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 June 30, 1999
( ) 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 (July 31, 1999).
Class A Common Stock, $.01 par value: 5,372,683 shares
Class B Common Stock, $.01 par value: 913,751 shares
Exhibit Index is on Page 13
<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 June 30, 1999 and September 30, 1998 3
Condensed consolidated statements of earnings
for the three months and nine months ended
June 30, 1999 and 1998 4
Condensed consolidated statements of cash flows
for the nine months ended June 30, 1999 and 1998 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 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
<CAPTION>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
<S> <C> <C>
June 30, 1999 September 30, 1998
------------- ------------------
(Unaudited)
Current Assets:
Cash $ 5,510,677 $ 7,826,365
Receivables, net of allowance for doubtful accounts of
$260,000 and $189,000, respectively 24,065,991 20,250,931
Operating supplies 1,044,760 1,069,095
Prepaid expenses and other 7,185,471 5,537,548
------------------------ ------------------------
Total current assets 37,806,899 34,683,939
------------------------ ------------------------
Property and Equipment, at cost:
Land 8,387,972 8,589,422
Revenue equipment 44,876,488 47,702,977
Buildings and improvements 18,460,492 18,350,370
Office furniture and equipment 8,786,592 8,573,389
------------------------ ------------------------
80,511,544 83,216,158
Less accumulated depreciation and amortization (21,556,466) (18,598,221)
------------------------ ------------------------
58,955,078 64,617,937
------------------------ ------------------------
Other Assets 329,397 223,823
======================== ========================
$ 97,091,374 $ 99,525,699
======================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 14,474,550 $ 7,627,142
Current portion of capitalized lease obligations 532,349 2,030,988
Accounts payable 6,138,990 5,015,049
Accrued liabilities 3,431,171 3,188,404
Accrued claims payable 1,598,423 1,260,827
------------------------ ------------------------
Total current liabilities 26,175,483 19,122,410
------------------------ ------------------------
Long-Term Debt, net of current portion 3,309,145 9,102,649
------------------------ ------------------------
Capitalized Lease Obligations, net of current portion 2,020,299 2,444,856
------------------------ ------------------------
Deferred Income Taxes 9,156,843 9,156,843
------------------------ ------------------------
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, 5,372,683 shares issued 53,727 53,727
Class B common stock, $.01 par value, 5,000,000 shares
authorized, 913,751 shares issued 9,138 9,138
Treasury stock, 176,600 and 81,100 shares
held at cost, respectively (1,053,147) (531,547)
Additional paid-in capital 48,277,256 48,277,256
Retained earnings 9,142,630 11,890,367
------------------------ ------------------------
Total stockholders' equity 56,429,604 59,698,941
------------------------ ------------------------
$ 97,091,374 $ 99,525,699
======================== ========================
<FN>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
Operating Revenue $ 53,599,181 $ 50,054,991 $ 155,862,817 $ 143,210,822
--------------------------------------------------------------------------
Operating Expenses:
Salaries, wages, and benefits 23,197,573 21,552,353 67,933,038 58,915,495
Fuel & fuel taxes 9,614,285 9,275,404 26,916,966 26,635,452
Operating supplies and expenses 7,446,816 6,656,953 21,634,545 20,237,124
Taxes and licenses 1,629,903 1,516,404 5,545,865 4,872,748
Insurance and claims 1,849,620 1,232,362 4,966,929 4,152,060
Communications and utilities 1,121,009 1,079,165 3,271,198 2,924,327
Depreciation and amortization 1,110,584 1,330,842 3,189,634 3,669,524
Rent 8,687,677 7,501,373 25,809,447 20,613,548
--------------------------------------------------------------------------
Total operating expenses 54,657,467 50,144,856 159,267,622 142,020,278
--------------------------------------------------------------------------
Operating earnings (loss) (1,058,286) (89,865) (3,404,805) 1,190,544
Net interest expense (334,745) (344,811) (1,012,779) (1,164,056)
--------------------------------------------------------------------------
Earnings (loss) before income taxes (1,393,031) (434,676) (4,417,584) 26,488
Provision (benefit) for income taxes (526,566) (164,308) (1,669,847) 10,012
