News | January 27, 2000

Motor Cargo Industries Announces Opening of New Reno Facility

Motor Cargo Industries, Inc. announced that it has opened a new terminal facility in Reno, Nevada. The new 50,000 square foot facility is located on approximately 12 acres, has 84 dock doors and a state of the art maintenance facility. The new facility, which is owed by the company, replaces the company's prior Reno facility, which was leased by the company.

According to Marshall Tate, the company's President and Chief Executive Officer, "The Reno/Sparks market has experienced spectacular growth over the last several years. As this market continues to evolve into a key distribution center for the western region, Motor Cargo will be well positioned to accommodate the increased demand."

The Reno facility was constructed for a total cost of approximately $6 million, which the company financed largely through working capital and short- term bank borrowings. Expenses associated with these new borrowings and related purchase price amortization should be comparable to the lease payments for the company's prior Reno facility. Accordingly, the company does not expect any material increase in operating expenses as a result of the new facility.

The opening of the new Reno facility is part of an ongoing infrastructure investment program by Motor Cargo. The company presently anticipates total capital expenditures of approximately $13 million for the year 2000, of which approximately $10 million is budgeted for rolling stock (tractors, trailers etc.). The company believes that targeted investments in infrastructure will provide the company with increased capacity in key locations and allow the company to improve operating efficiency.

As part of the company's efforts to improve infrastructure, they previously announced the opening of a new service center in Fremont, California. The company has consolidated its former Newark and Benicia, California service centers into the larger Fremont service center. They believe this consolidation will result in a reduction in line-haul expense and re-handling of freight. The company expects to receive net proceeds of approximately $3 million from the sale of the Newark facility during 2000, which would result in a pre-tax gain of approximately $1.5 million. They also expect to construct a new facility in Denver Colorado, with completion targeted for the fourth quarter of 2000. In conjunction with this new facility, the company plans to sell its existing Denver facility for approximately $2.5 million. This transaction would also result in a pre-tax gain of approximately $1.5 million. It is uncertain when the sale of the Denver facility will be completed.

While the company's increased capital expenditures will result in a corresponding increase in total depreciation and amortization expense, the company expects these expenses will be offset by current revenue growth levels. Accordingly, as a percentage of operating revenues, the company does not expect its capital expenditures and investments in infrastructure to result in a material increase in depreciation and amortization expense. For the first nine months of 1999, depreciation and amortization expense of $6.5 million (6.9% of operating revenues) was reported. The company believes depreciation and amortization expense levels, as a percentage of operating revenues, will be slightly lower in 2000.

Edited by Kathe Archibald