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, 1997
( ) 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)
5175 West 2100 South
West Valley City, Utah 84120
(801) 924-7000
(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, 1997).
Class A Common Stock, $.01 par value: 5,323,123 shares
Class B Common Stock, $.01 par value: 962,661 shares
Exhibit Index is on Page 11.
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
Item 1. Financial Statements:
Condensed consolidated statements 3
of financial position as of
September 30, 1997 and December 31, 1997
Condensed consolidated statements 4
of earnings for the three months ended
December 31, 1997 and 1996
Condensed consolidated statements 5
of cash flows for the three months ended
December 31, 1997 and 1996
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of 7
financial condition and results of operations
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 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1997 September 30, 1997
----------------- ------------------
(Unaudited)
Current Assets:
Cash $ 13,537,212 $ 12,766,001
Receivables, net of allowance for doubtful accounts of
$80,000 and $62,000, respectively 19,063,373 20,712,286
Operating supplies 872,905 752,213
Prepaid expenses and other 4,718,152 2,193,950
------------------------ ------------------------
Total current assets 38,191,642 36,424,450
------------------------ ------------------------
Property and Equipment, at cost:
Land 7,646,922 7,632,711
Revenue equipment 55,484,729 59,392,072
Buildings and improvements 16,951,292 14,321,869
Office furniture and equipment 7,598,759 5,974,291
------------------------ ------------------------
87,681,702 87,320,943
Less accumulated depreciation and amortization (16,785,102) (16,166,473)
------------------------ ------------------------
70,896,600 71,154,470
------------------------ ------------------------
Other Assets 125,450 125,450
======================== ========================
$ 109,213,692 $ 107,704,370
======================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ $
7,488,228 6,382,697
Current portion of capitalized lease obligations 4,909,600 5,346,645
Accounts payable 3,246,159 3,593,420
Accrued liabilities 3,939,757 3,957,055
Accrued claims payable 1,186,354 1,259,674
------------------------ ------------------------
Total current liabilities 20,770,098 20,539,491
------------------------ ------------------------
Long-Term Debt, net of current portion 14,787,735 14,638,389
------------------------ ------------------------
Capitalized Lease Obligations, net of current portion 5,663,519 6,423,385
------------------------ ------------------------
Deferred Income Taxes 6,254,445 6,254,445
------------------------ ------------------------
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, 5,323,123 and 5,320,313 shares issued,
respectively 53,231 53,203
Class B common stock, $.01 par value, 5,000,000 shares
authorized, 962,661 shares issued 9,627 9,627
Additional paid-in capital 48,258,870 48,233,608
Retained earnings 13,416,167 11,552,222
------------------------ ------------------------
Total stockholders' equity 61,737,895 59,848,660
------------------------ ------------------------
$ 109,213,692 $ 107,704,370
======================== ========================
</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
-----------------------------------------------------
<S> <C> <C>
December 31, 1997 December 31, 1996
----------------- -----------------
Operating Revenue $ 47,006,493 $ 34,166,193
------------------------ ------------------------
Operating Expenses:
Salaries, wages, and benefits 18,011,315 13,171,808
Fuel & fuel taxes 9,097,054 6,657,636
Operating supplies and expenses 5,781,677 4,350,499
Taxes and licenses 1,809,906 1,436,465
Insurance and claims 1,020,727 626,360
Communications and utilities 785,142 530,004
Depreciation and amortization 1,203,154 1,513,545
Rent 5,911,947 3,446,607
------------------------
------------------------
Total operating expenses 43,620,922 31,732,924
------------------------ ------------------------
Operating earnings 3,385,571 2,433,269
Net interest expense 388,875 446,623
------------------------ ------------------------
Earnings before provision for income taxes 2,996,696 1,986,646
Provision for income taxes 1,132,751 750,952
======================== ========================
Net earnings $ 1,863,945 $ 1,235,694
======================== ========================
Net earnings per common share:
Basic $ 0.30 $ 0.26
======================== ========================
Diluted $ 0.29 $ 0.26
======================== ========================
Weighted average common shares outstanding:
Basic 6,284,419 4,743,154
======================== ========================
Diluted 6,457,288 4,837,776
======================== ========================
</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, 1997 December 31, 1996
