-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O4CxdL5VxZFcvuaAYoVGTKFr4yLCo8l/+469hJ5I34garLffv1a24eYr01yaHaCz LKP+d7FG9t9B3E7agLV66g== 0000881895-97-000002.txt : 19970328 0000881895-97-000002.hdr.sgml : 19970328 ACCESSION NUMBER: 0000881895-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OTR EXPRESS INC/KS CENTRAL INDEX KEY: 0000881895 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 480993128 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19773 FILM NUMBER: 97564584 BUSINESS ADDRESS: STREET 1: 804 N MEADOWBROOK DR STREET 2: PO BOX 2819 CITY: OLATHE STATE: KS ZIP: 66062-0819 BUSINESS PHONE: 9138291616 MAIL ADDRESS: STREET 1: P O BOX 2819 CITY: OLATHE STATE: KS ZIP: 66063 10-K 1 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, 1996 Commission file number 1-19773 OTR EXPRESS, INC. (Exact name of registrant as specified in its charter) Kansas (State or other jurisdiction or of incorporation of organization) 48-0993128 (IRS Employer Identification No.) 804 N. Meadowbrook Drive, Olathe, Kansas (Address of principal executive offices) 66062 (Zip Code) Registrant's telephone number, including area code (913) 829-1616 Securities Registered Pursuant to Section 12(g) of the Act: Title of each class Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for the 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. (1) Yes X No (2) Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of 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 voting stock held by non-affiliates of the registrant was $5,751,609 as of February 28, 1997. 1,840,515 (Number of shares of common stock outstanding as of February 28, 1997) Part II incorporates certain information by reference from the Registrant's Annual Report to Stockholders for fiscal year ended December 31, 1996 and Part III incorporates certain information by reference from the Registrant's definitive proxy statement dated April 2, 1997. OTR EXPRESS, INC. 1996 Annual Report on Form 10-K Table of Contents Page Part I Item 1. Business 3 Item 2. Properties 9 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 10 Item 6. Selected Financial Data 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 8. Financial Statements and Supplementary Data 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 10 Part III Item 10. Directors and Executive Officers of the Registrant 11 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 11 PART I Item 1. Business Overview The discussion set forth below as well as other documents incorporated by reference herein and oral statements made by officers of the Company relating thereto, may contain forward looking statements. Such comments are based upon information currently available to management and management's perception thereof as of the date of this Form 10-K. Actual results of the Company's operations could materially differ from those forward looking statements. Such differences could be caused by a number of factors including, but not limited to, potential adverse affects of regulation; changes in competition and the effects of such changes; increased competition; changes in fuel prices; changes in economic, political or regulatory environments; litigation involving the Company; changes in the availability of a stable labor force; ability of the Company to hire drivers meeting Company standards; changes in management strategies; environmental or tax matters; and risks described from time to time in reports filed by the Company with the Securities and Exchange Commission. Readers should take these factors into account in evaluating any such forward looking statements. The Company OTR Express, Inc., a Kansas corporation organized in 1985 (the "Company" or "OTR") operates as a long-haul, dry van, truckload carrier. The Company transports a diversified mix of general commodities, including paper products, food products, furniture, wire and retail goods for a large base of customers (currently over 1,000) throughout the continental United States. OTR is headquartered in Olathe, Kansas, a suburb of Kansas City, Missouri. Operating Strategy OTR's operating strategy is based in large part upon its proprietary Freight Optimization System - a next move probability based freight system. The system, developed internally over the last nine years, utilizes the Company's computer network and software system and consists of the following four components: (i) rate analysis, (ii) customer priority ranking, (iii) fleet replanning and (iv) equipment dispersal management. The Freight Optimization System enables the Company to analyze historical data to prioritize customers most likely to have freight that will produce the most profitable combination of rates and destination. The system is designed to maximize freight opportunities, maximize revenue per mile and minimize empty miles. Rate Analysis. The Company obtains market information on freight rates and destinations on a daily basis. This enables the Company to ensure that OTR is obtaining market rates on all freight. Customer Priority Ranking. The Freight Optimization System continually analyzes each customer's freight history and develops a customer priority ranking to direct our load planners to call customers with the highest probability of giving OTR the most profitable combinations of rates and destinations. Fleet Replanning. The Freight Optimization System replans OTR's fleet every three minutes and provides the Company's load planners with a time sensitive listing of the trucks that need to be reloaded. Equipment Dispersal Management. The equipment dispersal management system monitors the distribution of trucks across the country to maximize freight opportunities and minimize empty miles and downtime. In 1996, due to changing market conditions, the Company began marketing to larger national accounts capable of offering increased load counts at higher revenue rates. These larger shippers require additional services including guaranteed equipment availability, drop trailers and fifty-three foot trailers. Additionally, in 1996, the Company began offering QualComm satellite communications on every truck and electronic data interchange (EDI) for load status information to serve the larger national accounts. These larger shippers can be integrated into the Company's existing operating strategy effectively, providing a higher mix of more profitable shipper freight. The Freight Optimization System will continue to locate the most profitable combination of moves, working in conjunction with the new national accounts program. This operating strategy has contributed to the Company's rapid growth during the five year period ending December 31, 1996, with revenue increasing to $55.3 million in 1996 from $16.9 million in 1991 (a compound annual growth rate of 26.7%), and a corresponding increase in its fleet to 503 tractors from 162 during the same period. The Company intends to continue its expansion and growth by acquiring approximately 50 new tractors in 1997. These expansion plan commitments are flexible and conditioned upon freight demand. Customers and Marketing OTR has developed a marketing strategy that is designed to maintain a large customer base that is diversified in terms of geographic location and types of commodities shipped. The Company markets its services based on dependable, time definite delivery, service and pricing. The Company obtains freight in three different manners: directly from shippers ("OTR Shippers"), through Company agents ("Agent Shippers") and from freight brokers. OTR Shippers are marketed directly by internal OTR sales representatives. Agent Shippers are marketed by the Company's outside sales agents. The Company's customer database includes approximately 450 OTR Shippers, 275 Agent Shippers and 275 freight brokers. In 1996, OTR Shippers accounted for 46% of OTR's revenue miles, Agent Shippers accounted for 14% and freight brokers accounted for 40%. The freight obtained from OTR Shippers and Agent Shippers is generally more profitable than freight obtained from brokers, having freight rates which average 10% to 15% more than brokered freight. To maximize this more profitable revenue base by generating new OTR Shippers, OTR increased the number of its internal sales representatives and customer service representatives to thirteen at February 28, 1997 from three at December 31, 1994. These sales representatives have historically operated primarily through direct telemarketing efforts. In 1996, the Company began making trips to current customers and prospective customers in conjuction with its national account program. The Company plans to continue aggressive expansion of its internal sales force as well as the network of outside sales agents in 1997. For the year ended December 31, 1996, the Company's 20, 10 and five largest customers accounted for 29.9%, 20.6% and 13.1%, respectively, of the Company's operating revenue. The largest customer accounted for 3.8% of the Company's operating revenue for that period. Freight Brokerage Division To better service its customers, OTR has developed a freight brokerage division which brokers loads to other carriers. By brokering loads which the Company views as less profitable under its Freight Optimization System, the Company is able to increase its profitability while satisfying its customers' shipping needs without utilizing Company owned equipment. Freight brokerage division revenue increased to $3.3 million in 1996 from $2.6 million in 1995. In 1996, the Company hired additional staff for its brokerage operation. The Company's brokered freight is obtained through a network of freight brokers who contract for freight directly from shippers and re-contract with the Company to transport the freight. A freight broker helps carriers obtain loads in areas where the carrier does not typically have a large number of customers, thereby minimizing the empty miles of the carrier. Freight brokers typically earn a margin of approximately 10%-15% of the carrier's freight fee. The Company has developed a network of approximately 282 freight brokers. The Company believes that it has excellent relationships with these freight brokers, and that this network provides both profitable loads and valuable information for the Company's Freight Optimization System. Drivers and Other Employees Recruiting and retaining professional, experienced drivers is critical to the Company's success, and all of the Company's drivers must meet specific guidelines relating primarily to safety record, driving experience and personal evaluation, including drug and alcohol testing. OTR's drivers have an average age of 47.5 years and average 15.3 years of driving experience. Within the Company, drivers are considered "managers" and are given a high level of responsibility to manage the profitability of their equipment. The Company's Driver Incentive Management System allows experienced drivers to earn higher compensation than prevailing industry wages. The Company provides incentive programs for its drivers based on miles driven, fuel efficiency, safety record and profitability. OTR considers each tractor and its driver to be a separate profit center, with profit center reports, including the actual revenue and expense of the equipment and fixed expense components for administration, taxes and depreciation, generated monthly. Under the Company's "profit center" program, drivers can receive quarterly distributions equal to 50% of the net income of their profit center, up to a maximum of $2,650 in any calendar year. The program is designed to give OTR's drivers the incentive to improve their individual productivity, minimize costs and thereby increase overall Company profitability. Driver recruitment and retention is essential to the maintenance of high equipment utilization, particularly during periods of rapid fleet growth. OTR's drivers are given recruiting bonuses for the referral of new drivers to the Company. In order to attract and retain highly qualified drivers and to promote safe operations, the Company purchases premium quality tractors and equips them with optimal comfort and safety features, such as on-board satellite communications, high quality interiors, power steering, automatic braking systems, engine brakes and oversized sleepers. At December 31, 1996, the Company's ratio of tractors to non-driving employees was 5.59 to one, which management believes is well above industry standards. At February 28, 1997, the Company had 591 employees, of whom 488 were drivers and 103 were management and administrative personnel. The Company's employees are not represented by a collective bargaining unit. Employees participate in OTR's 401(k) program and in Company-sponsored health, life and dental plans. The Company does not have any employees who are receiving post retirement benefits and does not anticipate offering any post retirement benefits in the future. Management considers relations with its employees to be very good. The Company's driver turnover rate was 73% in 1996, which is below industry average. Revenue Equipment The Company believes that a key to the successful retention of drivers is the use of standardized, fuel efficient, late-model tractors and trailers. The Company purchases all new tractors, primarily with driver comfort, fuel efficiency, safety and overall economy in mind. To recruit and retain high-quality drivers, all the tractors owned by the Company have deluxe interiors and oversized sleepers. The average age of OTR's tractors and trailers at December 31, 1996 was 1.8 years and 1.9 years, respectively. The Company plans its trade cycle based on engine warranties and routinely replaces its tractors after forty months of use (approximately 400,000 miles). At December 31, 1996 the Company owned 232 Navistar tractors, 138 Peterbilt tractors and 133 Freightliner tractors. The tractors include engines which are fully electronic, manufactured by Detroit Diesel, Caterpillar or Cummins. Trailers in the fleet at year end were manufactured by Pines, Utility, Stoughton, Trailmobile and Fruehauf. All of the Company's trailers have a 110 inch inside and are 102 inches wide, the maximum width generally allowed by law. The trailer fleet at December 31, 1996 included 205 fifty-three foot trailers and 403 forty-eight foot trailers. The following table shows the age of Company equipment in service at December 31, 1996. Acquisition Year Tractors Trailers 1996 67 205 1995 248 130 1994 145 120 1993 43 85 1992 _ 68 Total 503 608 The Company's preventive maintenance program focuses on early diagnosis of problems and contracting maintenance out to third-party providers. In addition to annual DOT inspections, tractors are inspected when they pass through the Company's diagnostic facilities at its headquarters. All tractors are under warranty and are generally traded in before their engine warranties expire. The exclusive use of third-party maintenance providers, coupled with the effective utilization