----------
Trade accounts receivable $ 4,217,188 $ 4,462,420
Allowance for doubtful accounts (112,881) (112,881)
---------- ----------
$ 4,104,307 $ 4,349,539
========== ==========
Accounts receivable other than trade are summarized as follows:
Officers and employees(Note 11) $ 166,288 $ 220,178
Insurance premium refunds 35,361 35,361
Miscellaneous (103,862) 243,670
---------- ----------
$ 97,787 $ 499,209
========== ==========
NOTE 4: Prepaid Expenses
Prepaid expenses are summarized as follows:
2000 1999
---------- ----------
Insurance, including deposits $ 1,076,120 $ 2,188,003
Taxes, licences and permits 476,170 520,997
Other 181,372 202,644
---------- ----------
$ 1,733,662 $ 2,911,644
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 5: Fixed Assets and Depreciation
Major classes of fixed assets and accumulated depreciation are
summarized as follows:
2000 1999
---------- ----------
Land $ 318,944 $ 338,944
Building and land improvements 1,696,967 1,696,967
Revenue equipment 20,075,820 27,867,964
Furniture, fixtures and other 3,340,512 3,301,869
---------- ----------
25,432,243 33,205,744
Accumulated depreciation (19,339,222)(23,162,094)
---------- ----------
$ 6,093,021 $10,043,651
========== ==========
NOTE 6: Short-Term Borrowings
Short-term borrowings consists of the following:
2000 1999
---------- ----------
$5,000,000 line of credit from Systran Financial
Services Corporation, with interest at prime
plus 2%, accounts receivable as collateral.
Borrowings on the line of credit are limited by
various restrictions on the above collateral. $ 2,978,730 $ -
Demand note from Columbus Bank & Trust with
interest at prime plus 3%, accounts receivable,
contract rights as collateral. 5,018,879 4,813,049
Unsecured note from stockholders, interest at
8.5%, due January 18, 2001. 250,000 -
Other notes payable - stockholders 49,990 -
---------- ----------
$ 8,297,599 $ 4,813,049
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 7: Other Accrued Expenses
Other accrued expenses are summarized as follows:
2000 1999
---------- ----------
Accrued self-insured liability claims
(see below) $ 286,440 $ 812,726
Accrued workers' compensation 1,989,503 1,687,621
Other accrued expenses (65,821) 209,158
---------- ----------
$ 2,210,122 $ 2,709,505
========== ==========
During 1998, the Company negotiated with its previous liability
insurance carrier for forgiveness of $ 1,106,951 of outstanding claims
under its policy. The forgiveness was accepted, subject to certain
contingencies which were not resolved until 1999. Accordingly, this
debt foregiveness income is recognized in the 1999 statement of
operations as an extraordinary item.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 8: Long-Term Debt
Long-term debt consists of the following:
2000 1999
---------- ----------
Notes payable - Columbus Bank & Trust Co.,
interest only through June 2001, thereafter
monthly payments of approximately $ 180,000,
including interest at prime, final payment
due August 2005; equipment other assets and
endorsements as collateral; $ 3,900,000 $ -
Note payable - equipment: Navistar Financial
Corporation (see below); 2,100,000 8,182,306
Note payable - equipment: Navistar Financial
Corporation weekly payments total $ 9,205
as of June 30, 1999, including interest at
9.5% - 1,422,521
Note payable - equipment
Associates Commercial Corporation, monthly
payments total $33,098 as of September 30,
1999, including interest at 9.25% - 580,749
Note payable -equipment:
TBCC Funding Trust I, monthly payments total
$75,034 as of September 30, 1999 including
interest at 10.4%; - 1,917,175
Note payable -equipment:
Financial Federal Credit, Inc. monthly
principal payments of $27,679 plus interest
at prime plus 2%, due October 2005; 779,215 1,226,846
Note payable - real estate:
Columbus Bank & Trust Co., interest only to
June 2001,thereafter, monthly blended
payments of $12,174 at prime plus 2%, due
July 2005 480,000 480,000
Note payable - vehicles:
Ford Credit, monthly payments total $ 2,314,
including interest at prime plus 2.0%, due
July 2005. 79,618 39,482
Notes payable - McClendon Enterprises 36,500 36,500
---------- ----------
7,375,333 13,885,579
Less: Current portion (6,183) (4,666,059)
---------- ----------
$ 7,369,150 $ 9,219,520
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 8: Long-Term Debt(continued)
During the year, the Company refinanced $ 3,500,000 of its debt with
Navistar Financial Corporation. Terms of the refinancing allowed for
debt foregiveness of $ 2,635,095 which will be recognized in subsequent
reports in the statement of operations as an extraordinary item. Also,
as part of the refinancing agreement, the Company executed a new note in
the amount of $ 2,100,000 with interest at 10%. This amount will be
reflected in the balance sheet in current maturities of long-term debt.
Subsequent to December 31, 2000, the Company also refinanced certain
debt with Columbus Bank & Trust. The above descriptions reflect the
refinanced terms and rates.
