UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
------------------------------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27208
Simon Transportation Services Inc.
(Exact name of registrant as specified in its charter)
Nevada 87-0545608
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
4646 South 500 West
Salt Lake City, Utah 84123
(801) 268-9100
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
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 such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (December 31, 1996).
Class A Common Stock, $.01 par value: 2,872,757 shares
Class B Common Stock, $.01 par value: 1,872,161 shares
Exhibit Index is on Page 10.
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
Item 1. Financial statements:
Condensed consolidated statements of financial position
as of September 30, 1996 and December 31, 1996 3
Condensed consolidated statements of earnings
for the three months December 31, 1996 and 1995 4
Condensed consolidated statements of cash
flows for the three months ended
December 31, 1996 and 1995 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 7
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
----------------- ------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 4,107,994 $ 5,571,431
Receivables, net of allowance for doubtful accounts of
$48,000 and $66,000, respectively 14,256,016 13,261,974
Operating supplies 425,371 428,123
Prepaid expenses and other 2,950,573 1,930,375
------------------------ ------------------------
Total current assets 21,739,954 21,191,903
------------------------ ------------------------
Property and Equipment, at cost:
Land 2,928,804 2,918,804
Revenue equipment 53,700,875 58,779,032
Buildings and improvements 11,375,793 8,639,875
Office furniture and equipment 2,790,525 2,766,218
------------------------ ------------------------
70,795,997 73,103,929
Less accumulated depreciation and amortization (14,960,370) (16,390,209)
------------------------ ------------------------
55,835,627 56,713,720
------------------------ ------------------------
Other Assets 951,995 317,645
======================== ========================
$ 78,527,576 $ 78,223,268
======================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,927,734 $ 2,892,300
Current portion of capitalized lease obligations 3,725,397 3,760,250
Accounts payable 1,731,341 1,691,900
Accrued liabilities 3,031,518 4,516,902
Accrued claims payable 1,512,132 1,602,344
------------------------ ------------------------
Total current liabilities 12,928,122 14,463,696
------------------------ ------------------------
Long-Term Debt, net of current portion 17,328,692 15,433,145
------------------------ ------------------------
Capitalized Lease Obligations, net of current portion 14,030,684 15,342,293
------------------------ ------------------------
Deferred Income Taxes 3,880,653 3,880,653
------------------------ ------------------------
Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued -- --
Class A common stock, $.01 par value, 20,000,000 shares
authorized, 2,872,757 and 2,870,507 shares issued,
respectively 28,728 28,705
Class B common stock, $.01 par value, 5,000,000 shares
authorized, 1,872,161 shares issued 18,722 18,722
Additional paid-in capital 25,302,723 25,282,496
Retained earnings 5,009,252 3,773,558
------------------------ ------------------------
Total stockholders' equity 30,359,425 29,103,481
------------------------ ------------------------
$ 78,527,576 $ 78,223,268
======================== ========================
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated financial statements.
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------------------------
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Operating Revenue $ 34,166,193 $ 20,588,101
------------------------ ------------------------
Operating Expenses:
Salaries, wages, and benefits 13,171,808 8,241,904
Fuel & fuel taxes 6,657,636 4,042,972
Operating supplies and expenses 4,350,499 3,166,317
Taxes and licenses 1,436,465 700,390
Insurance and claims 626,360 274,627
Communications and utilities 530,004 354,331
Depreciation and amortization 1,513,545 1,728,200
Rent 3,446,607 418,792
------------------------ ------------------------
Total operating expenses 31,732,924 18,927,533
------------------------ ------------------------
Operating earnings 2,433,269 1,660,568
Net interest expense (446,623) (805,597)
------------------------ ------------------------
Earnings before provision for income taxes 1,986,646 854,971
Provision for income taxes (Note 2) 750,952 3,257,112
======================== ========================
Net earnings (loss) 1,235,694 (2,402,141)
======================== ========================
Pro Forma Information (Note 3):
Earnings before provision for income taxes $ 1,986,646 854,971
Provision for income taxes 750,952 338,569
======================== ========================
Net earnings $ 1,235,694 $ 516,402
======================== ========================
Net earnings per common share $ 0.26 $ 0.15
======================== ========================
Weighted average common shares outstanding 4,743,154 3,451,233
======================== ========================
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated financial statements.