of manufacturers' warranties and the Company's trade-in policy, allows the Company to minimize its maintenance costs. Fuel Availability and Cost The Company actively manages its fuel costs through a five component fuel management system which incorporates: wholesale purchasing for the Company's unmanned fuel facilities, mileage pay rates based upon fuel economy, the "profit center" incentive driver compensation program, fuel hedging and equipment specifications. See "_ Drivers and Other Employees." The Company owns five automated fuel facilities, one located at the Company's headquarters in Kansas and one each located on major traffic lanes in Arizona, Ohio, Texas and Wyoming. Each of the four remote unmanned fuel facilities consists of an above-ground fuel tank, pump and a computer modem linking it directly to the Company's computers. In 1996, the Company purchased 32.1% of its fuel in bulk for distribution through its automated fuel facilities. These facilities allow the Company to purchase fuel at wholesale prices. As a way to protect the Company against major fuel price increases and "smooth" its fuel costs, since October 1994 the Company has engaged in a fuel hedging strategy. Pursuant to this program, the Company buys six month call options within $.10 of current market prices, to buy futures contracts for #2 heating oil, in amounts equal to the Company's anticipated fuel purchases for such period. All of the Company's tractors have fully electronic engines, which typically deliver enhanced fuel economy compared to tractors with mechanically governed engines. Environmental Matters The Company's operations are subject to federal, state and local laws and regulations concerning the environment. There is the possibility of environmental liability as a result of the Company's use of fuels, from the fuel storage tanks installed at its fuel facilities and also from the cargo it may transport. The Company's only underground storage tanks are two fiberglass tanks installed at its headquarters facility. One tank was installed in 1988 and the other in 1995. The tanks have overfill protection hardware, spill containment manhole covers and leak detection equipment. The Company believes that the use of above-ground storage tanks at its remote fuel facilities minimizes both potential liability and the cost of compliance with environmental regulations. The Company occasionally transports environmentally hazardous substances in accordance with haz-mat guidelines. To date, the Company has experienced no material claims for hazardous substance shipments. The Company believes that its environmental practices comply with applicable federal, state and local environmental laws and regulations. In the event the Company should fail to comply with applicable regulations, the Company could be subject to substantial fines or penalties and to civil or criminal liability. Competition The truckload industry is extremely competitive and highly fragmented, with numerous regional, inter-regional and national truckload carriers, none of which dominates the market. The Company competes primarily with other long-haul truckload carriers, rail-truck intermodal transportation, railroads and, to a lesser degree, with less-than-truckload (LTL) carriers. Most of OTR's larger truckload competitors utilize "core carrier" or "lane density" marketing concepts, which emphasize greater individualized service to a smaller number of shippers. Many long haul truck load carriers utilize driver teams which allow them to provide expedited service while complying with DOT regulations concerning driver's duty hours. OTR's drivers consist principally of single drivers. Intermodal transportation and railroads typically have created downward pressure on the truckload industry's pricing structure. The Company competes for freight based primarily on freight rates, service and reliability. Governmental Regulation The Company is a contract and common motor carrier subject to the authority of federal and state agencies. These regulatory authorities have broad powers, but the rates and charges of the Company are not directly regulated by these authorities. OTR, as primarily a contract carrier, negotiates competitive rates directly with its customers as opposed to adhering to scheduled tariffs. The trucking industry is subject to regulatory and legislative changes such as increasingly stringent environmental regulations and limits on weight and size that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and the costs of providing, services to shippers. In August 1994, the Federal Aviation Administration Authorization Act of 1994 (the "1994 FAA Act") became law. Effective January 1, 1995, the 1994 FAA Act preempted certain state and local laws regulating the prices, routes or services of motor carriers (other than household carriers). State agencies may continue to impose tax, license, bonding and insurance requirements. The 1994 FAA Act does not limit the authority of a state or other political subdivision to impose safety regulations or highway route limitations or controls based on the size or weight of the motor vehicle, the hazardous nature of cargo being transported by motor vehicles or minimum financial responsibility requirements relating to insurance and self- insurance authorization. The Negotiated Rates Act of 1993 ("NRA"), in tandem with the Trucking Industry Regulatory Reform Act of 1994 ("TIRRA"), further redefined the regulatory structure applicable to interstate transportation of goods. The NRA provided further regulation governing interstate transportation, including prohibitions on off-bill discounting, certain re-regulation of contract shipping arrangements, and, with respect to common carriers, regulation regarding the collection of undercharge claims, and applicable defenses and exceptions to such claims. The TIRRA further deregulated the trucking industry by partially repealing the "filed-rate" doctrine previously applicable to common carriers. Under the TIRRA, while collectively-made bureau rates must still be published in tariffs, individually negotiated rates are not. The Company's drivers must be licensed as "commercial drivers" pursuant to requirements established by the Federal Highway Administration ("FHA") of the DOT. In addition to the knowledge and driving skills tests required to obtain a commercial driver's license (a "CDL"), there are various disqualifying offenses set forth in the FHA rules, which, if committed, result in suspension or termination of the operator's CDL, as well as potential civil or criminal liabilities. Also, DOT regulations impose mandatory drug testing of drivers and the Company has its own ongoing drug- testing program. DOT alcohol testing rules require certain tests for alcohol levels in drivers and other safety personnel. Motor carrier operations are also subject to safety, equipment and operators' hours of service requirements prescribed by the DOT. During 1993, the Company underwent a DOT audit of its driver logs and currently has a satisfactory rating. Safety The Company maintains a program for training and supervising personnel to keep safety awareness at its highest level. The emphasis on safety begins in the hiring and training process. A minimum of 1.5 years of over-the- road driving experience is required for new drivers. OTR also verifies the driving records of all new drivers before they begin employment. Prospective employees are given physical examinations and drug tests, and newly hired drivers are trained in the Company's safety procedures. In general, any driver who violates the Company's safety standards will receive a warning letter, and any driver who has more than two such violations within certain periods of time is subject to termination. The Company continuously monitors driver performance and has final authority regarding employment and retention of drivers. OTR currently has a "satisfactory" safety and fitness rating from the DOT. See "_ Governmental Regulation." Item 2. Properties The Company owns real estate in Olathe, Kansas, where the Company is headquartered. The property includes a 22,000 square foot office facility and a 9,400 square foot diagnostic and inspection facility. The property also includes approximately 258,000 square feet of parking space and the Kansas fuel facility. Additionally, the Company owns tracts, each approximately one acre in size, in Arizona, Ohio, Texas and Wyoming, on which its remote fuel facilities are located. See "Item 1, Fuel Availability and Cost." Item 3. Legal Proceedings The Company is routinely a party to litigation incidental to its business, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. All litigation in which the Company is currently involved is covered by the Company's liability insurance (personal injury, physical damage and cargo) or workers' compensation insurance. The Company believes the ultimate outcome of current litigation will not have a material adverse effect on its financial position or results of operations. The Company maintains liability insurance (including umbrella coverage) in the amount of $10 million per occurrence for personal injury, property damage and cargo. Under the terms of the policy, the Company retains the first $100,000 of losses paid and loss adjusting expense. The Company is self-insured for workers' compensation insurance. The Company is responsible for claims up to $250,000 per occurrence. The Company carries excess insurance to cover losses over $250,000, subject to a maximum coverage of $10 million per occurrence and per year. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information required by this Item is incorporated by reference from the Company's Annual Report to Stock- holders for the fiscal year ended December 31, 1996, under the caption "Price Range of Stock." Item 6. Selected Financial Data The information required by this Item is incorporated by reference from the Company's Annual Report to Stock- holders for the fiscal year ended December 31, 1996, under the caption "Financial Highlights." Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by this Item is incorporated by reference from the Company's Annual Report to Stock- holders for the fiscal year ended December 31, 1996 under the caption "Financial Review." Item 8. Financial Statements and Supplementary Data Index to Financial Statements The information required by this Item is incorporated by reference from the Company's annual report to security- holders for the fiscal year ended December 31, 1996 under the caption "Financial Statements" and "Quarterly Financial Data." Annual Report Page Report of Independent Public Accountants 13 Balance Sheets 14 Statements of Operations 15 Statements of Stockholders' Equity 16 Statements of Cash Flows 17 Notes to Financial Statements 18 Supplemental Financial Information 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None. PART III Item 10. Directors and Executive Officers of the Registrant The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement under the headings "Proposal One: Election of Class B Directors-Nominees," "The Board of Directors-Continuing Directors," "Executive Officers-Information About Other Executive Officers" and "Miscellaneous-Section 16 Reporting" to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. Item 11. Executive Compensation The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement under the heading "Executive Officers-Executive Compensation and Other Information" to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement under the heading "Stock Ownership of Certain Beneficial Owners and Management" to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. Item 13. Certain Relationships and Related Transactions None. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K List of Documents filed as part of this Report on Form 10-K. (1) Financial Statements All financial statements of the Registrant as set forth under Item 8 of this Report on Form 10-K. (2) Financial Statements Schedules Page of Schedule Number Description 1996 10-K II Valuation and Qualifying Accounts 16 The report of the Registrant's independent public accountants with respect to the above listed financial statements and financial statement schedules appears on page 15 of this Annual Report on Form 10-K. All other financial statement schedules not listed above have been omitted since the required information is included in the financial statements or the notes thereto, or is not applicable or required. Reports on Form 8-K No reports on Form 8-K were filed for the year ended December 31, 1996. Exhibits Exhibit Number Description Page Number orIncorporation By Reference To 3(a) Articles of Incorporation, Exhibit 3(a) to AnnualReport as, amended for the year ended Dec 31, 1994 on Form 10-K (SEC File No. 1-19773) 3(b) Restated By-Laws Exhibit 3(b) to Annual Report for the year ended Dec 31, 1995 on Form 10-K (SEC File No. 1-19773) 4 The Registrant, by signing this Report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the Registrant. 4(a) Specimen Common Stock Certificate Exhibit 4(a) to Amendment No. 1 to Registration Statement on Form S-18(SEC File No. 33-44422FW) 10(a) 1991 Incentive Stock Option Exhibit 10(a) to Registration Plan of OTR Express, Inc Statement on Form S-18 (SEC File No. 33-44422FW) 10(b) Assignment regarding post Exhibit 10(aa) to Annual office box dated June 26, Report for the year ended 1992 between Registrant and Dec 31, 1992 on Form 10-K Boatmen's First National Bank (SEC File No. 1-19773) of Kansas City 10(c) Mortgage note dated January 10, Exhibit 10(xx) to Annual 1995 between Registrant and Report for the year ended Toni J. Waggoner and Robert E. Dec 31, 1994 on Form 10-K Waggoner , as Trustees (SEC File No. 1-19773) 10(d) Accounts Receivable Loan Exhibit 10(zz) to Annual Agreement dated August 27, Report for the year ended 1995 between Registrant and Dec 31, 1995 on Form 10-K Boatmen's First National (SEC File No. 1-19773) Bank of Kansas City 10(e) Amendment to Accounts Exhibit 10(aaa) to Annual Receivable Loan Agreement Report for the year ended dated April 27, 1995 between Dec 31, 1995 on Form 10-K Registrant and Boatmen's (SEC File No. 1-19773) First National Bank of Kansas City 10(f) OTR Express, Inc. 1996 Stock Exhibit 10(bbb) to Annual Option Plan Report for the year ended Dec 31, 1995 on Form 10-K (SEC File No. 1-19773) 10(g) OTR Express, Inc. 1996 Exhibit 10(ccc) to Annual Directors' Stock Option Report for the year ended Plan Dec 31, 1995 on Form 10-K (SEC File No. 1-19773) 10(h) Form of Carrier/Shipper Page 17 of sequentially Transportation Contract numbered pages 10(i) Contract to Purchase Tractors Page 19 of sequentially in 1997 between Registrant and numbered pages KCR International Trucks, Inc. 10(j) Contract to Purchase Trailers Page 20 of sequentially in 1997 between Registrant and numbered pages Utility Trailer Sales of Kansas City 10(k) Accounts receivable Loan Page 21 of sequentially Agreement dated May 1, 1996 numbered pages between Registrant and UMB Bank, N.A. 11 Statement re: Computation of Page 26 ofsequentially Earnings per Share numbered pages 13 Annual Report to Stockholders Page 27 of sequentially for the year ended December numbered pages 31, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registration has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OTR EXPRESS, INC. Date: March 15, 1997 /s/WILLIAM P. WARD Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ WILLIAM P. WARD Chairman of the Board March 15, 1997 William P. Ward President and Principal Executive Officer /s/ GARY J. KLUSMAN Executive Vice President March 15, 1997 Gary J. Klusman and Director /s/ JANICE K. WARD Vice President March 15, 1997 Janice K. Ward Compensation and Administration, Secretary and Director /s/ STEVEN W. RUBEN Vice President Finance March 15, 1997 Steven W. Ruben Principal Financial Officer and Principal Accounting /s/ CHRISTINE D. SCHOWENGERDT Treasurer March 15, 1997 Christine D. Schowengerdt /s/ JAMES P. ANTHONY Director March 15, 1997 James P. Anthony /s/ DEAN W. GRAVES Director March 15, 1997 Dean W. Graves /s/ RALPH E. MACNAUGHTON Director March 15, 1997 Ralph E. MacNaughton /s/ TERRY G. CHRISTENBERRY Director March 15, 1997 Terry G. Christenberry /s/ CHARLES M. FOUDREE Director March 15, 1997 Charles M. Foudree /s/ FRANK J. BECKER Director March 15, 1997 Frank J. Becker REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To the Board of Directors and Stockholders of OTR Express, Inc.: We have audited in accordance with generally accepted auditing standards, the financial statements included in OTR Express, Inc.'s annual report to shareholders incorporated by reference into this Form 10-K, and have issued our report thereon dated February 4, 1997. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements, and, in our opinion, fairly states in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Kansas City, Missouri February 4, 1997 Schedule II SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at Beginning Charged to End of Year Expense Deductions of Year Allowance for doubtful accounts 1994 40,279 30,989 31,272 39,996 1995 39,996 21,840 4,904 56,932 1996 56,932 38,070 37,986 57,016
CORPORATE INFORMATION Corporate Offices Common Stock Listing OTR Express, Inc. OTR Express, Inc. common stock 804 N. Meadowbrook Drive is traded on the NASDAQ National Olathe, Kansas 66062 Market System under the symbol: (913) 829-1616 OTRX Mailing address: PO Box 2819 Olathe, Kansas 66063-0819 EX-10 2 CARRIER/SHIPPER TRANSPORTATION CONTRACT rev 12/14/95 THIS CONTRACT, made this day of by and between ___________ (Shipper) and OTR Express, Inc. (Carrier) for the transportation of specified goods in accordance with the following conditions: WITNESSETH: WHEREAS, Carrier is a motor vehicle contract carrier in interstate commerce, holding Interstate Commerce Commission operating authority in Docket MC-181996; and WHEREAS, Shipper desires to engage the services of Carrier for the transportation of Shipper's goods in interstate commerce between points within Carrier's ICC authorized licenses; NOW, THEREFORE, in consideration of the following mutual covenants, the Shipper and Carrier agree as follows: 1. BILATERAL COMMITMENT: Shipper shall tender to Carrier and Carrier shall transport a series of shipments between points designated by Shipper. Carrier shall advise Shipper if it is unable to supply transportation service within the time requested by Shipper in which case Shipper may arrange other transportation. Carrier shall use its best efforts to transport shipments tendered by Shipper in a timely fashion. 2. DISTINCT NEEDS: Carrier shall provide service to meet the unique, distinct needs of the Shipper which shall include but not be limited to team service, driver loading/unloading, overnight delivery, stops in transit, drop trailers, detention, weekend/holiday shipments and dedication of equipment. 3. COMMON CARRIER RATES: Rates offered by Carrier under its common authority in individual or bureau tariffs do not apply to shipments tendered to Carrier by Shipper under this agreement. 4. RATES AND CHARGES: Shipper shall pay Carrier for the transportation services described herein at the rates and subject to the rules set forth in Appendix A or agreements/modifications later written between the parties which shall be deemed as additional appendices to this contract. 5. INDEMNIFICATION: Carrier shall furnish tractors and trailers to transport the goods tendered hereunder and to assume all costs and liabilities incident to the transportation of such goods and shall indemnify and hold the Shipper harmless from any costs and liabilities except those caused solely by acts of the Shipper, its employees or agents. 6. C.O.D. SHIPMENTS: In the absence of advance notification by Shipper and written acceptance by Carrier, no C.O.D. shipments will be tendered by Shipper. 7. INSURANCE: Carrier shall maintain public liability insurance with a single limit of not less than $1,000,000. Carrier shall maintain cargo insurance against Carrier's liabilities for loss or damage to goods shipped pursuant to this Contract with a limit of $500,000 per truckload which shall be carrier's maximum liability. For those shipments valued in excess of $500,000 Carrier shall not be liable to pay for a greater proportion of liability for loss or damage than $500,000 bears to 100% of the value of the goods. Carrier's insurance shall be primary insurance irrespective of any other insurance carried by Shipper in effect at the time of loss. 8. CLAIMS: All loss and damage claims and any salvage arising therefrom shall be handled and processed in accordance with the regulations of ICC as published in the Code of Federal Regulations (49 C.F.R. 1005). 9. COLLECTION FEE: If Shipper's account should necessitate outside collection action, Carrier reserves the right to add collection costs, finance charges, court costs and/or legal fees to the invoice amounts. 10. DURATION: This Contract shall continue for a period of (1) year and shall be renewed automatically for durations of an additional year but either party shall have the right to cancel this Contract upon 30 days prior notice to the other party. 11. PAYMENT TERMS: Net/30 Days from date of invoice. IN WITNESS WHEREOF, the parties hereto have executed this Contract in duplicate the date above first written. OTR Express, Inc (Carrier) (Shipper) By____________________________ By__________________________ Title_________________________ Title_______________________ EX-10 3 KCR INTERNATIONAL TRUCKS, INC. FINANCIAL SUMMARY PURCHASE CONTRACT 9300 SFA 6X4 DESCRIPTION PRICE TOTAL PRICE PER VEHICLE, INCLUDING FREIGHT (Less F.E.T.) $69,585.77 FEDERAL EXCISE TAX PER VEHICLE 7,437.00 TOTAL PRICE PER VEHICLE (With F.E.T) $77,022.77 EXTENDED WARRANTY COVERAGE 2,865.00 TOTAL PRICE PER VEHICLE $79,887.77 TOTAL PRICE FOR 200 VEHICLES $15,977,554.00 LESS TRADE-IN ALLOWANCE (150 TRADES) ($6,000,000.00) TOTAL NET SALES PRICE FOR 200 VEHICLES $9,977,554.00 We at KCR INTERNATIONAL TRUCKS thank you for the opportunity to make this proposal and will appreciate your acceptance. RANDY O'SHEA (816) 455-1833 APPROVED BY SELLER: APPROVED BY PURCHASER: KCR INTERNATIONAL TRUCKS, INC. OTR EXPRESS, INC. /s/ R. S. KING /s/ WILLIAM P. WARD BY: BY: C.E.O. 12/6/96 PRESIDENT 12/6/96 OFFICIAL TITLE DATE OFFICIAL TITLE DATE Proposal: 2606 -13- 12/05/96 EX-10 4 SALES ORDER UTILITY TRAILER SALES OF KC, INC. 11 N. James Street Kansas City, Ks 66118 (913) 321-6060 Purchaser OTR Express, Inc. Date 1/22/97 Address 804 N. Meadowbrook Dr. Delivery Per OTR Schedule City Olathe State KS ZIP 66063 Customer P.O. # Per Marc H. Telephone (913) 829-1616 Factory order # CA-2281 Quantity (190) Make 1997/8 Utility Model VS2DC Size 53'x102-3/8"x13'6" General specifications are as follows: Specifications are per OTR request dated 12/30/96 FIFTH WHEEL HEIGHT SIDE DOOR KING PIN SETTING SUPPORT LEG LOCATION FLOOR CRANK LOCATION FORKLIFT REINFORCING CROSSMEMBER FLOOR FILLERS REAR SUBFRAME TURN-UP DOCK BUMPER & STEPS INSULATION: FRONT WALL SUSPENSION ROOF SIDE WALL SUSP LOCATION FLOOR REAR DOORS SPRINGS FLOOR UNDERSKIN AXLES FRONT WALL LINING BRAKES SIDE WALL LINING OIL SEALS ROOF LINING HUBS REAR DOOR LINING DRUMS WEARBAND SLACK ADJUSTERS WIRING HARNESS FRONT CORNER POST CLEARANCE LIGHTS FRONT PANELS CLEARANCE LIGHT QTY UNIT PREP S/T/T LIGHTS SIDE PANELS TIRE CARRIER SIDE POSTS MUD FLAPS ROOF SKIN TIRES ROOF BOWS WHEELS REAR DOORS REFRIGERATION UNIT REAR DOOR PANELS DOOR HINGES/CROSSBRACES WEIGHT W/O UNIT LOCK RODS MISC. OTR Express, Inc. To have an REAR DOOR CASE option to purchase and additional (75) RUBBER BUMPERS trailers at the end of the original schedule for the same price w/o trades. You are hereby authorized to enter our order on your books for the above specified equipment and/or labor for which we agree to pay the sum of: AMOUNT EACH $20,570.00 TERMS: C.O.D. DEPOSIT: -0- F.E.T. Included CONTRACT :Number months TBA Down payment TBA SALES TAX ICC Exempt Contract conditions: TOTAL EACH $20,570.00 TOTAL ORDER $3,908,300.00 Trade-in allowance $1,778,000.00 Make Various Serial # Per OTR Schedule CONDITIONS OF SALES The seller is not responsible for loss, damage or delays in transportation after shipment, nor for failure to supply any goods where prevented by strikes, fires or accidents or by the demand exceeding the available supply or by any other causes beyond its reasonable control. In case the purchaser refuses to receive and pay for said goods in full as provided, the seller may retain as liquidated damages all money or goods paid on account of said goods herein furnished. If a tax is imposed by a State or Federal Government because of the sale of the specified articles an amount equal to such tax will be added to the above price and paid by the purchaser to the vendor. This order is subject to a change in price which may be effective at the time of delivery. The future labor and material costs may make it necessary for us to modify this price at the date of delivery. Order taken by /s/ Jeff Janssen Price OK Signed OTR Express, Inc. By: /s/ William P. Ward, Pres. EX-10 5 MASTER NOTE UMB BANK, N.A. 1010 GRAND AVE, KANSAS CITY, MO 64106 Loan Number:0015644 TST Date: NOVEMBER 1, 1996 AMOUNT: $5,500,000.00 FOR VALUE RECEIVED the undersigned (the "undersigned" means each maker and each endorser, and if more than one, each shall be jointly and severally liable hereunder) promises to pay to the order of UMB BANK, N.A., (hereinafter "Bank") at its main office or at such other place as the holder hereof may from time to time designate in writing, on MAY 1, 1997, the principal sum of FIVE MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars ($5,500,000.00), or such other lessor amount as shall be noted as the Unpaid Principal Balance on the Schedule of Disbursements and Payments of Principal included herein or attached hereto pursuant to the authority set forth herein, together with interest on the unpaid principal balance hereof from time to time outstanding from date(s) of disbursement(s) until Maturity (as herein defined) at the rate (the "Loan Interest Rate") indicated below: X Periodic Variable Rate. From the date hereof until the first Adjustment Date (as herein defined) the Loan Interest Rate shall be EIGHT AND 250/1000 percent per annum. On each Adjustment Date hereafter, the Loan Interest Rate shall be adjusted to a rate equal to NO/1000 percentage points above the Index Rate (as herein defined) in effect as of such date. The term "Adjustment Date" shall mean FEBRUARY 1, 1997, and the 1ST day of each QUARTER thereafter. The Bank's Index Rate for this Note is defined as: UMB BANK,N.A. INDEX RATE Accrued interest shall be payable Monthly. The term "Maturity shall mean MAY 1, 1997, or any earlier date on which payment hereunder is due pursuant to any demand or acceleration rights provided in this Note. The term "Index Rate", if applicable to this Note, shall mean that rate of interest per annum determined from time to time by Bank as its base or index rate for loans to commercial borrowers. Such base or index rate does not necessarily reflect the rate that Bank charges its best or most creditworthy customers. If the Bank is precluded by law or otherwise from using the above base or index rate, the term "Index Rate" shall mean that substitute index rate selected by Bank in place of its base or index rate, which substitute index rate shall be comparable to Bank's base or index rate provided for herein. Interest hereunder shall be computed on the basis of days elapsed and assuming a 360-day year. Each payment received shall be applied first to accrued interest, and then to a reduction of the principal sum and any expense or other sums owed under this Note, or in any other order as determined by Bank in Bank's sole discretion and as permitted by law. Any sum remaining unpaid after Maturity shall thereafter bear interest at a rate (the "Default Interest Rate") which shall be at all times TWO AND NO/1000 percentage points in excess of the Loan Interest Rate (adjusted, if applicable, as provided above) that would have been applicable but for such Maturity. If not paid at Maturity, interest thereafter shall be compounded monthly. The privilege is hereby reserved to prepay without penalty all or any part of the outstanding amount due hereunder at any time prior to Maturity. If at any time prior to Maturity the outstanding principal balance due hereunder is less than the face amount of this Note, the undersigned, or any of them, may from time to time until Maturity request, and Bank may in its sole discretion make, further disbursements hereunder which shall be evidenced by this Note; provided, however, the aggregate amount of all principal amounts outstanding hereunder shall at no time exceed the face amount of this Note; and provided further, that each and every disbursement made under this Note shall be at the Bank's sole discretion, Bank having made no commitment to make any such disbursements. The principal amount due hereunder shall be the last amount stated to be the Unpaid Principal Balance on the Schedule of Disbursements and Payments of Principal, and the undersigned hereby authorizes any officer of the Bank to make notations on the Schedule of Disbursements and Payments of Principal from time to time to evidence payments and disbursements hereunder. The Bank is hereby directed by the undersigned to credit all future disbursements, if any, under this Note to account number 987-072-839-7 carried on the books of Bank in the name of OTR EXPRESS, INC., and the undersigned agrees that the Bank or holder hereof may make disbursements, at its discretion, upon oral or written instructions of any of the undersigned, or any other person(s) authorized by any of the undersigned. Notwithstanding anything contained herein to the contrary, in no event shall interest accrue under this Note, before