UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 2000.
McCLENDON TRANSPORTATION GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Nevada 0-3880 22 - 3714235
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
121 South LaFayette Street, Lafayette, Alabama 36362
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (334) 864-9311
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Not Applicable
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(Former name or former address, 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________
Indicate by check mark if disclosure of delinguent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of the Common Stock on July
2, 2001, as reported on The Nasdaq Stock Market(Nasdaq), was
approximately $ . Shares of common stock held by each executive
officer and director have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status for this
purpose is not necessarily a conclusive determination for other purposes.
The number of shares of the Registrant's Common Stock, par value $.001
outstanding as of December 31, 2000 was 16,228,000.
PART I
Item 1. DESCRIPTION OF BUSINESS
GENERAL
McClendon Transportation Group, Inc. (the "Company") was incorporated in the
State of Delaware on February 20, 1996 as RDA Services, Inc. ("RDA"). In
November, 1999, RDA acquired 100% of the assets of Glenn McClendon Trucking
Company, Inc., an Alabama corporation ("McClendon Trucking") in a reverse merger
transaction and RDA changed its name to McClendon Transportation Group, Inc. In
March, 2000 Transportation merged into its wholly owned subsidiary, a Nevada
corporation with the same name. The merger was effected solely for the purpose
of changing the Company's state of domicile to Nevada. Transportation has no
operations and acts a holding company. Operations are conducted through
Transportation's subsidiary, McClendon Trucking. Unless otherwise indicated
herein, all references to the "Company" or "McClendon" include both
Transportation and McClendon Trucking.
The Company operates a medium-haul, irregular route, truckload carrying business
of general commodities. The McClendon Trucking fleet transports freight
primarily throughout the eastern United States.
PROPERTIES
The Corporate offices for the "Company" are located at 121 South Lafayette St.,
Lafayette, Alabama 36362. The offices are leased for a five-year term from
January 1, 2000 through December 31, 2005 at a monthly rental of $11,000.
Our operations center, located at 810 South LaFayette Street, Lafayette, Alabama
is our main maintenance terminal and training facility and is owned by us.
We own 2 additional maintenance facilities at 1516 Alduc Crt., Montgomery, Al.,
and 33 Market Street, Charleston, Tennessee. These facilities are pledged to
Navistar Financial Corporation as collateral security for a loan.
Additionally, the Company owns 7 other minor facilities that are up for sale and
are collateral security for lines of credit. They were operated as terminals
for trucks when alternate parking accommodations were not available. However,
there is no need for such facilities at the present time.
Item 3. Legal Proceedings
The following matters represent contingent liabilities which might exceed
$25,000:
1. Navistar Financial Corporation vs. Glenn McClendon Trucking Company, Inc.,
et al. This action is in the Circuit Court for Montgomery County, Alabama. It
has been on the administrative docket since August, 1998, subject to terms of a
forbearance and settlement agreement between the parties.
2. State of Alabama Department of Revenue vs. Glenn McClendon Trucking Co., is
a 1999 administrative proceeding assessing approximately $54,000 in state use
taxes is pending departmental conference(s).
3. McClendon operates a self-insured workers' compensation program under the
supervision of the Alabama Department of Industrial Relations. Open claims
include 18 cases in the Circuit Courts of Chambers and Montgomery counties in
Alabama and 2 litigated cases in Georgia. This matter is ongoing and standard
within the industry. The Company believes that its maximum liability on the
aggregate 20 pending claims is approximately $ 700,000 which has been provided
for as a liability under accrued expenses.
4. Under our current liability Mutual insurance coverage for vehicle liability
claims we continue a self-insurance retention level of $100,000 per incident.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
To be submitted under separate cover.
ITEM 6: SELECTED FINANCIAL DATA
The following selected financial data is for the three fiscal years ended
December 31, 2000
2000 1999 1998
---------- ----------- -----------
Revenues $40,324,396 $48,671,565 $61,748,800
Loss Before Extraordinary
items $(3,733,169) $(1,293,317) $(3,131,753)
Net Loss $(2,020,324) $ (592,699) $(3,131,753)
Loss per Share $ (0.12) $ (0.04) $ (0.20)
Total Assets $13,926,397 $17,632,590 $22,356,395
Long Term Obligations $ 8,983,667 $ 3,980,612 $ 8,193,345
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION.