Cash Flows From Operating Activities:
Net earnings $ 1,863,945 $ 1,235,694
Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities
Depreciation and amortization 1,203,154 1,513,545
Changes in assets and liabilities:
Decrease in receivables, net 1,143,413 93,458
(Increase) decrease in operating supplies (120,692) 2,752
Increase in prepaid expenses and other (2,524,202) (1,020,198)
Increase in other assets -- (634,350)
(Decrease) increase in accounts payable (347,261) 39,441
Decrease in accrued liabilities (17,298) (1,485,384)
Decrease in accrued claims payable (73,320) (90,212)
---------------------------------------------
Net cash provided by (used in) operating activities 1,127,739 (345,254)
---------------------------------------------
Cash Flows From Investing Activities:
Purchase of property and equipment (4,878,584) (3,731,952)
Proceeds from the sale of property and equipment 3,933,300 2,009,000
---------------------------------------------
Net cash used in investing activities (945,284) (1,722,952)
---------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt 2,900,000 2,628,684
Principal payments on long-term debt (1,645,123) (697,703)
Principal payments under capitalized lease obligations (1,196,911) (1,346,462)
Decrease in receivable from sale of equipment 505,500 --
Net proceeds from issuance of Class A common stock 25,290 20,250
---------------------------------------------
Net cash provided by financing activities 588,756 604,769
---------------------------------------------
Net Increase (Decrease) In Cash 771,211 (1,463,437)
Cash at Beginning of Period 12,766,001 5,571,431
---------------------------------------------
Cash at End of Period $ 13,537,212 $ 4,107,994
=============================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 516,368 $ 526,424
Cash paid during the period for income taxes 417,292 1,891,923
Supplemental Schedule of Noncash Investing and Financing Activities:
Sale of equipment in exchange for receivable paid after
period end 583,000 1,087,500
</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 30, 1997 condensed
consolidated statement of financial position 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, 1997. Results of
operations in interim periods are not necessarily indicative
of results to be expected for a full year.
Note 2: Net Income Per Common Share
In accordance with Statement of Financial Accounting Standards
No. 128 "Earnings per Share," which became effective December
15, 1997, basic net income per common share was computed by
dividing net income by the weighted average number of common
shares outstanding during the period. Diluted net income per
common share takes into consideration the effects of
outstanding stock options. The calculation of the weighted
average number of common shares outstanding is as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
<S> <C> <C>
1997 1996
Weighted average number of shares for basic
net income per common share 6,284,419 4,743,154
Stock Options 172,869 94,622
============== ==============
Weighted average number of shares for diluted
net income per common share 6,457,288 4,837,776
============== ==============
</TABLE>
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 1998 and 1997 fiscal years, respectively.
Results of Operations
Three months ended December 31, 1997 and 1996
Operating revenue increased $12.8 million (37.6%) to $47.0 million for
the three months ended December 31, 1997, from $34.2 million for the
corresponding period of 1996. The increase in operating revenue was primarily
attributable to a 41.6% increase in weighted average tractors, to 1,402 in the
1997 period from 990 in the 1996 period. This increase was partially offset by a
decrease in average revenue per tractor per week, to $2,591 in the 1997 period
from $2,665 in the 1996 period.
Salaries, wages, and benefits increased $4.8 million (36.7%) to $18.0
million during the quarter ended December 31, 1997 from $13.2 million in the
1996 period. As a percentage of revenue, salaries, wages, and benefits decreased
to 38.3% of revenue for the three months ended December 31, 1997, from 38.6% for
the corresponding period of 1996. The change was attributable to a leveling of
the fixed costs associated with salaries paid to shop and administrative
personnel, which did not increase proportionately with revenue.
Fuel and fuel taxes increased $2.4 million (36.6%) to $9.1 million
during the quarter ended December 31, 1997 from $6.7 million in the 1996 period.
As a percentage of revenue, fuel and fuel taxes remained essentially constant at
19.4% of revenue for the three months ended December 31, 1997, from 19.5% for
the corresponding period of 1996, as an increase in the overall fuel efficiency
of the Company's newer tractor fleet and lower overall fuel prices during the
1997 period more than offset greater surcharge revenue during the 1996 period.