Equipment notes are collateralized by substantially all revenue
equipment with a total book value of approximately $5,314,108. Personal
guarantees by the Company's principal stockholders are also used as
collateral on certain notes.
Aggregate maturities under these arrangements for years subsequent to
September 30, 2000 are as follows:
2001 $ 6,183
2002 1,593,989
2003 1,771,251
2004 1,666,403
2005 2,337,507
----------
$ 7,375,333
==========
NOTE 9: Operating Leases
The Company has acquired trailers through operating leases with various
leasing companies with options to purchase at fair market value at the
end of such leases. The leases are for periods of 6 to 7 years;
however, after 3 years the lease may be canceled by the Company upon
meeting specified conditions in the contracts. Under a terminal rental
adjustment clause, the Company guarantees a 15% residual value at the
end of each lease.
During the year the Company also acquired tractors through operating
leases with options to purchase the equipment at their fair market value
at the end of the leases. The leases are for periods of 18 months to 36
months.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 9: Operating Leases
The Company also leases certain real estate properties from McClendon
Enterprises (a related party).
Below is a schedule of future minimum payments under the above operating
leases:
McClendon Total
Tractor Trailer Enterprises Operating
Leases Leases Leases Leases
Amounts due during:
2001 $ 1,002,240 $760,357 $ 132,000 $ 1,894,597
2002 751,680 48,627 132,000 932,307
2003 288,144 - 132,000 420,144
2004 - - 132,000 132,000
2005 - - 132,000 132,000
---------- ------- -------- ----------
$ 2,042,064 $808,984 $ 660,000 $ 3,511,048
========== ======= ======== ==========
During 1997, the Company started a program whereby the Company leases
tractors with qualified drivers from independent operators, ("owner-
operators"). Owner-operator expense amounted to $13,264,261 in 2000 and
$13,794,021 in 1999 respectively, and is reflected in the Statements of
Operations as Purchased Transportation.
Other rent expense is summarized as follows:
2000 1999
---------- ----------
Tractor leases $ 199,056 $ -
Trailer leases 629,502 682,885
McClendon Enterprises lease 99,000 172,125
Spotting service 213,263 294,188
Other rents 158,475 185,884
---------- ----------
$ 1,299,296 $ 1,335,082
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 10: Income Taxes
The Company's net carry basis of long-term assets exceeded its tax
basis for such assets by approximately $ 5,210,174 at September 30,
2000. See Note 2.
Net deferred tax liabilities in the accompanying balance sheet reflect
the liabilities associated with temporary differences, principally
depreciation of fixed assets.
Provison for income tax benefit is summarized as follows:
2000 1999
---------- ----------
Current tax expense
Federal $ - $ -
State - -
Deferred tax benefit - -
---------- ---------
$ - $ -
========== =========
The income tax benefit differs from the income tax benefit that
would result from applying statutory rates to pretax income.
This is due primarily to the payment of per diems to drivers,
which are only partly tax deductible. As a result of the non-
deductible per diems and other permanent differences, the
Company has no net operating loss carryforward available at
June 30, 2000. Reconciliation of the provision for income tax
benefit to statutory rates are is as follows:
2000 1999
% %
Federal provision for income taxes at
statutory rates (34.0) (34.0)
State provision for income taxes at
statutory rates (5.0) (5.0)
Federal tax benefit from state income
tax deduction - 0.79
Per diems and other permanent
differences 2.74 16.24
Other 9.03 7.69
------ ------
Total (27.23) (31.24)
====== ======
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 11: Related Party Transactions
McClendon Enterprises
The Company leases under operating leases, its present operating
facility and other real estate from McClendon Enterprises, a
partnership comprised of two Company stockholders. Total rent expenses
on these leases was $99,000 for 2000, $172,125 for 1999.
Other
The Company's two stockholders are obligated to a previously redeemed
stockholder on notes executed to acquire the previous stockholder's
stock. The balance of these notes as of September 30, 2000 was
approximately $ 170,000 with quarterly principal and interest payments
due through 2001.
The Company has a note payable outstanding from two stockholders in the
amount of $ 250,000. The Company also has a loan payable outstanding
from a stockholder in the amount of $ 49,990 for September 2000 and
$ 0 for September 1999 respectively. These amounts are included in
short-term borrowings, as discussed in Note 6.
The Company also has various loans and other receivables from certain
officers and stockholders, summarized as follows:
2000 1999
---------- ----------
Stockholder notes receivable, interest at 7% $ 91,000 $ 173,000
Other stockholder receivables 9,677 19,694
Other officer and employee receivables 65,611 27,484
---------- ----------
$ 166,288 $ 220,178
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 12: Profit Sharing Plan
The Company maintains a qualified defined contribution profit sharing
plan with 401(k) provisions covering substantially all employees with
over one year of service.
Contributions based on a percentage of compensation are determined
annually by the board of directors. The Company made contributions
totaling $25,007 for the period ended September 30, 2000 and $ 25,854
for the period ended September 30, 1999.