To be submitted under separate cover.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
To be submitted under separate cover.
ITEM 8: FINANCIAL STATEMENTS
TABLE OF CONTENTS
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INDEPENDENT AUDITORS' REPORT ...........................Page 1
FINANCIAL STATEMENTS
Balance Sheet...................................................2
Statement of Stockholder's Equity(Deficiency)...................3
Statement of Operations.........................................4
Statement of Cash Flows.........................................5
Notes to Financial Statements.............................6 to 19
INDEPENDENT'S AUDITORS' REPORT
- ------------------------------
The Directors and Stockholders
McClendon Transportation Group, Inc.
Lafayette, Alabama
We have audited the accompanying balance sheet of McClendon Transportation
Group, Inc. as of December 31, 2000, and the related statements of stockholders'
equity (deficiency), operations and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 our audit provides 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 McClendon Transportation Group,
Inc. as of December 31, 2000 and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company has experienced recurring operating losses
resulting in significant negative stockholders' equity. These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Notes 16 and
17. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ ROBINSON, GRIMES & COMPANY, P.C.
Certified Public Accountants
Columbus, Georgia
April 24, 2001
-1-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
BALANCE SHEET
AS AT DECEMBER 31, 2000
2000 1999
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 124,501 $ 76,020
Restricted investments 101,548 201,548
Accounts receivable - trade 4,096,769 4,353,589
Accounts receivable - other 347,552 338,617
Inventories 167,882 210,597
Prepaid expenses 2,000,533 3,021,736
--------- ---------
6,866,785 8,202,107
FIXED ASSETS(Net of accumulated depreciation
and amortization) 6,877,762 9,198,743
OTHER ASSETS 181,850 231,740
--------- ----------
$13,926,397 $17,632,590
========== ==========
2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
-----------
CURRENT LIABILITIES
Bank overdraft $ 2,609,261 $ 1,262,885
Short-term borrowings 5,052,875 5,801,862
Accounts payable 1,632,263 2,142,442
Accrued taxes 142,877 154,077
Other accrued charges 2,264,321 2,106,011
Income taxes payable -estimated 0 113,000
Current portion of long-term debt 3,110,074 9,597,818
---------- ----------
14,811,671 21,178,095
LONG TERM DEBT(less: current portion) 8,983,667 3,980,612
DEFERRED INCOME TAXES 1,918,000 2,406,000
---------- ----------
25,713,338 27,564,707
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STOCKHOLDERS' EQUITY(DEFICIENCY)
Common stock, par value $.001 each, authorized
100,000,000,
issued and outstanding - 16,228,000(1999-16,100,000) 16,228 16,100
Additional paid-in capital 254,155 88,783
Deficit (12,057,324) (10,037,000)
----------- ----------
(11,786,941) (9,932,117)
----------- ----------
$13,926,397 $17,632,590
=========== ==========
See Notes to Financial Statements
-2-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 2000
TOTAL
STOCKHOLDER
NUMBER PAID-IN ACCUMULATED EQUITY
OF SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
Balance - January 1,
1998 15,590,000 $ 15,590 $89,293 $(5,809,928) $(5,705,045)
Net loss - - - (3,131,753) (3,131,753)
Dividend declared
($.02 per share) - - - (315,091) (315,091)
---------- ------- -------- ----------- ----------
Balance, December 31,
1998 15,590,000 15,590 89,293 (9,256,772) (9,151,889)
Acquisition of assets
of RDA Services, Inc. 510,000 510 (510) - -
Net loss - - - (592,669) (592,669)
Dividend declared
($.01 per share) - - - (187,529) (187,529)
---------- ------- -------- ----------- ----------
Balance, December 31,
1999 16,100,000 16,100 88,783 (10,037,000) (9,932,117)
Issuance of common
stock 128,000 128 165,372 - 165,500
Net loss - - - (2,020,324) (2,020,324)
---------- ------- -------- ----------- ----------
Balance, December 31,