Operating supplies and expenses increased $1.4 million (32.9%) to $5.8
million during the quarter ended December 31, 1997 from $4.4 million in the 1996
period. As a percentage of revenue, operating supplies and expenses decreased to
12.3% of revenue for the three months ended December 31, 1997, from 12.7% for
the corresponding period of 1996, 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 $373,000 (26.0%) to $1.8 million during
the quarter ended December 31, 1997 from $1.4 million for the corresponding
period of 1996. As a percentage of revenue, taxes and licenses decreased to 3.9%
of revenue for the three months ended December 31, 1997, from 4.2% for the
corresponding period of 1996, primarily as a result of greater efficiency in
licensing new equipment being added to the fleet.
Insurance and claims increased $394,000 (63.0%) to $1.0 million during
the quarter ended December 31, 1997 from $626,000 for the corresponding period
of 1996. As a percentage of revenue, insurance and claims increased to 2.2% of
revenue for the three months ended December 31, 1997, from 1.8% for the
corresponding period of 1996 because of increased claims expense.
Communications and utilities increased $255,000 (48.1%) to $785,000
during the quarter ended December 31, 1997 from $530,000 for the corresponding
period of 1996. As a percentage of revenue, communications and utilities
<PAGE>
remained essentially unchanged at 1.7% of revenue for the three months ended
December 31, 1997, compared with 1.6% for the corresponding period of 1996.
Depreciation and amortization decreased $310,000 (20.5%) to $1.2
million during the quarter ended December 31, 1997 from $1.5 million for the
corresponding period of 1996. As a percentage of revenue, depreciation and
amortization (adjusted for the net gain on the sale of property and equipment)
decreased to 2.6% of revenue for the three months ended December 31, 1997, from
4.4% for the corresponding period of 1996. The decrease was primarily
attributable to an increase in the net gain on the sale of property and revenue
equipment to $687,443 during the 1997 period compared with a net gain of
$156,931 during the 1996 period as well as the use of operating leases rather
than capital leases to acquire new equipment during the last year.
Rent increased $2.5 million (71.5%) to $5.9 million for the quarter
ended December 31, 1997 from $3.4 million for the corresponding period of 1996.
As a percentage of revenue, rent increased to 12.6% of revenue for the three
months ended December 31, 1997, from 10.1% for the corresponding period of 1996
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 during the last year because of more favorable terms.
If the Company continues to use operating lease financing, its operating ratio
will continue to 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 decreased
to 92.8% for the three months ended December 31, 1997, from 92.9% for the
corresponding period of 1996.
Net interest expense decreased $58,000 (12.9%) to $389,000 for the
quarter ended December 31, 1997 from $447,000 for the corresponding period of
1996. As a percentage of revenue, net interest expense decreased to 0.8% of
revenue for the three months ended December 31, 1997, from 1.3% for the
corresponding period in 1996 as a result of lower average debt and capitalized
lease balances in the 1997 period compared with the 1996 period.
The Company's effective combined federal and state income tax rate for
the three months ended December 31, 1997 and 1996 was 37.8%.
As a result of the factors described above, net earnings increased
$628,000 (50.8%) to $1.9 million for the three months ended December 31, 1997,
compared with net earnings of $1.2 million for the corresponding period of 1996.
As a percentage of revenue, net earnings increased to 4.0% of revenue in the
quarter ended December 31, 1997 from 3.6% in the 1996 period.
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 public
offerings in November 1995 and February 1997, and cash flow from operations. The
Company's primary sources of liquidity currently are cash and cash equivalents,
funds provided by operations, and borrowings and leases with financial
institutions and equipment manufacturers.
The Company's primary source of cash flow from operations generally is
net earnings adjusted for depreciation and deferred income taxes. The Company's
principal uses of cash flow from operations are to service debt or lease
payments associated with new revenue equipment and to internally finance
accounts receivable associated with growth in the business. Net cash provided by
operating activities was $1.1 million for the three months ended December 31,
1997. The primary sources of funds were net earnings increased by non-cash
adjustments of $1.2 million in depreciation and $1.1 million in accounts
receivable attributable to a decrease in average days outstanding. The primary
<PAGE>
uses of funds were $347,000 to reduce accounts payable, $121,000 to purchase
operating supplies, $2.5 million to prepay licensing on revenue equipment, and
$91,000 to reduce accrued liabilities and claims payable.