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------------------
<S> <C> <C>
December 31, 1996 December 31, 1995
Cash Flows From Operating Activities:
Net earnings (loss) 1,235,694 (2,402,141)
Adjustments to reconcile net earnings (loss) to net cash (used in)
provided by operating activities
Depreciation and amortization 1,513,545 1,728,200
Change in assets and liabilities:
Decrease (Increase) in receivables, net 93,458 (187,658)
Decrease in operating supplies 2,752 63,178
Increase in prepaid expenses and other (1,020,198) (1,783,916)
(Increase) Decrease in other assets (634,350) 373,306
Increase in accounts payable 39,441 271,588
Decrease in accrued liabilities (1,485,384) (231,730)
Decrease in accrued claims payable (90,212) (92,300)
Increase in deferred income taxes -- 3,351,427
---------------------------------------------
Net cash (used in) provided by operating activities (345,254) 1,089,954
---------------------------------------------
Cash Flows From Investing Activities:
Purchase of property and equipment (3,731,952) (1,131,139)
Proceeds from the sale of property and equipment 2,009,000 837,500
---------------------------------------------
Net cash used in investing activities (1,722,952) (293,639)
---------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt 2,628,684 --
Principal payments on long-term debt (697,703) (10,232,605)
Net payments under line-of-credit agreement -- (4,279,741)
Principal payments under capitalized lease obligations (1,346,462) (3,558,523)
Net proceeds from issuance of Class A common stock 20,250 19,716,753
Distributions to stockholders -- (605,060)
---------------------------------------------
Net cash provided by financing activities 604,769 1,040,824
---------------------------------------------
Net (Decrease) Increase In Cash (1,463,437) 1,837,139
Cash at Beginning of Period 5,571,431 350,380
---------------------------------------------
Cash at End of Period $ 4,107,994 $ 2,187,519
=============================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest 526,424 820,383
Cash paid during the period for income taxes 1,891,923 --
Supplemental Schedule of Noncash Investing and Financing Activities:
Equipment acquired through capitalized lease obligations -- 5,784,406
Sale of equipment in exchange for receivable paid after
period end 1,087,500 2,211,000
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated financial statements.
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements include the
accounts of Simon Transportation Services Inc., a Nevada
holding company, and its wholly owned subsidiary, Dick Simon
Trucking, Inc. (together, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
The financial statements have been prepared, without audit, in
accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the
accompanying financial statements include all adjustments
which are necessary for a fair presentation of the results for
the interim periods presented, such adjustments being of a
normal recurring nature. Certain information and footnote
disclosures have been condensed or omitted pursuant to such
rules and regulations. The September 31, 1996 condensed
consolidated balance sheet was derived from the audited
balance sheet of the Company for the year then ended. It is
suggested that these condensed consolidated financial
statements and notes thereto be read in conjunction with the
consolidated financial statements and notes thereto included
in the Form 10-K of Simon Transportation Services Inc. for the
year ended September 30, 1996. Results of operations in
interim periods are not necessarily indicative of results to
be expected for a full year.
Note 2. Income Taxes
The provision for income taxes for the three months ended
December 31, 1995 includes a one-time, non-cash charge for
deferred taxes totaling $2,980,115 relating to the Company's
termination of its S corporation election on November 17,
1995.
Note 3. Pro Forma Net Earnings Per Common Share
Pro forma net income per common share is determined by
dividing net earnings (loss) by the weighted average number of
common shares (considering common stock equivalents)
outstanding during the periods. Net earnings (loss) for the
three-month period ended December 31, 1995 has been adjusted
to reflect the results of operations as if the Company
had been a C corporation and therefore subject to income
taxes in the period, and, to eliminate the effect of the $3.0
million one-time, non-cash charge discussed in Note 2.