or after Maturity, at a rate in excess of the highest rate permitted by applicable law, and if interest (including any charge or fee held to be interest by a court of competent jurisdiction) in excess thereof shall be paid, then the excess shall constitute a payment of, and be applied to, the principal balance hereof, or at Bank's option, shall be repaid to the undersigned. The undersigned warrants and represents that all proceeds of the loan evidenced by this Note are to be used solely for business or agricultural purposes, and not for personal, family or household purposes. The undersigned agrees that if the proceeds are to be used for agricultural purposes, such proceeds will be used only for the specific operating purposes described to Bank by the undersigned, and not for the acquisition of fixed assets or capital expenditures. No collateral security securing this Note will be sold unless Bank is first notified and approves in writing of such sale. As security for the payment of all amounts due under this Note and all renewals and extensions hereof, and for the payment of all other present or future indebtedness and obligations to the Bank of any party liable hereon, however and whenever created, arising or evidenced, direct or indirect, contingent, secured, unsecured, matured or not yet due, the undersigned pledges and grants to Bank a lien and security interest in all indebtedness of Bank to any of the undersigned, including (without limitation) any moneys, credit balances or deposits (general or special) due from or standing on deposit with the Bank, which belongs to, is in the name of, or is subject to withdrawal by, any party liable hereon, whether now existing or hereafter arising or deposited, and in all items, moneys, instruments, certificates of deposit, securities and other personal property of or in the name of any of the undersigned now or hereafter in the possession or control of, or in transit to, the Bank for any purpose and in any capacity (but excluding however from the foregoing any accounts or deposits held in or by any trust qualified under sections 401(a) or 408 of the Internal Revenue Code of 1986), including all proceeds and products thereof and all accessions and accruals thereto and all dividends, rights, payments, shares and property received in respect thereto, the undersigned further agreeing that the aforesaid indebtedness (if any) of Bank to any of the undersigned may, at any time that all or any part of this Note remains unpaid (whether before or after Maturity), be held or applied to the payment of this Note by the holder hereof. Nothing herein shall in any way limit any of Bank's rights of setoff. This Note may also be secured by other collateral in which the undersigned or others may have granted a security interest or lien to Bank, including, without limitations, the following: ACCOUNTS RECEIVABLE AS FURTHER DESCRIBED IN SECURITY AGREEMENT DTD 5-1-96. Bank may retain any and all of the above collateral security, irrespective of the payment in full of the indebtedness evidenced by this Note, until all indebtedness secured thereby has been repaid and performed in full. It is intended that the above security interests and liens secure all of each of the undersigned's existing and future indebtedness to Bank of all types and nature, including indebtedness unrelated or dissimilar to the indebtedness evidenced by this Note. If this Note is secured by a mortgage or deed of trust, such mortgage or deed of trust is dated ________ and is a lien on real property located in the State of ________ and recorded in such state. The undersigned agrees to give to Bank upon Bank's request, from time to time, such other and further security as Bank, in its sole discretion, may deem necessary or appropriate, such additional security to become collateral security for this Note under the provisions hereof. Presentment, demand, notice of nonpayment, dishonor, protest, notice of protest, notice of dishonor or default, and any and all lack of diligence and suit are hereby waived by all parties liable hereon. The undersigned and each endorser, guarantor, surety or other person who may now or hereafter be liable for the payment of this Note, by executing, endorsing, guaranteeing or assuming this Note, jointly and severally consent and agree to all of the terms and conditions herein, and without limitation of the foregoing and without affecting their liabilities hereunder or under any other document or instrument, agree and consent without further notice to (i) all renewals, deferrals, extensions and modifications hereof, (ii) the impairment, alteration, compromise, acceleration, extension or change in the time or manner of the payment of any of the undersigned's indebtedness to Bank, (iii) the impairment, substitution, exchange or release at any time of all or any part of any collateral security or any guaranty for this Note, (iv) the release of, or impairment of the right of recourse against, any of the undersigned or any endorser, guarantor, surety or any other person now or hereafter liable hereon, (v) the substitution of extension or renewal notes for this Note, and (vi) the modification of any terms hereof or of any mortgage, deed of trust or other agreement now or hereafter given in connection with or as security for this Note. To the full extent (if any) permitted by applicable law, the undersigned agrees to pay, and to indemnify Bank from and against, all costs, charges, expenses, judgements, fines, penalties and reasonable attorneys' fees incurred by the holder in: (a) collecting this Note, (b) enforcing rights with respect to or realizing upon any collateral security therefor, (c) defending any action brought against Bank with respect to this Note, any matter relating thereto or to any relationship or transaction between Bank and any of the undersigned, or (d) complying with, or failing to comply with, any Environmental Regulations (as herein defined) including abatement and cleanup costs. Any sums paid by the holder for any such expenses shall be immediately due and payable by the undersigned and shall bear interest at the rate then applicable to any outstanding principal hereunder from the date advanced until paid. The occurrence of any of the following shall constitute an "Event of Default": (i) default in the payment of any sum due hereunder, or in the payment or performance of any other obligation of any of the undersigned to Bank or the occurrence of any default by any of the undersigned pursuant to any obligation or undertaking under any security agreement, assignment, pledge agreement, deed of trust, mortgage or other instrument or document governing or relating to the indebtedness evidenced hereby or granting or providing for a security interest, pledge or other lien as security for any obligations of any of the undersigned to Bank (including, but not limited to, the indebtedness evidenced by this Note); (ii) the occurrence of any adverse development with respect to the financial condition of any of the undersigned or any other person or entity("Guarantor") who is directly or indirectly liable for any of the indebtedness evidenced by this Note, which materially affects the ability of any of the undersigned or such Guarantor to perform their respective obligations to Bank; (iii) any material representation or warranty made by any of the undersigned or any Guarantor to Bank being untrue, inaccurate or incomplete as of the day it was made or given; (iv) the death, dissolution or termination of existence of any of the undersigned or any Guarantor or the failure of any of the undersigned or any Guarantor to pay debts as they mature, the appointment of a receiver for any part of the property of any of the undersigned or any Guarantor, an assignment for the benefit of creditors by any of the undersigned or any Guarantor, or the commencement of any proceedings under bankruptcy or insolvency laws by or against any of the undersigned or any Guarantor; *(v) a levy, attachment, restraint or other legal process filed against any of the undersigned or any Guarantor or any collateral security securing this Note; (vi) as a result of its reasonable determination that any collateral security given for this Note is impaired or has a value insufficient to adequately secure the obligations of the undersigned secured thereby, Bank has requested additional collateral and such additional collateral has not been promptly provided by the undersigned or a Guarantor, of a type and in the manner satisfactory to Bank; (vii) that subsequent to the date of this Note (or any predecessor note(s) for which this Note constitutes a renewal, extension or refinancing) there has occurred a "change of control" in any of the undersigned that is a corporation or partnership (for purposes of this Note, a "change of control" is deemed to have occurred upon the transfer, directly or indirectly, in one or more transactions, of any general partnership interest or of n/a % or more of any class of voting stock of a corporation or the right to vote or control such stock or partnership interest, or if the percentage of a corporation's issued and outstanding shares that are held by any one shareholder changes (for any reason) by more that n/a percentage points) or (viii) Bank has deemed itself insecure with respect to the undersigned's indebtedness under this Note or with respect to any of the undersigned's other obligations to Bank. Upon the occurrence of any Event of Default, Bank may, at its sole option and without limitation on the demand feature of this Note and without notice or demand: (A) declare the entire principal sum owed hereunder and all other indebtedness of the undersigned to Bank, immediately due and payable; (B) appropriate and apply toward the payment of the undersigned's obligations to Bank (including, but not limited to, the indebtedness evidenced by this Note), in such order of application as it elects, any or all balances, credits, deposits, *LIMITED TO LAWSUITS OF $2.5 MILLION OR GREATER accounts or moneys of or in the name of any of the undersigned then or thereafter with Bank in any capacity; and (C) exercise, in addition to all other rights hereunder or under any other applicable agreements and instruments, its rights under applicable law, including those of a secured party under the Uniform Commercial Code of the State of Missouri. Upon the occurrence of an Event of Default described in clause (iv) of the immediately preceding paragraph, this Note shall automatically and immediately become due and payable without notice or demand. The failure of the Bank to exercise any option or right or remedy shall not preclude Bank from exercising any other right or remedy Bank may be entitled to exercise upon the occurrence of any Event of Default hereunder, and shall not constitute a waiver of such option or any other right at any time thereafter. Bank's acceptance of a partial payment of any sum due hereunder after any Event of Default or after Maturity, shall not rescind, waive or otherwise affect any such Event of Default or Maturity or any acceleration or any other exercise by Bank of any of its rights hereunder or under any other documents or applicable law. The undersigned agrees that time is of the essence. If any provision of this Note violates the law or is unenforceable, the other provisions of this Note shall remain valid. The undersigned shall furnish to Bank such information and reports regarding any collateral security, the undersigned's financial condition and operations, and such other matters as Bank may from time to time reasonably request. Specifically, and without limitation on the foregoing, the undersigned shall provide to Bank upon reasonable request, current financial statement for each of the undersigned and each Guarantor including, but not limited to, balance sheets and profit and loss statements. The undersigned shall comply with all federal, state and local laws, statutes, rules, regulations, standards, ordinances and orders pertaining to the environment, hazardous substances, pollutants or contaminants ("Environmental Regulations") and shall immediately deliver to Bank copies of any notice or other communication received by any of the undersigned alleging a violation of, or a failure to maintain any permit or license required by, any Environmental Regulations. The undersigned covenants, represents and warrants to Bank that any property now or hereafter or previously owned or operated by any of the undersigned, has not been, and will not be, used by any of the undersigned, or to the best knowledge and belief of each of the undersigned, by any prior owner or operator, to refine, produce, store, handle, process or transport any hazardous substance, pollutant or contaminant except in full compliance with all applicable Environmental Regulations, and that any substance disposed of off-site by any of the undersigned have been, and will be, disposed of in accordance with all applicable Environmental Regulations. The loan evidenced hereby has been made, and this Note has been delivered, at Bank's office at the address indicated above, and such loan, this Note and the rights, obligations and remedies of Bank and the undersigned shall be governed by and construed in accordance with the laws of the State of Missouri. All obligations of the undersigned, and the rights, powers and remedies of Bank, expressed herein shall be in addition to, and not in limitation of, those provided by law or in any written agreements or instruments (other than this Note) relating to any obligation of any of the undersigned to Bank, the loan evidenced by this Note or any collateral security. It is the intent hereof that each of the undersigned (if more than one) remain liable as principal until the full amount of all indebtedness evidenced by this Note has been paid, notwithstanding any act, omission or event that might otherwise operate as a legal or equitable discharge or defense with respect to any of the undersigned. No setoff or counterclaim of any kind claimed by any person liable under this Note shall stand as a defense to the enforcement of this Note against any such person, it being agreed that any such setoff or counterclaim must be maintained by separate suit. The undersigned and Bank hereby agree to trial by court and irrevocably waive jury trial in any action or proceeding (including but not limited to any counterclaim) arising out of or in any way relating to or connected to this Note, any relationship or transaction between any of the undersigned and Bank, the origination, administration or enforcement of the indebtedness evidenced or secured by this Note, or any other matter. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT. Address: 804 N. MEADOWBROOK DRIVE Borrower: OTR EXPRESS, INC. OLATHE, KS 66063-0819 By: /S/WILLIAM P. WARD Title: Pres. Borrower: By: /S/ GARY J. KLUSMAN Title: Ex. V. P. EX-11 6 OTR Express, Inc. Exhibit 11. Statement Re: Computation of Earnings Per Share Earnings per share is calculated by dividing net income by the average weighted number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents include the outstanding convertible preferred stock. EX-13 7 OTR EXPRESS, INC. 1996 ANNUAL REPORT (Pictured on cover OTR tractor omitted) OTR uses technology and its proprietary Freight Optimization System to profitably acquire and haul freight in the full truckload industry. OTR maximizes freight oportunities from a large base of more than 1,000 customers, geographically dispersed throughout the United States. OTR implemented a marketing program in 1996 to provide total transportation solutions to larger shippers. We now offer QualComm satellite communications on every truck, electronic data interchange (EDI) for load status information and 53- foot air-ride trailers for premium capacity and safety. In 1996, OTR began marketing its services to larger national accounts capable of offering increased load counts at higher rates. OTR's unique operating strategy and its technological leadership have enabled it to grow revenues at an annual compound growth rate of 27% over the past five years. Table of Contents Highlights 1 Report to Stockholders 3 Technology, Customer Service and Marketing 6 Driver Incentive Management System 8 Financial Review 9 Financial Statements 13 Directors and Officers 25 Quarterly Financial Data 26 Stockholder Information 28 (Graphs-five year histories of various operating statistics omitted) Financial Highlights