2000 16,228,000 $ 16,228 $254,155 $(12,057,324)$(11,786,941)
========== ======= ======== =========== ===========
See Notes to Financial Statements
-3-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
2000 1999
REVENUE
Freight $39,774,961 $48,267,343
Other freight related 549,435 404,222
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40,324,396 48,671,565
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OPERATING EXPENSES
Purchased transportation(owner-operators) 18,291,833 19,399,640
Salaries, wages and benefits 11,022,155 13,168,293
Operations and maintenance 6,361,252 7,099,219
Insurance and claims 2,480,961 2,537,758
Other rent expense 1,918,654 1,745,839
Taxes and licences 697,903 885,851
Communications and utilities 575,787 607,015
Depreciation and amortization 2,013,164 3,535,823
Sale of fixed assets and other expenses 266,239 (225,802)
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43,627,948 48,753,636
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OPERATING LOSS (3,303,552) (82,071)
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OTHER ITEMS
Interest income 47,386 57,795
Interest expense (1,640,997) (1,786,010)
Miscellaneous expenses (233,177) (70,676)
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(1,826,788) (1,798,891)
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LOSS BEFORE PROVISION FOR INCOME TAX BENEFIT
AND EXTRAORDINARY ITEM (5,130,340) (1,880,962)
PROVISION FOR INCOME TAX BENEFIT (1,397,171) (587,645)
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (3,733,169) (1,293,317)
EXTRAORDINARY ITEM(NET OF TAX EFFECT) 1,712,845 700,618
---------- ----------
NET LOSS $(2,020,324) $ (592,699)
========== =========
BASIC AND DILUTED LOSS PER SHARE
Loss before extraordinary item $ (0.23) $ (.08)
Extraordinary item 0.11 .04
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$ (0.12) $ .04
========== =========
WEIGHTED AVERAGE NUMBER OF SHARES 16,171,111 15,652,000
========== ==========
See Notes to Financial Statements
-4-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
2000 1999
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(2,020,324) $ (592,699)
---------- ----------
Adjustments to reconcile net loss to net cash provided
from operating activities:
Depreciation and amortization 2,013,164 3,535,283
Deferred income taxes-net (488,000) (385,700)
Gain on sale of fixed assets (675,521) (683,857)
Foregiveness of debt (2,635,095) (1,106,951)
Changes in current assets and liabilities
Accounts receivable 220,863 436,393
Inventories 42,715 82,285
Refundable income taxes (28,000) -
Prepaid expenses 1,021,203 118,348
Accounts payable (510,179) (283,594)
Other current liabilities 752,110 (621,165)
---------- ----------
(286,740) 1,091,582
---------- ----------
NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES (2,307,064) 498,883
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (2,016,731) (1,103,916)
Proceeds from sale of fixed assets 2,007,570 1,198,844
Decrease in other assets 49,890 170,719
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 40,729 265,647
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft - net 1,346,376 592,949
Restricted investments - net 100,000 (101,335)
Short-term borrowings - net (287,318) (745,042)
Proceeds of long-term debt 2,739,498 4,361,304
Principal payments on long-term debt (1,749,240) (5,121,155)
Issuance of common stock 165,500 -
Dividends paid - (187,529)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (2,314,816) (1,200,808)
--------- ---------
NET CHANGE IN CASH 48,481 (436,278)
CASH - January 1, 76,020 512,298
--------- ---------
CASH - December 31, $ 124,501 $ 76,020
========= =========
See Notes to Financial Statements.
-5-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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
-6-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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.
Reclassifications
Certain items in the 1999 financial statements have been reclassifed in
order to be in conformity with the 2000 statement presentation.
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.