Forward Looking Statements
This quarterly report and statements by the Company in reports to its
stockholders and public filings, as well as oral public statements by Company
representatives may contain certain forward looking information that is subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected. Without limitation, these risks and
uncertainties include economic recessions or downturns in customers' business
cycles, excessive increases in capacity with the truckload markets, decreased
demand for transportation services offered by the Company, rapid inflation and
fuel price increases, increases in interest rates, and the availability and
compensation of qualified drivers. Readers should review and consider the
various disclosures made by the Company in this quarterly statement and in its
reports to its stockholders and periodic reports on Forms 10-K and 10-Q.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's fiscal year ends on September 30 of each year. Thus, the
fiscal quarters discussed in this report represent the Company's first fiscal
quarters of its 1997 and 1996 fiscal years, respectively. The Company completed
its initial public offering of approximately 2.4 million shares of Class A
Common Stock during November 1995.
The Company operated as an S corporation prior to November 17, 1995. As
a result, the Company's net taxable earnings prior to that date were taxed
directly to the Company's then-existing stockholders rather than to the Company.
The pro forma statement of operations data included in the financial statements
contained herein set forth the Company's net earnings (loss) for the periods
presented as if the Company had been subject to federal and state income taxes
for all periods. The termination of the Company's S corporation status
contemporaneously with its initial public offering resulted in a one-time,
non-cash charge of approximately $3.0 million in recognition of deferred income
taxes, and the Company distributed approximately $605,000 in S corporation
earnings to its existing shareholders prior to the offering.
Results of Operations
Three months ended December 31, 1996 and 1995
Operating revenue increased 66.0% to $34.2 million for the three months
ended December 31, 1996, from $20.6 million for the corresponding period of
1995. The increase in operating revenue was primarily attributable to a 56.7%
increase in weighted average tractors, to 990 in the 1996 period from 632 in the
1995 period, and a 6.0% increase in average revenue per tractor per week, to
$2,665 in the 1996 period from $2,513 in the 1995 period. These increases were
partially offset by an increase in empty miles percentage to 12.0% from 11.8%.
Salaries, wages, and benefits decreased to 38.6% of revenue for the
three months ended December 31, 1996, from 40.0% for the corresponding period of
1995. The change was attributable to a leveling of the fixed costs associated
with salaries paid to shop and administrative personnel. Salaries and wages for
administrative personnel did not increase proportionately with revenue.
Fuel and fuel taxes decreased to 19.5% of revenue for the three months
ended December 31, 1996, from 19.6% for the corresponding period of 1995,
principally as a result of an increase in the overall fuel efficiency of the
Company's newer tractor fleet and fuel surcharges implemented with a substantial
number of customers during the 1996 period. These savings were partially offset
by higher fuel prices in the 1996 period as compared with the 1995 period.
Operating supplies and expenses decreased to 12.7% of revenue for the
three months ended December 31, 1996, from 15.4% for the corresponding period of
1995, primarily as a result of lower parts and tire replacement costs, outside
repairs, and maintenance expense associated with a decrease in the average age
of the Company's tractor fleet. Most of the Company's tractors are covered by
three-year, 500,000-mile warranties.
Taxes and licenses increased to 4.2% of revenue for the three months
ended December 31, 1996, from 3.4% for the corresponding period of 1995,
primarily as a result of amortizing the remaining portion of prepaid licensing
fees for equipment disposed of prior to the end of the licensing year.
Insurance and claims increased to 1.8% of revenue for the three months
ended December 31, 1996, from 1.3% for the corresponding period of 1995 because
of increased claims expense.
Communications and utilities decreased to 1.6% of revenue for the three
months ended December 31, 1996, from 1.7% for the corresponding period of 1995,
primarily as a result of reduced rates for the Company's long distance service.