(In thousands except per share data) 1996 1995 1994 1993 1992 Income Statement Data Operating revenue $55,261 $49,211 $42,760 $30,646 $21,993 Operating income 2,195 2,029 3,648 2,452 1,780 Net income (loss) (368) (157) 1,278 744 546 Outstanding shares 1,836 1,830 1,825 1,817 1,725 Earnings (loss) per share $ (0.20) $ (0.09)$ 0.70 $ 0.41 $ 0.32 Operating ratio (1) 96.0% 95.9% 91.5% 92.0% 91.9% Balance Sheet Data Current assets $ 7,681 $ 6,799 $ 6,109 $ 4,413 $ 2,990 Current liabilities 19,152 17,187 10,781 7,402 4,420 Total assets 50,576 48,883 36,720 28,508 22,291 Short-term debt 15,751 13,968 7,913 5,606 3,340 Long-term debt, less current portion 21,019 20,844 14,595 11,995 10,090 Stockholders' equity 8,805 9,156 9,301 7,973 7,207 (1) Operating expenses as a percentage of operating revenue Operational Highlights 1996 1995 1994 1993 1992 Total miles (in thousands) 52,330 47,197 40,279 30,644 22,195 Average number of tractors 506 450 345 262 189 Revenue per loaded mile $ 1.042 $ 1.031 $ 1.041 $ 1.013 $ 0.997 Revenue per mile $ 0.973 $ 0.963 $ 0.983 $ 0.957 $ 0.936 Miles per week per truck 1,984 2,015 2,247 2,249 2,247 Empty miles percentage 6.6% 6.6% 5.6% 5.6% 6.1% Miles per load 1,464 1,506 1,576 1,552 1,460 Licensed tractors - end of period 503 503 394 301 228 Licensed trailers - end of period 608 567 449 329 244 Average equipment age (in years) Tractors - end of period 1.82 1.23 1.50 1.34 1.12 Trailers - end of period 1.88 3.05 2.92 2.81 2.60 Fuel purchases at wholesale (% of total ) 32.1% 31.9% 36.4% 32.3% 28.2% Blended average fuel cost per gallon $ 1.17 $ 1.07 $ 1.04 $ 1.04 $ 1.06
To Our Stockholders: The trucking industry was very challenging again in 1996, which included the second consecutive year of weak freight demand, high fuel prices and a shortage of qualified drivers. The end result was a disappointing loss of $0.20 per share accompanied by a decline in the stock price and market capitalization. The adversity faced by the company in the past two years has encouraged us to continue to modify our marketing approach to a changing industry. We began with a goal of increasing our percentage of shipper freight with a corresponding reduction in less profitable broker freight. Today we have a new focus on marketing, customer service and national account development. During 1996, OTR implemented major programs, all of which are significant changes designed to provide total transportation solutions to expand our customer base. These included on-board satellite communications; electronic data interchange (EDI) with our customers, guaranteed equipment and rates for customer contracts; conversion of the trailer fleet from 48 foot to 53 foot air-ride; additional drop- trailers for customers; and expanded brokerage services to cover logistics packages. Our marketing department is now three times its former size and 400 new shippers generating 6,000 loads were added in 1996 . We are targeting larger national accounts to complement our freight optimization system, which maximizes the profitability of freight acquired on the spot market. Our 1996 shipper statistics reflect the success of our new marketing effort. Shipper freight increased from 52% to 66% of total miles, reducing broker freight from 48% to 34%. Revenue increased by $6.0 million or 12% from 1995 in the midst of a weak market. We accomplished these results with an emphasis on technological excellence and on-time reliability for our customers. We believe we have made the correct decisions in 1996 with our investment in customer service and marketing. The company is now in a position to compete for freight on any level. The future for OTR and the truckload industry depends on technology, reliability and customer service. (Picture of Executive Officers omitted) 1996 Results Revenues increased by 12% to $55.2 million in 1996 from $49.1 million in 1995. Operating income improved 8% to $2.2 million from $2.0 million. The company reported a net loss for the year of $368,000 or $0.20 per share compared to a loss of $157,000 or $0.09 per share in 1995. The revenue increase was primarily related to a 12% increase in the fleet size in 1996. Although the economy continued to grow in 1996, freight demand was weak throughout the year as a result of an over-capacity of trucks nation-wide. At 1,984 miles per unit per week, utilization was comparable with 1995. Fuel costs were expected to trend downward during 1996. Forecasted increases in exports from Iraq and lower crude oil costs never developed. Inventories declined to minimum levels while refineries waited in vain for a decline in crude oil prices to build up diesel stocks for the winter. As a result, diesel fuel prices trended higher throughout the year, peaking at an average of $1.28 per gallon in the fourth quarter. For the year, higher fuel costs (net of recovery from fuel surcharges and fuel hedging) reduced earnings by $0.20 per share. Wages and benefits as a percentage of revenue stabilized during 1996. OTR continues to pay premium wages to attract experienced drivers. The average compensation for a driver with OTR for all of 1996 was $39,400. Staffing the trucks with the quality of driver we demand continues to be a challenge in the face of a national driver shortage. Our unmanned truck percentage was 6.0% in 1996 compared to 4.6% in 1995 and a target of 3.5%. Our demographics remained strong with a fleet average of 17 years over-the- road driving experience. 1997 It appears that 1997 will see a continuation of the dramatic changes that are reshaping the truckload segment of our industry. We have already altered the direction and strategy at OTR to capitalize on these changes. We expect over-capacity in the truckload market to be reduced in 1997, improving the demand for freight services. Only those carriers providing shippers with increasingly reliable service and sophisticated technology will benefit from the improvement, however. We will strive to be a leader in providing advanced technology as well as high quality freight services to our customers. (Picture of OTR tractor omitted) In August 1996, we completed the installation of on- board satellite communications in all our trucks. We now have continuous communication with our drivers and the current location of any truck through satellite positioning. This capability is required by many larger shippers who use EDI for inventory control purposes. Expansion plans for 1997 will add 50 units to the fleet, bringing the total to 553 units. The expansion is contingent on strong freight demand and fleet staffing experience during the year. We are proud of the creativity and hard work of our people in management information systems (MIS) and the strides they have made in the past two years. They have successfully integrated our on-board satellite messaging system with our load order system and developed new EDI solutions for five of our larger shippers in 1996. Our local area network now links all of our 130 computers, using internally developed software that can be modified continuously to meet our changing requirements. We have made excellent progress in positioning ourselves as a company that can provide technological solutions for customer service requirements. Technology and customer focus will determine the success of truckload carriers in the future. These areas will receive the highest priority in the years ahead. We expect 1997 to be a year in which our efforts to adapt to industry changes will allow us to achieve a position of leadership in the industry. Our size will allow us to be flexible and innovative in an increasingly sophisticated and competitive market. All associates of OTR Express remain committed to achieve our mission statement of becoming the most efficient provider of high quality truckload service in America. We want to thank our investors for their continuing interest and confidence. We will strive to provide you an interesting and profitable investment as a result of your ownership in our company. Very truly yours, /S/ William P. Ward William P. Ward President and Chairman (Picture of Vice Presidents omitted) OTR Technology OTR has utilized its leading edge technological capabilities to be an industry leader in customer service and on time reliability. Our historical on-time delivery percentage is in excess of 96%. In 1996, we made several investments in technology that will enable OTR to maintain its customer service leadership. Our new investments include: o Qualcomm Omnitracs System - Each OTR truck is equipped with a Qualcomm Omnitracs on-board satellite communications system that provides on-demand, immediate contact with any driver and global positioning reports for equipment location, anywhere in the nation. The company receives hourly position reports on all of its trucks. This service is critical for customers with just-in-time inventory management programs. o Electronic Data Interchange (EDI) - Using set protocols, OTR provides daily or on-demand transfer of load status information to our customers by computer. o Bar coding (October 1997) - Cartons will contain bar coding information input by shippers. This will enable receivers to swipe the bar codes with a "wand" and obtain the corresponding receiving information to input into their inventory system. Customer Service and Marketing In the past eighteen months, OTR's marketing strategy has adapted to changing market conditions, primarily as a result of our goal to achieve higher levels of shipper freight. The company will continue to maximize the number of customers and, therefore, freight opportunities for the freight optimization system. In addition, we are continuing to market OTR to larger national accounts capable of offering increased load counts at higher revenue rates. These larger shippers can be integrated into our existing operating strategy effectively, providing a higher mix of more profitable shipper freight. In addition to the advanced technology, we are offering customers the following services: o Guaranteed equipment availability and rates, a commitment to a higher level of customer service. o Total transportation solutions, including additional drop trailers, expanded brokerage department to cover loads and warehousing. o Fifty-three-foot trailers in order to market to a new segment of shippers with requirements for higher cubic capacity. As of December 31, 1996, more than one-third of our trailer fleet had been converted to the 53-foot format. o In late 1996, OTR established a new customer service department dedicated to serving the freight needs of our larger national account shippers. The customer service department provides those customers with a dedicated contact within OTR who can respond to all customer needs. OTR Services OTR Services is our brokerage division, which includes a base of more than 900 quality carriers who can provide service beyond our own equipment availability. OTR Services enables OTR to meet all of a shippers needs in just one phone call. In 1996, OTR Services revenues increased by more than 50% primarily due to the increase in OTR's customer base. OTR Efficiency OTR continues to be one of the most efficient carriers in the industry due to our focus on technology and our experienced drivers. Our tractor-to-administrative staff ratio, a measure of operating efficiency, is 5.59 to 1 in an industry where 3.5 to 1 is considered very good. Freight Optimization System OTR continues to utilize the Freight Optimization System as the core of its dispatching and freight selection process. The OTR operating strategy places a premium on management information and load planning systems. The Freight Optimization System utilizes the company's computer network and a software system developed internally during the past eight years. This unique system allows OTR to maximize rates and minimize empty miles. The Freight Optimization System consists of the following four continuous systems: o Rate Analysis - The company obtains the most current market information on freight rates and destinations from brokers. This enables the company to ensure that OTR is obtaining market rates on all freight. o Customer Priority Ranking - The system continually analyzes our customers' freight history and develops a customer priority ranking to direct our load planners to call customers with the highest probability of giving OTR the most profitable combinations of rates and destinations. o Fleet Replanning - The system replans the fleet every three minutes, and provides the load planners with a time sensitive listing of the trucks that need to be reloaded. o Equipment Dispersal Management - The dispersal management system monitors the distribution of trucks across the country to maximize freight opportunities and minimize empty miles and downtime. The Freight Optimization System will continue to locate the most profitable combination of moves, working in conjunction with the new national accounts program. On-time reliability OTR continues to offer customers and potential customers on-time reliability in a manner that few can match: o Experienced drivers with an average of 47 years of age and more than 15 years driving experience. o High-quality, low mileage, reliable equipment to minimize downtime. o Superior service record- with a historical on-time delivery percentage of greater than 96%. OTR's approach also reduces the company's dependence on any single customer. The largest customer accounted for only 3.8% of