-7-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
NOTE 3: Accounts Receivable
Trade accounts receivable are summarized as follows:
2000 1999
--------- --------
Trade accounts receivable $4,273,375 $4,466,470
Allowance for doubtful accounts (176,606) (112,881)
--------- ---------
$4,096,769 $4,353,589
========= =========
Accounts receivable other than trade are summarized as follows:
Officers and employees(Note 11) $ 158,089 $ 122,486
Insurance premium refunds 32,509 35,361
Miscellaneous 156,954 180,770
--------- ---------
$ 347,552 $ 338,617
========= =========
NOTE 4: Prepaid Expenses
Prepaid expenses are summarized as follows:
2000 1999
--------- ---------
Insurance, including deposits $1,568,316 $2,545,943
Taxes, licences and permits 390,434 418,491
Other 41,783 57,302
--------- ---------
$2,000,533 $3,021,736
========= =========
-8-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
NOTE 5: Fixed Assets and Depreciation
Major classes of fixed assets and accumulated depreciation are
summarized as follows:
2000 1999
----------- -----------
Land $ 295,944 $ 338,944
Building and land improvements 1,596,967 1,696,967
Revenue equipment 18,595,878 27,704,954
Furniture, fixtures and other 3,355,518 3,336,609
---------- ----------
23,844,307 33,077,474
Accumulated depreciation (16,966,545) (23,878,731)
---------- ----------
$ 6,877,762 $ 9,198,743
========== ==========
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. $ 3,230,358 $ 3,802,323
Demand note from Columbus Bank & Trust with
interest at prime plus 3%, accounts receivable,
contract rights as collateral. 1,513,049 1,513,049
Unsecured note from stockholders, interest at
8.5%, due January 18, 2001. 250,000 250,000
Other notes payable - stockholders 22,968 49,990
Other 36,500 186,500
---------- -----------
$ 5,052,875 $ 5,801,862
========== ===========
-9-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
NOTE 7: Other Accrued Expenses
Other accrued expenses are summarized as follows:
2000 1999
---------- ------------
Accrued self-insured liability claims
(see below) $ 351,843 $ 542,880
Accrued workers' compensation 1,077,000 1,028,049
Accrued interest 415,212 12,511
Other accrued expenses 420,626 522,571
---------- ----------
$ 2,264,321 $ 2,106,011
========== ==========
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.
-10-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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; $ 7,117,111 $ -
Note payable - equipment: Navistar Financial
Corporation (see below); 2,100,000 7,599,038
Note payable - equipment: Navistar Financial
Corporation weekly payments total $ 9,205
as of December 31, 1999, including interest
at 9.50% - 1,328,921
Note payable - equipment:
Associates Commercial Corporation, monthly
payments total $33,098 as of December 31,
1999, including interest at 9.25% - 527,319
Note payable -equipment:
TBCC Funding Trust I, monthly payments total
$75,034 as of December 31, 1999 including
interest at 10.4%; - 1,740,315
Note payable -equipment:
Financial Federal Credit, Inc. monthly
principal payments of $27,679 plus interest
at prime plus 2%, due October 2005; 1,605,380 1,118,546
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 $ 2,134,
including interest at 2.90%, due September
2003 73,250 99,291
Accrued workers' compensation(Note 14) 718,000 685,000
---------- ----------
12,093,741 13,578,430
Less: Current maturities (3,110,074) (9,597,818)
---------- ----------
$ 8,983,667 $ 3,980,612
========== ==========
-11-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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
December 31, 2000 are as follows:
2001 $ 3,110,074
2002 2,502,172
2003 2,682,131
2004 2,516,153
2005 1,283,211
----------
$12,093,741
==========
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.