Depreciation and amortization (adjusted for the net gain on the sale of
property and equipment) decreased to 4.4% of revenue for the three months ended
December 31, 1996, from 8.4% for the corresponding period of 1995. The decrease
was primarily attributable to the use of operating leases rather than capital
leases to acquire new equipment during the period. The Company realized a net
gain of $156,931 on the sale of property and revenue equipment during the 1996
period compared with a $463,500 net gain during the 1995 period.
Rent increased to 10.1% of revenue for the three months ended December
31, 1996, from 2.0% for the corresponding period of 1995 as the Company replaced
equipment that had been financed under capital lease arrangements with equipment
financed under operating leases. The Company has utilized operating leases in
the most recent quarter because of more favorable terms. If the Company
continues to use operating lease financing, its operating ratio may be affected
in future periods because the implied financing costs of such equipment are
included as operating expenses instead of interest expense.
As a result of the foregoing, the Company's operating ratio increased
to 92.9% for the three months ended December 31, 1996, from 91.9% for the
corresponding period of 1995.
Net interest expense decreased to 1.3% of revenue for the three months
ended December 31, 1996, from 3.9% for the corresponding period in 1995 as a
result of lower average debt and capitalized lease balances and a decrease in
the Company's average interest rate in the 1996 period compared with the 1995
period.
The Company's effective combined federal and state income tax rate for
the three months ended December 31, 1996 was 37.8%, compared with an estimated
combined federal and state income tax rate of 39.6% used for the three months
ended December 31, 1995.
As a result of the factors described above, net earnings increased to
$1,235,694 for the three months ended December 31, 1996, compared with pro forma
net income of $516,402 for the corresponding period of 1995.
Liquidity and Capital Resources
The growth of the Company's business has required significant
investment in new revenue equipment that the Company historically has financed
with borrowings under installment notes payable to commercial lending
institutions and equipment manufacturers, equipment leases from third-party
lessors, borrowings under its line of credit, funds provided by its initial
public offering in November 1995, and cash flow from operations. The Company's
primary sources of liquidity currently are funds provided by operations, and
borrowings and leases with financial institutions and equipment manufacturers.
The Company's primary source of cash flow from operations is net earnings
adjusted for depreciation and deferred income taxes. The Company's principal
uses of cash flow from operations are to service debt incurred to purchase new
revenue equipment and internally finance accounts receivable associated with
growth in the business. Net cash used in operating activities was $345,254 for
the three months ended December 31, 1996. The primary sources of funds were net
earnings increased by non-cash adjustments of $1,513,545 in depreciation,
$93,458 in accounts receivable, $39,441 in accounts payable, and $2,752 in
supplies. The primary uses of funds were $1,020,198 to prepay licensing on
revenue equipment, $1,575,596 to reduce accrued liabilities and claims payable,
and $634,350 to increase other assets.
Net cash used in investing activities was $1,722,952 for the three
months ended December 31, 1996, as the Company purchased $3,731,952 of new
revenue equipment, and continued construction of its new terminal in Salt Lake
City, Utah. The Company sold revenue equipment for $2,009,000. The Company
expects capital expenditures (primarily for revenue equipment, satellite
communications units, and the construction of a new main terminal and
headquarters facility), net of revenue equipment sales and trade-ins, to be
approximately $34.0 million in calendar 1997.
Net cash provided by financing activities was $604,769 in the 1996
period, consisting primarily of $2.6 million of new borrowings for the
construction of the new terminal, and payments of $2.0 million of principal
under the Company's long-term debt, line of credit, and capitalized lease
agreements. In addition, the Company received $20,250 from the exercise of stock
options and the issuance of stock to individuals who participate in the
Company's stock option plans.
The Company maintains a $5 million, unsecured line of credit with a
financial institution. Borrowings on the line of credit bear interest at
one-half percent (.5%) above the 30-day London Interbank Offered Rate ("LIBOR")
in effect from time to time. The Company had not drawn against the line of
credit at December 31, 1996.