revenues in 1996, while the top five customers combined for only 13.1% of revenues. The dry van segment of the domestic truckload market is estimated by trucking analysts at $24 billion. The largest three carriers in this market have captured approximately 10% of the market on a combined basis. OTR revenues for 1996 were 0.2% of the total dry van market in the U.S. (Picture of OTR tractor omitted) Driver Incentive Management System An article in the industry publication Transport Topics characterized driving for OTR as "A thinking man's job." Driver/managers are given a high level of responsibility to manage the profitability of their equipment. OTR provides financial incentives to its equipment managers to analyze each decision based on the impact on net income. This system results in higher revenues and utilization with reduced fuel costs, maintenance, accidents, insurance premiums and road expenses. Management has recognized from the start the importance of quality, experienced equipment managers. The company is committed to paying managers a premium wage and providing them with equipment they are proud to drive. This approach has produced a group of managers averaging 48 years of age and 15 years of experience. The company's Driver Incentive Management System rewards equipment managers with mileage pay, profit center distributions and an ESOP based on the profitability of their equipment. All manager pay programs provide incentive for managers to keep expenses low and equipment running efficiently. Mileage pay at OTR is based on fuel efficiency achieved by a manager. Above-average fuel economy is rewarded with premium pay per mile. Managers have a large incentive to run equipment at efficient speeds, reduce out of route miles, idle less and maintain the equipment in peak operating condition. Profit Center Distributions OTR maintains each truck as a separate profit center. Profit center reports include the actual revenues and expenses of the equipment and fixed expense components for administration, taxes and depreciation. Managers earn 50% of the net income of their profit center. A typical monthly profit center statement for one of our managers might look like the one shown below. This manager would receive 50% of $1,040 for the current quarter. OTR Express, Inc. PROFIT CENTER STATEMENT Report Period Ended 3/31/96 Manager: JD7 Jeff Driver Profit Center Start Date 1/1/96 Tractor: 1545
March Percent Quarter Percent REVENUES Mileage income $10,866 100.0 $31,490 100.0 OPERATING EXPENSES Wages 3,002 27.6 8,483 26.9 Payroll taxes 280 2.6 848 2.7 Fuel and fuel taxes 1,945 17.9 5,826 18.5 Tractor oil 75 0.7 140 0.4 Tractor tires 380 3.5 656 2.1 Tractor additives 20 0.2 45 0.1 Tractor maintenance 278 2.6 1,016 3.2 Tractor wash 25 0.2 73 0.2 Tractor parts 42 0.4 185 0.6 Trailer expense (fixed) 500 4.6 1,500 4.8 Trailer maintenance (fixed) 185 1.7 555 1.8 Road expenses 110 1.0 314 1.0 Insurance (fixed) 400 3.7 1,200 3.8 Accidents and claims 0 0.0 0 0.0 Licensing and permits (fixed) 435 4.0 1,305 4.1 Management expenses (% of revenue) 1,195 11.0 3,464 11.0 Total 8,872 81.7 25,610 81.3 OPERATING INCOME 1,994 18.3 5,880 18.7 Principal payment (per mile) 1,232 11.3 3,571 11.3 Interest payment (fixed) 423 3.9 1,269 4.0 NET CASH FLOW $ 339 3.1 $ 1,040 3.3
Selected Financial Data
(In thousands except per share data) 1996 1995 1994 1993 1992 INCOME STATEMENT Operating revenue $55,261 $49,211 $42,760 $30,646 $21,993 Operating expenses Salaries, wages and benefits 22,395 19,837 15,912 10,779 7,570 Purchased transportation 2,930 2,402 2,094 825 833 Fuel 7,011 5,511 4,546 3,777 2,883 Maintenance 3,310 3,005 2,648 1,896 1,323 Depreciation 6,723 6,517 5,243 4,276 2,896 Insurance and claims 1,639 1,594 1,738 1,624 1,060 Taxes and licenses 6,048 5,541 4,684 3,508 2,602 Supplies and other 3,010 2,775 2,247 1,509 1,046 Total operating expenses 53,066 47,182 39,112 28,194 20,213 Operating income 2,195 2,029 3,648 2,452 1,780 Interest expense 2,789 2,283 1,449 1,143 913 Income (loss) before income taxes (594) (254) 2,199 1,309 867 Income tax expense (benefit) (226) (97) 921 497 321 Income (loss) before change in acct principle (368) (157) 1,278 812 546 Cumulative effect of change in acct principle - - - (68) - Net income (loss) $ (368) $ (157) $ 1,278 $ 744 $ 546 Outstanding shares 1,836 1,830 1,825 1,817 1,725 Earnings (loss) per share $ (0.20) $ (0.09) $ 0.70 $ 0.41 $ 0.32 PERCENT OF REVENUE Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0% Operating expenses Salaries, wages and benefits 40.5 40.3 37.2 35.2 34.4 Purchased transportation 5.3 4.9 4.9 2.7 3.8 Fuel 12.7 11.2 10.6 12.3 13.1 Maintenance 6.0 6.1 6.2 6.2 6.0 Depreciation 12.2 13.2 12.3 14.0 13.2 Insurance and claims 3.0 3.3 4.1 5.3 4.8 Taxes and licenses 10.9 11.3 11.0 11.4 11.8 Supplies and other 5.4 5.6 5.3 4.9 4.8 Total operating expenses 96.0 95.9 91.5 92.0 91.9 Operating income 4.0 4.1 8.5 8.0 8.1 Interest expense 5.1 4.6 3.4 3.7 4.2 Income (loss) before income taxes (1.1) (0.5) 5.1 4.3 3.9 Income tax expense (benefit) (0.4) (0.2) 2.1 1.7 1.5 Income (loss) before change in acct principle (0.7) (0.3) 3.0 2.6 2.4 Cumulative effect of change in acct principle - - - (0.2) - Net income (loss) (0.7) (0.3) 3.0 2.4 2.4
Financial Review 1996 Compared to 1995 Operating Revenue. Operating revenue increased by 12% to $55.3 million in 1996 from $49.2 million in 1995. The average number of tractors in service increased by 12% from 450 to 506 for the year . Revenue per loaded mile increased by 1.0% to $1.042 from $1.031. The company continued to allocate additional resources to the brokerage operation in 1996, resulting in a 25% increase in brokerage revenue to $3.3 million in 1996 from $2.6 million in 1995. Management expects the brokerage division to expand in 1997 as a result of increased marketing efforts. Operating Expenses. The operating ratio (total operating expenses as a percent of operating revenue) increased to 96.0% in 1996 compared to 95.9% in 1995. Salaries, wages and benefits increased to 40.5% of revenue in 1996 compared to 40.3% in 1995. The company increased wage rates for drivers twice in 1995 to attract and retain highly qualified and experienced drivers in a very competitive market. There were no increases in wage rates for drivers in 1996. Purchased transportation, which represents payments to other trucklines for hauling loads contracted through the company's brokerage division, was 5.3% of revenue compared to 4.9% in 1995 because of the 25% increase in brokerage revenue. As a percentage of brokerage revenue, purchased transportation was 90.1% in 1996 versus 92.5% in 1995. Fuel increased to 12.7% of revenue from 11.2% in 1995. The increase is primarily due to an increase in the average fuel cost per gallon ($1.17 in 1996 vs. $1.07 in 1995). The cost in 1996 is net of $220,000 of gain on fuel hedging contracts which were in the money as a result of higher fuel prices. Depreciation as a percent of revenue was 12.2% in 1996 compared to 13.2% in 1995. The increase is primarily a result of an extended holding period for tractors. In 1996, the company began depreciating its tractors straight line over 40 months to an estimated salvage value versus 36 months to an estimated salvage value in 1995. Insurance and claims decreased to 3.0% of revenue in 1996 from 3.3% in 1995. Effective January 1, 1996, the company's liability insurance carrier reduced its premium rate, reducing premiums by $115,000 in 1996. In addition, the company had a more favorable loss experience per mile in 1996. Supplies and other expenses decreased to 5.4% of revenue from 5.6% in 1995. In 1995, the company took a one- time charge of $171,000 to write off the cost of a stock offering which was withdrawn in June 1995 due to market conditions. Interest Expense. Interest expense increased to 5.1% of revenue in 1996 from 4.6% in 1995 as a result of higher debt levels. In 1996, 81% of the company's capital was interest bearing compared to 79% in 1995. Net Income (Loss). The net loss for 1996 was $368,000 or $0.20 per share compared to net loss of $157,000 or $0.09 per share in 1995. 1995 Compared to 1994 Operating Revenue. Operating revenue increased by 15% to $49.2 million in 1995 from $42.8 million in 1994. The average number of tractors in service increased by 30% from 345 to 450 for the year . Revenue per loaded mile decreased by 1.0% to $1.031 from $1.041 primarily due to an over capacity of trucks and weaker freight demand. Operating Expenses. The operating ratio increased to 95.9% in 1995 compared to 91.5% in 1994. Salaries, wages and benefits increased to 40.3% of revenue in 1995 compared to 37.2% in 1994. The company increased wage rates for drivers twice in 1995 to attract and retain highly qualified and experienced drivers in a very competitive market. The increased wages, combined with lower revenue rates per mile, caused the wages as a percent of revenue to increase. Fuel increased to 11.2% of revenue from 10.6% in 1994. The increase is primarily due to an increase in the average fuel cost per gallon ($1.07 in 1995 vs. $1.04 in 1994) and a decrease in revenue per mile. The fleet fuel economy improved to 5.53 miles per gallon in 1995 from 5.50 in 1994. Depreciation as a percent of revenue was 13.2% in 1995 compared to 12.3% in 1994. The increase as a percent of revenue in 1995 is a result of fixed expenses being spread over lower revenue per unit in 1995. Insurance and claims decreased to 3.3% of revenue in 1995 from 4.1% in 1994. Effective January 1, 1995, the company's liability insurance carrier reduced its premium rate from 0.0135% of revenue to 0.0101%, reducing premiums by $156,000 in 1995. In addition, the company had a more favorable loss experience per mile in 1995. Taxes and licenses as a percent of revenue increased to 11.3% from 11.0% in 1994, primarily as a result of lower revenue rates per mile in 1995. Supplies and other expenses increased to 5.6% of revenue from 5.3% in 1994, representing an increase in advertising for new drivers and a one-time charge of $171,000 to write off the cost of the withdrawn stock offering. Interest Expense. Interest expense increased to 4.6% of revenue in 1995 from 3.4% in 1994 as a result of lower revenue per mile in 1995. In addition, 79% of the company's capital was interest bearing in 1995 compared to 71% in 1994. Net Income (Loss). The net loss for 1995 was $157,000 or $0.09 per share compared to net income of $1,278,000 or $0.70 per share in 1994. Seasonality Seasonality causes variations in the operations of the company as well as industry-wide operations. Demand for the company's service is generally the highest during the summer and fall months. Historically, expenses are greater during the winter months when fuel costs are higher and fuel efficiency is lower. Inflation The effect of inflation on the company has not been significant during the last three years. An extended period of inflation could be expected to have an impact on the company's earnings by causing interest rates, fuel and other operating costs to increase. Unless freight rates could be increased on a timely basis, operating results could be adversely affected. Liquidity and Capital Resources The growth of the company's business has required significant investments in new revenue equipment acquired primarily through secured borrowings. Net capital expenditures, principally for revenue equipment, were $11.9 million, $18.0 million and $7.6 million for the years ended December 31, 1994, 1995 and 1996, respectively. Included in the 1996 figure is $1.6 million for on-board satellite communications equipment. The company plans to expand its fleet by 50 tractors in 1997, conditioned upon improvement in freight market conditions. At February 28, 1997, the company had conditional arrangements for 200 tractors (50 new units and 150 replacement units) at a cost of $16.0 million, as well as 190 new trailers (all replacement units) at a cost of $3.9 million. The company's capital expenditures will be financed through internally generated funds and secured borrowings. Historically, the company has obtained loans for its revenue equipment which are of shorter duration (three years for trailers, four years for tractors) than the economic useful lives of the equipment. While such loans have current maturities that tend to create working capital deficits that could adversely affect cash flows, management believes these factors are mitigated by the more attractive interest rates and terms available on these shorter maturities. This financing practice has been a significant cause of the working capital deficit which has existed since the company's inception. The company intends to continue to obtain loans with shorter maturities than the useful lives of its revenue equipment. However, beginning in 1997, the company will finance tractors over forty months to reflect the longer holding period. Trailers will be financed over sixty months. This method of financing can be expected to continue to produce working capital deficits in the future. The company's working capital deficit at December 31, 1996 was $11.5 million. Primarily due to the company's equity position and the potential for refinancing of both unencumbered and encumbered assets, working capital deficits historically have not been a barrier to the company's ability to borrow funds for operations and expansion. The company has a credit line of $5.5 million with its primary lending bank that bears interest at the prime lending rate. Borrowings under this line were $1.4 million at December 31, 1996 and $1.5 million of the available credit line was committed for letters of credit issued by the bank. The current line matures May 1, 1997 and is secured by accounts receivable. The company received commitments in December 1996 for up to $20 million of new revenue equipment financing. Of the anticipated new financing, 85% will be fixed rate debt. In the opinion of management, the company has adequate liquidity for the foreseeable future based upon funds expected to be generated from operations, the company's equity position, the potential for refinancing of assets owned by the company and the company's ability to obtain secured equipment financing. Other This annual report contains forward-looking statements that are based on current expectations and are subject to risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions, competitive factors, pricing pressures and other risks described in the company's SEC reports. (Picture of OTR tractor omitted) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of OTR Express, Inc.: We have audited the accompanying balance sheets of OTR Express, Inc. (a Kansas corporation) as of December 31, 1996 and 1995, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of OTR Express, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /S/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Kansas City, Missouri February 4, 1997 Balance Sheets OTR Express, Inc.