-12-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBERR 31, 2000
NOTE 9: Operating Leases(continued)
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 0 132,000 420,144
2004 0 0 132,000 132,000
2005 0 0 132,000 132,000
--------- ------- ------- ---------
$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 $18,291,833 in 2000 and
$19,399,640 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 $ 449,616 $ 0
Trailer leases 834,696 888,966
McClendon Enterprises lease 132,000 229,500
Spotting service 289,791 388,192
Other rents 212,551 239,181
--------- ---------
$1,918,654 $1,745,839
========= =========
-13-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
NOTE 10: Income Taxes
The Company's net carry basis of long-term assets exceeded its tax
basis for such assets by approximately $6,878,000 at December 31, 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 $ 0 $ 161,716
State 0 42,672
Deferred tax benefit (1,397,171) (792,033)
---------- ----------
$(1,397,171) $ (587,645)
========== ==========
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
December 31, 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)
====== ======
-14-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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 $132,000 for 2000, $229,500 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 December 31, 2000 was
approximately $ 110,000 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 $ 22,968 and $ 49,990 at December
31, 2000 and 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% $ 126,440 $ 91,000
Other stockholder receivables 9,778 9,677
Other officer and employee receivables 21,911 21,809
--------- ---------
$ 158,089 $ 122,486
========= =========
-15-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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 $ 36,940 and $ 37,991 to the Plan for the years ended December
31, 2000 and 1999 respectively.
NOTE 13: Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
2000 1999
---------- ----------
Interest $1,238,297 $1,786,010
Taxes $ 151,548 $ 302,179
Non-Cash Financing Activity
The Company refinanced parts of certain loans with Navistar Financial
Corporation as disclosed in Note 8. As part of this refinancing,
certain equipment with agreed values was turned in to Navistar as
payment on the debt in the amount of $ 992,500 and $ 634,000 for the
years ended December 31, 2000 and 1999 respectively.
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.
-16-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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.
-17-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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
Notes payable $2,635,095 0
Liability insurance 0 $1,106,951
--------- ---------
2,635,095 1,106,951
Less: Deferred tax expense (922,250) (406,333)
--------- ---------
$1,712,845 $ 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.
-18-
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
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.
-19-
ITEM 9: CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The McClendon Transportation directors and executive officers and their ages
as of the date of this document are as follows:
Name Age Position
- -------- ------- -----------------------
Hugh McClendon 42 Chairman, Chief Executive Officer
James W. McClendon 40 President, Chief Operating Officer, Director
H. Glenn Scarborough 35 Vice President of Finance, Director
Biographical Information
Hugh F. McClendon
Hugh F. McClendon has been Chairman of the Board and Chief Executive Officer
of the McClendon Group for the past 6 years. He formerly served as Executive
Vice President. He began his career with the Company in 1979. Mr. McClendon
has served on the Board of Directors of the Alabama Trucking Association and the
Truckload Carriers Conference of the American Trucking Association. Mr.
McClendon received his B.A. from Auburn University in 1979.
James W. McClendon
James W. McClendon has been President and Chief Operating Officer of the
McClendon Trucking Group since 1995, and Vice Chairman of the Board since 1993.
He has been with the Company since 1980. He formerly served as Secretary-
Treasurer and Vice President of Administration from 1983 to 1988. Mr. McClendon
received his B.A. from Auburn University in 1980.
H. Glenn Scarborough
H. Glenn Scarborough has been Vice President of Finance of the Company since
1998. Mr. Scarborough is a CPA who began his career in public accounting. He
also worked in the hospitality, manufacturing and telecommunications industries
before joining McClendon in December, 1998. Mr. Scarborough received his B.A.
from the University of Georgia in 1986.
ITEM 11: EXECUTIVE COMPENSATION
To be submitted under separate cover.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 2000, certain information
regarding beneficial ownership of the common stock by (i) those persons
beneficially holding more than 5% of the Company's stock; (ii) directors who
beneficially own shares of the common stock; and (iii) all of directors and
officers as a group.
Name and Address Amount of Common Shares Percent
of Beneficial Owner of Beneficial Owner Of Class
- ------------------- ----------------------- ---------
Hugh F. McClendong 7,795,000 39.9%
Lafayette, Alabama
James W. McClendon 7,795,000 39.9%
Lafayette, Alabama
H. Glenn Scarborough 0 0.0%
Lafayette, Alabama
All Officers and Directors
As a Group 15,590,000 79.8%
PART IV
ITEM 14: 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 9, 2001