NOTE 13: Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
2000 1999
---------- ----------
Interest $ 763,514 $ 1,143,800
Taxes $ 151,548 $ 286,699
NOTE 14: Contingencies
Self-Insurance Plans
The Company is partially self-insured with respect to various risk
areas as follows:
Liability, Cargo and Physical Damage
For automobile liability, the Company is responsible for any claims
less than $100,000 and for claims in excess of the $ 1,000,000 policy
limit. The Company also has a $4,000,000 umbrella policy per
occurrence.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 14: Contingencies(continued)
For general liability, the Company is responsible for any claims less
than $10,000 and for claims in excess of $1,000,000 per occurrence.
The policy has a $2,000,000 annual aggregate limit. The Company also
has a $ 4,000,000 annual aggregate umbrella policy.
For cargo damage, the Company is responsible for any claims less than
$100,000 and for any claims in excess of the $300,000 policy limit.
For physical damage to the revenue equipment, the Company is
responsible for any claims less than $1,000.
Workers' Compensation
The Company is also self-insured with respect to workers' compensation.
Claims in excess of $300,000 are covered by an insurance policy. The
Company is responsible for any claims less than $300,000. As a result
of state requirements, an actuarial valuation was obtained during the
year which estimated the expected future claims. Accordingly, the
Company accrued the estimated present value of claims outstanding and
those incurred but not reported.
Group Health
The Company has elected to self-insure for its group health insurance
coverage. Blue Cross-Blue Shield acts as administrator for the plan
whereby the Company is responsible for all health claims, not to exceed
$50,000 annually, per insured individual. The claims under this plan
are accounted for on a cash basis.
Credit Risks
The Company extends credit across different industries and geographic
areas and requires no collateral from its customers.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 15: Extraordinary Items
As discussed in Notes 7 and 8, the Company negotiated two separate debt
forgiveness arrangements. One subsequently in 2000 and one in 1999.
The amount for 1999 and the related deferred tax effects are summarized
as follows:
2000 1999
Debt forgiveness income
Liability insurance $ - $1,106,951
Less: Deferred tax expense - (406,333)
--------- ---------
$ - $ 700,618
========= =========
NOTE 16: Going Concern
As shown in the accompanying financial statements, the Company has
experienced significant operating losses and has deficits in working
capital and net worth. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
Management is working with its primary lenders to monitor the status of
its indebtedness and is currently evaluating methods to reduce costs
and improve operating results. In addition, as reflected in Note 8,
the Company has renegotiated certain debt obligations with Navistar
Financial Corporation and "Columbus Bank & Trust Company, that are
expected to further reduce its outstanding indebtedness through a
combination of foregiveness and equity conversion. During 1999, the
Company signed certain agreements to effect a reorganization plan as
more fully described in Note 17.
If the Company is unsuccessful in its efforts, it may be necessary to
undertake such other actions as may be appropriate to preserve asset
value. The financial statements do not include any adjustments, other
than the classification of long-term debt as disclosed in Note 8, that
might result from the outcome of this uncertainty.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 17: Reorganization
During June, 1999, the Company initiated a plan of reorganization. As
a result the Company entered into a reverse merger transaction with RDA
Services, Inc. in November, 1999 whereby RDA Services, Inc. purchased
Glenn McClendon Trucking Company, Inc. ("GMTC") through issuance of its
stock. RDA Services, Inc. then changed its name to McClendon
Transportation Group, Inc. The principal shareholders of GMTC retained
90% of the stock of the newly merged Company. The transaction also
included refinancing certain portions of the line-of-credit agreement,
as well as other long-term debt obligations as discussed in Note 8.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" may
constitute forward-looking statements for purposes of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended, and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievement of the Company to differ materially
from the Company's expectations include, without limitation, the following: 1)
the Company is unable to reduce transportation costs or pass on the increased
costs of fuel to its existing customers; 2) the Company is unable to attract new
customers; 3) the Company is unable to retain existing personnel or hire
additional personnel; 4) the industries the Company serves experience a downturn
in business or have less rapid growth than anticipated; 5) new competitors enter
the markets the Company serves or existing competitors increase their marketing
efforts; and 6) the Company is unable to obtain additional debt or equity
financing on favorable terms, if at all, to satisfy cash requirements. All
written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors.
Working Capital and Cash Flow
The Company's working capital deficiency decreased from a negative $12,975,988
as at December 31, 1999 to a negative $7,307,038 for the nine months ended
September 30, 2000. The current ratio was .39 and .47 at December 31, 1999 and
September 30, 2000 respectively. The change in working capital was due
primarily to the restructuring of certain long-term debt and foregiveness of
such debt.
The Company continues to experience cash flow problems as current liabilities
exceed current assets. Much of this is due to the current maturities of long-
term debt which the Company is in the process of restructuring. The Company
periodically seeks additional working capital through debt and equity financing
from public and private sources when opportunities become available, but to date
has been unable to obtain additional financing from any source although it is
able to meet its current cash flow needs for operations.
Item 6: Exhibits and Reports on Form 8-K
Exhibit 11 - Computation of earnings per common share - See Statement
of Operations
Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
McCLENDON TRANSPORTATION GROUP, INC.
By: /s/ JAMES McCLENDON
----------------------
James McClendon
President
Dated: July 2, 2001