At December 31 1996 1995 ASSETS CURRENT ASSETS Cash $ 43,107 $ 36,101 Accounts receivable, less allowance of $57,016 and $56,932 6,436,920 6,008,392 Fuel inventory 162,826 155,568 Prepaid expenses and other 1,038,207 693,401 TOTAL CURRENT ASSETS 7,681,060 6,893,462 PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 42,894,525 41,989,346 TOTAL ASSETS $50,575,585 $48,882,808 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank note payable $ 1,389,000 $ 2,522,555 Accounts payable, trade 1,396,760 1,113,192 Accrued payroll and taxes 823,811 1,036,687 Other accrued expenses 1,180,900 1,068,992 Current portion of long-term debt 14,361,651 11,445,508 TOTAL CURRENT LIABILITIES 19,152,122 17,186,934 LONG-TERM DEBT 21,019,354 20,844,188 DEFERRED INCOME TAXES 1,599,014 1,695,772 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS' EQUITY Common stock, $.01 par value, 5,000,000 shares authorized, 1,842,209 and 1,835,209 issued 18,422 18,352 Additional paid-in capital 6,540,124 6,515,694 Retained earnings 2,283,284 2,651,604 Treasury stock, 6,690 and 5,136 shares (36,735) (29,736) TOTAL STOCKHOLDERS' EQUITY 8,805,095 9,155,914 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $50,575,585 $48,882,808 The notes to financial statements are an integral part of these statements.
Statements of Operations OTR Express, Inc.
For the Years Ended December 31 1996 1995 1994 Operating revenue Freight revenue $ 52,008,754 $ 46,615,804 $ 40,490,206 Brokerage revenue 3,251,842 2,595,318 2,269,373 Total operating revenue 55,260,596 49,211,122 42,759,579 Operating expenses Salaries, wages and benefits 22,394,911 19,837,132 15,911,573 Purchased transportation 2,930,271 2,401,605 2,093,512 Fuel 7,011,074 5,511,198 4,546,499 Maintenance 3,310,101 3,005,321 2,648,374 Depreciation 6,722,717 6,516,919 5,243,267 Insurance and claims 1,639,039 1,593,642 1,737,593 Taxes and licenses 6,047,748 5,541,240 4,683,752 Supplies and other 3,010,050 2,774,623 2,247,089 Total operating expenses 53,065,911 47,181,680 39,111,659 Operating income 2,194,685 2,029,442 3,647,920 Interest expense 2,788,749 2,283,107 1,449,202 Income (loss) before income taxes (594,064) (253,665) 2,198,718 Income tax expense (benefit) (225,744) (96,393) 920,815 Net income (loss) $ (368,320) $ (157,272) $ 1,277,903 Average common and common equivalent shares outstanding 1,835,650 1,830,246 1,825,118 Net income (loss) per share $ (0.20) $ (0.09) $ 0.70 The notes to financial statements are an integral part of these statements.
Statements of Stockholders'Equity OTR Express, Inc.
Preferred Common Additional Retained Treasury Total Stock Stock Paid-In Earnings Stock Stockholders' Capital Equity Balance, December 31, 1993 $258 $17,954 $6,417,834 $1,546,476 $(9,680) $7,972,842 Preferred stock converted to common stock (258) 258 - - - - Allocation of common stock held by ESOP - 70 66,430 - - 66,500 Preferred stock dividends - - - (15,503) - (15,503) Repurchase of common stock - - - - (810) (810) Net income - - - 1,277,903 - 1,277,903 Balance, December 31, 1994 - 18,282 6,484,264 2,808,876 (10,490) 9,300,932 Allocation of common stock held by ESOP - 70 31,430 - - 31,500 Repurchase of common stock - - - - (19,246) (19,246) Net loss - - - (157,272) - (157,272) Balance, December 31, 1995 - 18,352 6,515,694 2,651,604 (29,736) 9,155,914 Allocation of common stock held by ESOP - 70 24,430 - - 24,500 Repurchase of common stock - - - - (6,999) (6,999) Net loss - - - (368,320) - (368,320) Balance, December 31, 1996 $ - $18,422 $6,540,124 $2,283,284 $(36,735)$8,805,095 The notes to financial statements are an integral part of these statements.
Statements of Cash Flows OTR Express, Inc.
For the Years Ended December 31 1996 1995 1994 OPERATING ACTIVITIES Net income (loss) $ (368,320) $ (157,272) $ 1,277,903 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation 6,722,717 6,516,919 5,243,267 Deferred income taxes (225,744) (96,393) 920,815 ESOP expenses and other 24,500 31,500 66,500 Changes in certain working capital items Accounts receivable (428,528) (489,820) (1,553,553) Other assets (223,078) (145,111) (140,068) Accounts payable and accrued expenses 182,600 99,866 1,080,513 Net cash provided by operating activities 5,684,147 5,759,689 6,895,377 INVESTING ACTIVITIES Acquisition of property and equipment (11,335,083) (23,409,750) (13,867,295) Disposition of property and equipment 3,707,187 5,380,077 1,951,000 Other - - 127,870 Net cash used in investing activities (7,627,896) (18,029,673) (11,788,425) FINANCING ACTIVITIES Proceeds from issuance of long term debt 20,370,872 21,846,185 13,188,122 Repayments of long-term debt (17,279,563) (11,331,461) (8,558,763) Net increase (decrease) in bank notes payable (1,133,555) 1,790,000 277,125 Other (6,999) (19,246) (16,313) Net cash provided by financing activities 1,950,755 12,285,478 4,890,171 Net increase (decrease) in cash 7,006 15,494 (2,877) Cash, beginning of year 36,101 20,607 23,484 Cash, end of year $ 43,107 $ 36,101 $ 20,607 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 2,794,254 $ 2,271,420 $ 1,445,708 Cash paid (refunded) for income taxes, net (128,986) 250,637 16,693 The notes to financial statements are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The company is a long-haul, dry van, truckload carrier headquartered in Olathe, Kansas. The company is a contract carrier authorized by the Interstate Commerce Commission and various state authorities to transport general commodities through the continental United States. Pervasiveness of Estimates Management makes estimates and assumptions which affect the amounts reported in the financial statements and footnotes. Actual results could differ from those estimates. Revenue Recognition Operating revenue is recognized upon receipt of freight. Related transportation expenses, including driver wages, purchased transportation, fuel and fuel taxes, are accrued when the revenue is recognized. Management believes the difference between the company's method of revenue recognition, which is acceptable for generally accepted accounting principles, and the proportional recognition method, which is preferred, is not material to financial position or the results of operations. Cash Flows For the statements of cash flows, cash consists of cash on hand and demand deposits with financial institutions. Concentration of Credit The company's primary market includes medium and large sized full truckload shippers in the United States. Loads encompass all types of products for dry vans, excluding perishables. Credit is offered to all qualified customers. There are no predominant customers. Fuel Hedging The company purchases six month call options on No. 2 heating oil to manage exposure to fluctuations in diesel fuel prices. The options are carried at cost. Gains and losses are deferred and recognized as adjustments to fuel expense when the underlying hedged transactions (fuel purchases) occur. At December 31, 1996, option fair values totaled $127,000, deferred gains totaled $55,000 and notional amounts totaled $2,794,000. Property, Equipment and Depreciation Property and equipment are stated at cost. When equipment is sold, the gain or loss indicated is recognized. When equipment is traded, the basis of the new equipment is adjusted when necessary for any gain indicated. The cost of tires and tubes are capitalized as part of the tractors and trailers at the time of acquisition and depreciated as a component of the tractors and trailers. Replacement tires and tubes are charged to maintenance expense when installed. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation of property and equipment is computed using straight line methods and the following estimates useful lives: Assets Estimated Useful Lives Tractors 3.3 years Trailers 10 years Computer equipment, software and other property 5 - 12 years Buildings and improvements 31.5 - 40 years The company depreciates tractors to estimated salvage values, currently 48% to 51% of original cost. The company depreciates trailers to estimated salvage values, currently 21% to 28% of original cost. Stock Issued to ESOP Stock issued to the Employee Stock Ownership Plan (ESOP) is recorded at the estimated fair market value at the date of issuance. When stock held by the ESOP is allocated to participants, employee benefits expense is charged for the fair market value of the stock at the date of allocation. Insurance and Claims Accrued expenses include reserves for the estimated cost of claims for health, workers' compensation, personal injury, property damage, and cargo loss not covered by insurance. Reserves are established by management based on the most current information available regarding the accident or claim. Adjustments to previously established reserves, if required, are included in operating results. Management does not believe future adjustments to these reserves, if any, will have a significant impact on financial position or results of operations. Net Income (Loss) Per Share Net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents include the outstanding convertible preferred stock which was converted on December 30, 1994. Reclassification Certain amounts in the 1995 financial statements have been reclassified to conform with the presentation in the 1996 financial statements. 2. PROPERTY AND EQUIPMENT 1996 1995 Cost
Tractors $39,261,365 $39,417,573 Trailers 10,352,234 9,134,981 Land 838,962 838,961 Buildings and improvements 2,879,459 1,573,485 Computers and onboard communications equipment 2,140,269 396,806 Construction-in-progress 5,014 554,165 Other 1,076,794 969,838 Total cost 56,554,097 52,885,809 Less accumulated depreciation 13,659,572 10,896,463 Net property and equipment $42,894,525 $41,989,346
3. BANK NOTE PAYABLE Bank note payable consists of lines of credit collateralized by accounts receivable. The company has a $5,500,000 line of credit limited to qualified accounts receivable, as defined, At December 31, 1996, $1,501,000 of the available line was allocated to outstanding letters of credit. The company has $2,029,000 available as of December 31, 1996. Borrowings on the line totaled $1,389,000 at December 31, 1996. The line bears interest at the prime rate (8.25% on December 31, 1996), and expires May 1, 1997, at which time the principal balance together with all accrued interest is payable. The weighted average interest rate on the line of credit for the years ended December 31, 1996 and 1995 was 8.5% and 8.2%, respectively. The annual average balance borrowed on the line of credit for the years ended December 31, 1996 and 1995 was $1,242,000 and $1,368,000, respectively. 4. LONG-TERM DEBT 1996 1995 Installment notes, 5.80% to 9.25% payable in monthly installments of principal and interest through December 2001, collateralized by tractors, trailers and computer equipment $33,824,958 $32,093,149 Installment notes, 7% to 8.75%, payable in monthly installments through January 2005, collateralized by land 1,556,047 196,547 35,381,005 32,289,696 Less current portion 14,361,651 11,445,508 Long-term debt $21,019,354 $20,844,188 Maturities of long-term debt are as follows: 1997 $14,361,651 1998 11,548,491 1999 6,657,472 2000 1,257,188 2001 1,396,318 Thereafter 159,885 $35,381,005