Net cash used in investing activities was $945,000 for the three months
ended December 31, 1997, as the Company purchased $4.9 million of new property
and revenue equipment, and a new facility in Atlanta, Georgia. The Company sold
property and revenue equipment for $3.9 million. The Company expects capital
expenditures, including the value of equipment financed with operating leases
for revenue equipment and satellite communications units, net of revenue
equipment sales and trade-ins, to be approximately $100.0 million through fiscal
1999.
Net cash provided by financing activities was $589,000 in the 1997
period, consisting primarily of $2.9 million of new borrowings for the purchase
of the Atlanta facility, a reduction of $506,000 in receivables from the sale of
revenue equipment, and payments of $2.8 million of principal under the Company's
long-term debt and capitalized lease agreements. In addition, the Company
received $25,000 from the exercise of stock options and the issuance of stock to
individuals who participate in the Company's stock option plans.
The Company's borrowings consist of $21.1 million for revenue equipment
debt and capitalized leases, and $11.7 million for the Company's new
headquarters in Salt Lake City and the Atlanta facility. 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 in effect from time to time. The Company had not
drawn against the line of credit at December 31, 1997.
.
<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.
The 1997 Annual Meeting of Stockholders of Simon Transportation
Services Inc. was held December 19, 1997, at the corporate headquarters
located at 5175 West 2100 South, West Valley City, Utah. Richard D.
Simon, Chairman, President, and Chief Executive Officer, presided.
The holders of 5,330,662 shares (representing 6,293,323
votes), which is approximately 87% of the total votes outstanding as of
the record date, were represented at the annual meeting in person or by
proxy. The eight candidates for election as directors were elected to
serve the terms specified in the proxy statement. The proposal to
ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the 1997 fiscal year was approved.
The proposal to amend the Company's Incentive Stock Plan to reserve an
additional 600,000 shares of Class A Common Stock for issuance to
participants and approve the issuance of options to purchase 375,000 of
such shares to Company officers was approved. The tabulation of votes
is listed in the table below.
<TABLE>
SUMMARY OF MATTERS VOTED UPON BY STOCKHOLDERS
<CAPTION>
Number of Shares
<S> <C> <C> <C> <C>
For Withheld
Election of Directors:
Richard D. Simon 6,276,748 16,575
Alban B. Lang 6,276,648 16,675
Kelle A. Simon 6,273,748 19,575
Lyn Simon 6,273,498 19,825
Sherry L. Simon Bokovoy 6,273,198 20,125
Richard D. Simon, Jr. 6,273,698 19,625
Irene Warr 6,287,548 5,775
H.J. Frazier 6,284,748 8,575
Other Matters: For Against Abstain Non-Vote
Ratification of selection of 6,264,928 27,225 1,170 0
Arthur Andersen LLP as independent
public accountants
Amendment to Incentive 3,603,602 2,187,245 6,450 496,026
Stock Plan
</TABLE>
<PAGE>
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
10.2 * Outside Director Stock Option Plan.
10.3 * Incentive Stock Plan.
10.4 * 401(k) Plan.
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.
27 Financial Data Schedule
* 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 30, 1998 By: /s/ Alban B. Lang
--------------------------- -----------------
(Signature)
Alban B. Lang
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 13,537,212
<SECURITIES> 0
<RECEIVABLES> 19,143,019
<ALLOWANCES> (79,646)
<INVENTORY> 574,782
<CURRENT-ASSETS> 38,191,642
<PP&E> 87,681,702
<DEPRECIATION> (16,785,102)
<TOTAL-ASSETS> 109,213,692
<CURRENT-LIABILITIES> 20,770,098
<BONDS> 0
0
0
<COMMON> 62,858
<OTHER-SE> 61,675,037
<TOTAL-LIABILITY-AND-EQUITY> 109,213,692
<SALES> 0
<TOTAL-REVENUES> 47,006,493
<CGS> 0
<TOTAL-COSTS> 43,620,922
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 388,875
<INCOME-PRETAX> 2,996,696
<INCOME-TAX> 1,132,751
<INCOME-CONTINUING> 1,863,945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,863,945
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29
</TABLE>