.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No reportable events or material changes occurred during the
quarter for which this report is filed.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
3.1 * Articles of Incorporation
3.2 * Bylaws
4.1 * Articles of Incorporation
4.2 * Bylaws
4.3 * Formation Agreement dated May 31, 1995, among Richard D.
Simon, Trustee of the Richard D. Simon Trust, UTAD 2/12/93,
Kelle Allen Simon, Arthur Lynn Simon (also known as Lyn
Simon), Sherry Lee Simon Bokovoy, Richard D. Simon, Jr. and
Alban Lang.
10.2 * Outside Director Stock Option Plan.
10.3 * Incentive Stock Plan.
10.4 * 401(k) Plan.
10.5 * Exchange Agreement dated April 19, 1995, among Richard D. Simon,
Trustee of the Richard D. Simon Revocable Trust, UTAD 2/12/93, and
Richard D. Simon as a sole proprietorship d/b/a R.D. Simon Trucking,
Kelle A. Simon, A. Lyn Simon, Sherry L. Simon Bokovoy, Richard D.
Simon, Jr., Alban B. Lang, and Dick Simon Trucking, Inc., a Utah
corporation.
10.6 * Formation Agreement dated May 31, 1995, among Richard D. Simon,
Trustee of the Richard D. Simon Trust, UTAD 2/12/93, Kelle Allen
Simon, Arthur Lynn Simon (also known as Lyn Simon), Sherry Lee
Simon Bokovoy, Richard D. Simon, Jr. and Alban Lang.
<PAGE>
Number Description
10.10 * Plan of Merger dated April 19, 1995 between Freight Sales, Inc. and
the Richard D. Simon Trust, UTAD 2/12/93, Kelle A. Simon, Lyn Simon,
Richard D. Simon, Jr. Sherry Simon Bokovoy, and Alban Lang as
officers, directors, and/or shareholders of Dick Simon Trucking,
Inc., a Utah corporation.
10.11 # Loan Agreement (Line of Credit) dated April 29, 1996
(replaced loan agreement dated December 1, 1995) between U.S.
Bank of Utah and Simon Transportation Services Inc.
10.12 # Loan Agreement (Headquarter's Loan) dated May 23, 1996 between U.S.
Bank of Utah and Dick Simon Trucking, Inc.
10.13 Description of Executive Bonus Plan.
* Incorporated by reference from the Company's Registration
Statement on Form S-1, Registration No. 33-96876, effective
November 17, 1995.
# Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1996, Commission File
No. 0-27208, dated August 9, 1996.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIMON TRANSPORTATION SERVICES INC.,
a Nevada corporation
Date: January 22, 1997 By: /s/ Alban B. Lang
----------------------- -----------------
(Signature)
Alban B. Lang
Treasurer and Chief Financial Officer
Exhibit 10.13
Description of Executive Bonus Plan.
On May 3, 1996, the Board of Directors approved an executive bonus program
whereby 5 percent of earnings before provision for income taxes will be
distributed to executive officers as bonuses. The executive bonus program will
be effective beginning in fiscal year 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Dec-31-1996
<CASH> 4,107,994
<SECURITIES> 0
<RECEIVABLES> 14,303,822
<ALLOWANCES> (47,807)
<INVENTORY> 167,705
<CURRENT-ASSETS> 21,739,954
<PP&E> 70,795,997
<DEPRECIATION> (14,960,370)
<TOTAL-ASSETS> 78,527,576
<CURRENT-LIABILITIES> 12,928,122
<BONDS> 0
0
0
<COMMON> 47,450
<OTHER-SE> 30,311,975
<TOTAL-LIABILITY-AND-EQUITY> 78,527,576
<SALES> 0
<TOTAL-REVENUES> 34,166,193
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,732,924
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 446,623
<INCOME-PRETAX> 1,986,646
<INCOME-TAX> 750,952
<INCOME-CONTINUING> 1,235,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,235,694
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