5. STOCKHOLDERS' EQUITY The company's preferred stock (25,839 shares) was converted to common stock on December 30, 1994 at the rate of one share of preferred stock for one share of common stock. Warrants to purchase 50,000 shares of common stock at a price of $6.00 per share expired unexercised on January 21, 1997. 6. STOCK OPTION PLAN The company has reserved 110,000 shares of its common stock for issuance to key management personnel and directors of the company under three stock option plans. The plans permit grants of nonqualified stock options. The option price cannot be lower than the fair market value of the stock at the date of grant. The options are exercisable over a period not to exceed 10 years from the date of grant (5 years for a more than 10% shareholder). The company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its plan, and accordingly has not recognized compensation costs in its financial statements for such plans. Had compensation costs been recognized in accordance with Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation, the company's operating results would have been reported at the unaudited pro forma amounts indicated below : 1996 1995 Net loss: As reported $(368,320) $(157,272) Pro Forma $(388,216) $(191,017) Loss per share: As reported $ (0.20) $ (0.09) Pro Forma $ (0.21) $ (0.10) 6. STOCK OPTION PLAN (continued) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for the 1996 and 1995 grants: 1996 1995 Dividend yield None None Expected volatility 36.3% 43.7% Risk-free interest rate 6.2% 5.4% Expected option life 3 Years 3 Years A summary of the company's stock option plans as of December 31, 1996 and changes during 1995 and 1996 is presented below. There were no options outstanding at December 31, 1994. Number of Number of Option price shares Shares Per Share Exercisable Granted during 1995 and outstanding at December 31, 1995 50,000 $5.25 - $6.00 21,333 Granted during 1996 30,000 $4.94 - $5.00 5,000 Outstanding at December 31, 1996 80,000 26,333 1996 1995 Fair value of options granted during the year $32,091 $54,428 Average remaining contract life 10 Years 9 Years 7. EMPLOYEE STOCK OWNERSHIP PLAN The company has a non-qualified ESOP which enables eligible employees to acquire shares of the company's common stock. The cost of the ESOP is borne by the company. In each of the years 1996, 1995 and 1994, 7,000 shares of stock held by the ESOP were allocated to participants, resulting in ESOP expense of $24,500, $31,500 and $66,500 for the years ended December 31, 1996, 1995 and 1994, respectively. The Board of Directors has approved additional allocations of 7,000 shares per year through 1997. No provision has been made in the financial statements for future contributions of stock to the Plan or for allocation of additional shares to the participants. 8. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets and liabilities are comprised of the following at December 31: 1996 1995 Deferred tax assets Claims and other reserves $ 378,341 $ 309,698 Net operating loss carryforward 2,023,708 185,986 Other 182,655 286,403 2,584,704 782,087 Deferred tax liabilities Property and equipment 3,983,038 2,269,890 Revenue 200,680 207,969 4,183,718 2,477,859 Net deferred tax liability $ 1,599,014 $ 1,695,772 A reconciliation between the provision for income taxes and the expected taxes using the federal statutory rate of 34% follows: 1996 1995 1994 Tax expense (benefit) at federal statutory rate $(201,982) $(86,246) $747,564 State income tax expense (benefit) (23,762) (10,147) 87,949 Other - - 85,302 Income tax expense (benefit) $(225,744) $(96,393) $920,815 The provision for income taxes consists of the following: 1996 1995 1994 Deferred tax expense (benefit) Federal $(201,981) $(86,246) $832,866 State (23,763) (10,147) 87,949 $(225,744) $(96,393) $920,815 The company has available net operating loss carryforwards of approximately $5,326,000 for regular income tax purposes expiring through 2011. 9. COMMITMENTS AND CONTINGENCIES Various legal actions, claims and assessments are pending against the company. It is the opinion of management that these actions will have no significant impact on the company's financial condition or its results of operations. Under an agreement with its auto liability insurance carrier, the company retains the first $100,000 of paid losses for any single occurrence involving cargo, personal injury or property damage. Liability in excess of these amounts is generally assumed by the carrier. The agreement with the carrier is collateralized by letters of credit totaling $301,000 and deposits of $29,750. Prior to January 1, 1995, the company retained the first $50,000 of paid losses and a portion of loss adjusting expense up to $50,000 for any single occurrence. The company is self-insured for workers' compensation through a program with the State of Kansas. All claims are processed by a third party administrator and the company will pay all losses and loss adjusting expense. The company carries an excess reinsurance policy that will limit the company's losses to $250,000 per occurrence and $10,000,000 aggregate per year. (Picture of OTR tractor omitted) Board of Directors Executive and Other Officers William P. Ward William P. Ward Chairman of the Board and President and President Chief Executive Officer OTR Express, Inc. Gary J. Klusman Gary J. Klusman Executive Vice President Executive Vice President OTR Express, Inc. Janice Kathryn Ward Janice Kathryn Ward Vice President Compensation and Vice President Compensation and Administration, Secretary Administration, Secretary OTR Express, Inc. Dr. James P. Anthony Steven W. Ruben Radiologist Vice President Finance and Carondelet Radiology Group Chief Financial Officer Frank J. Becker Christine D. Schowengerdt President Treasurer Becker Investments, Inc. Terry G. Christenberry Carolyn J. Davidson President Administrative Vice President and Christenberry, Collet & Co., Inc. Assistant Secretary Charles M. Foudree Gary L. Hinkle Executive Vice President - Finance Vice President Fleet Management Harmon Industries, Inc. Dean W. Graves Susan K. Raymond Owner, Dean Graves, FAIA Vice President Dispatch Management Architectural Firm Dr. Ralph E. MacNaughton Marc E. Hirschmann Physician, Retired Vice President Maintenance & Purchasing Carondelet Radiology Group Paul A. MacNaughton Vice President Management Information Systems Chip Seitz Vice President OTR Services Photography by: Eric T. Janzen Larry Andrew, Andrew Photography (p. 3)Vice President Marketing Attig Photography Studio (p. 5) and OTR Express Managers QUARTERLY FINANCIAL DATA
1996 (In thousands except per share data) Mar 31 Jun 30 Sep 30 Dec 31 Year Unaudited INCOME STATEMENT Operating revenue $13,033 $13,406 $14,470 $14,352 $55,261 Operating expenses Salaries, wages and benefits 5,404 5,256 5,828 5,907 22,395 Purchased transportation 647 734 702 847 2,930 Fuel 1,639 1,696 1,687 1,989 7,011 Maintenance 804 793 835 878 3,310 Depreciation 1,699 1,755 1,730 1,539 6,723 Insurance and claims 392 361 417 469 1,639 Taxes and licenses 1,523 1,441 1,554 1,530 6,048 Supplies and other 623 663 810 914 3,010 Total operating expenses 12,731 12,699 13,563 14,073 53,066 Operating income 302 707 907 279 2,195 Interest expense 692 646 721 730 2,789 Income (loss) before income taxes (390) 61 186 (451) (594) Income tax expense (benefit) (168) 25 82 (165) (226) Net income (loss) $ (222) $ 36 $ 104 $ (286) $ (368) Outstanding shares 1,836 1,836 1,836 1,836 1,836 Earnings (loss) per share $ (0.12) $ 0.02 $ 0.06 $ (0.16) $ (0.20) PERCENT OF REVENUE Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0% Operating expenses Salaries, wages and benefits 41.5 39.2 40.3 41.2 40.5 Purchased transportation 5.0 5.5 4.8 5.9 5.3 Fuel 12.6 12.7 11.6 13.9 12.7 Maintenance 6.2 5.9 5.8 6.1 6.0 Depreciation 13.0 13.1 12.0 10.7 12.2 Insurance and claims 3.0 2.7 2.9 3.3 3.0 Taxes and licenses 11.7 10.7 10.7 10.7 10.9 Supplies and other 4.7 4.9 5.6 6.3 5.4 Total operating expenses 97.7 94.7 93.7 98.1 96.0 Operating income 2.3 5.3 6.3 1.9 4.0 Interest expense 5.3 4.8 5.0 5.0 5.1 Income (loss) before income taxes (3.0) 0.5 1.3 (3.1) (1.1) Income tax expense (benefit) (1.3) 0.2 0.6 (1.1) (0.4) Net income (loss) (1.7) 0.3 0.7 (2.0) (0.7)
QUARTERLY FINANCIAL DATA
1995 (In thousands except per share data) Mar31 Jun 30 Sep 30 Dec 31 Year Unaudited INCOME STATEMENT Operating revenue $11,595 $11,819 $12,581 $13,216 $49,211 Operating expenses Salaries, wages and benefits 4,560 4,671 5,186 5,420 19,837 Purchased transportation 701 586 558 557 2,402 Fuel 1,214 1,329 1,408 1,560 5,511 Maintenance 720 778 791 716 3,005 Depreciation 1,383 1,653 1,721 1,760 6,517 Insurance and claims 405 401 361 427 1,594 Taxes and licenses 1,269 1,301 1,425 1,546 5,541 Supplies and other 569 656 850 700 2,775 Total operating expenses 10,821 11,375 12,300 12,686 47,182 Operating income 774 444 281 530 2,029 Interest expense 445 547 619 672 2,283 Income (loss) before income taxes 329 (103) (338) (142) (254) Income tax expense (benefit) 130 (37) (136) (54) (97) Net income (loss) $ 199 $ (66) $ (202) $ (88) $ (157) Outstanding shares 1,831 1,830 1,830 1,830 1,830 Earnings (loss) per share $ 0.11 $ (0.04) $ (0.11) $ (0.05) $ (0.09) PERCENT OF REVENUE Operating revenue 100.0% 100.0% 100.0% 100.0% 100.0% Operating expenses Salaries, wages and benefits 39.3 39.5 41.2 41.0 40.3 Purchased transportation 6.0 5.0 4.4 4.2 4.9 Fuel 10.5 11.2 11.2 11.8 11.2 Maintenance 6.2 6.6 6.3 5.4 6.1 Depreciation 11.9 14.0 13.7 13.3 13.2 Insurance and claims 3.5 3.4 2.9 3.2 3.3 Taxes and licenses 11.0 11.0 11.3 11.7 11.3 Supplies and other 4.9 5.6 6.8 5.3 5.6 Total operating expenses 93.3 96.2 97.8 96.0 95.9 Operating income 6.7 3.8 2.2 4.0 4.1 Interest expense 3.8 4.6 4.9 5.1 4.6 Income (loss) before income taxes 2.8 (0.9) (2.7) (1.1) (0.5) Income tax expense (benefit) 1.1 (0.3) (1.1) (0.4) (0.2) Net income (loss) 1.7 (0.6) (1.6) (0.7) (0.3)
Stockholder Information At March 1, 1997, there were 179 stockholders of record. Since many stockholders hold their certificates in "street name," management estimates the number of individual stockholders is approximately 1,000. Price Range of Stock The company's common stock is traded on The Nasdaq Stock Market/National Market System under the symbol OTRX. The following table sets forth for the periods indicated the high and low sale prices of the common stock, as reported by The Nasdaq Stock Market. 1995 Period Stock Price (Low-High) Jan 1 to Mar 31, 1995 $7.500 - $10.250 Apr 1 to Jun 30, 1995 $6.250 - $9.250 Jul 1 to Sep 30, 1995 $4.500 - $7.500 Oct 1 to Dec 31, 1995 $4.250 - $5.500 1996-1997 Period Stock Price (Low-High) Jan 1 to Mar 31, 1996 $4.250 - $5.000 Apr 1 to Jun 30, 1996 $4.500 - $5.750 Jul 1 to Sep 30, 1996 $4.875 - $5.875 Oct 1 to Dec 31, 1996 $3.250 - $5.375 Jan 1 to Feb 28, 1997 $3.000 - $4.000 To date, the company has not declared or paid any dividends on its Common Stock and presently does not anticipate paying any such dividends in the foreseeable future. It is management's present intention to retain future earnings, if any, for use in its business. Stockholder Information Corporate Offices Transfer Agent OTR Express, Inc. UMB Bank of Kansas City, N.A. 804 N. Meadowbrook Drive Securities Tranfer Division Olathe, Kansas 66062 P.O. Box 410064 (913) 829-1616 Kansas City, Missouri 64141-0064 Mailing address: P.O. Box 2819 Indepedendent Auditors Olathe, KS 66063-0819 Arthur Andersen LLP 911 Main Suite 1500 Kansas City, Missouri 64105 Annual Meeting General Counsel The annual meeting of the stockholders Bryan Cave LLP will be at 7:00 p.m., Thursday, 7500 College Boulevard May 1, 1997, at the Doubletree Hotel, Suite 1100 10100 College Boulevard, Overland Park, Overland Park, Ks. 66210 Kansas Form 10-K Common Stock Listing Stockholders may receive a copy of OTR Express, Inc. common stock the company's 1996 Annual Report to is traded on the NASDAQ National the Securities and Exchange Commission Market System under the on Form 10-K free of charge by writing symbol: OTRX to: Investor Relations 804 N. Meadowbrook Dr. P.O. Box 2819 Olathe, Kansas 66063 OTR Express, Inc. 804 N. Meadowbrook Drive Olathe, Kansas 66063-0819 1-913-829-1616 Fax 1-913-829-0622 (Back Cover picture of OTR tractor omitted) EX-27 8 ARTICLE 5. FIN. DATA SCHEDULE FOR FISCAL YEAR 1996 10 K
5 1 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 43,107 0 6,493,936 57,016 162,826 7,681,060 56,554,097 13,659,572 50,575,585 19,152,122 0 18,422 0 0 8,786,673 50,575,585 55,260,596 55,260,596 0 0 53,027,841 38,070 2,788,749 (594,064) (225,744) (368,320) 0 0 0 (368,320) (.20) (.20)
-----END PRIVACY-ENHANCED MESSAGE-----