==========================================================================
Net earnings (loss) $ (866,465) $ (270,368) $ (2,747,737) $ 16,476
==========================================================================
Net earnings (loss) per common share
Basic $ (0.14) $ (0.04) $ (0.45) $ 0.00
==========================================================================
Diluted $ (0.14) $ (0.04) $ (0.45) $ 0.00
==========================================================================
Weighted average common shares outstanding
Basic 6,109,834 6,286,427 6,119,167 6,285,582
==========================================================================
Diluted 6,109,834 6,286,427 6,119,167 6,285,582
==========================================================================
<FN>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
---------------------------------------------
<S> <C> <C>
June 30, 1999 June 30, 1998
Cash Flows From Operating Activities:
Net (loss) earnings $ (2,747,737) $ 16,476
Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities
Depreciation and amortization 3,189,634 3,669,524
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net (3,283,805) 760,781
Decrease (increase) in operating supplies 24,335 (108,935)
Increase in prepaid expenses and other (1,724,438) (1,798,356)
Increase in other assets (105,574) (80,320)
Increase in accounts payable 1,123,941 849,914
Increase (decrease) in accrued liabilities 319,282 (1,494,815)
Increase (decrease) in accrued claims payable 337,596 (90,572)
---------------------------------------------
Net cash (used in) provided by operating activities (2,866,766) 1,723,697
---------------------------------------------
Cash Flows From Investing Activities:
Purchase of property and equipment (3,921,776) (8,403,107)
Proceeds from the sale of property and equipment 6,395,000 11,140,800
---------------------------------------------
Net cash provided by investing activities 2,473,224 2,737,693
---------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt -- 2,900,000
Principal payments on long-term debt (5,646,096) (5,331,862)
Borrowings under line-of-credit agreement 6,700,000 --
Principal payments under capitalized lease obligations (1,923,196) (7,075,117)
(Increase) decrease in receivable from sale of equipment (531,255) 1,088,500
Purchase of treasury stock (521,600) --
Net proceeds from issuance of Class A common stock 1 31,139
---------------------------------------------
Net cash used in financing activities (1,922,146) (8,387,340)
---------------------------------------------
Net Decrease In Cash (2,315,688) (3,925,950)
Cash at Beginning of Period 7,826,365 12,766,001
---------------------------------------------
Cash at End of Period $ 5,510,677 $ 8,840,051
=============================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,103,149 $ 1,440,353
Cash paid during the period for income taxes 32,486 688,868
Supplemental Schedule of Noncash Investing and Financing Activities:
Sale of equipment in exchange for receivable paid after
Period end 531,255 --
<FN>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated financial statements.
</FN>
</TABLE>
<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, 1998 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, 1998. Results of
operations in interim periods are not necessarily indicative
of results to be expected for a full year.
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 within 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 periods discussed in this report represent the Company's third fiscal
quarters and nine months of its 1999 and 1998 fiscal years, respectively.
Effective July 16, 1999, the Company reduced its non-driver workforce
by approximately 25%. Management concluded that the number of administrative and
shop personnel exceeds near-term growth plans. Management anticipates that the
workforce reduction will decrease salary and benefit costs by approximately $4
million annually. After the reduction, the Company's ratio of tractors to
non-drivers is approximately 4-to-1.(*)
Results of Operations
Three months ended June 30, 1999 and 1998
Operating revenue increased $3.5 million (7.1%) to $53.6 million for
the three months ended June 30, 1999, from $50.1 million for the corresponding
period of 1998. The increase in operating revenue was primarily attributable to
a 6.8% increase in weighted average tractors, to 1,658 in the 1999 period from
1,552 in the corresponding 1998 period and a 0.4% increase in average revenue
per tractor per week, to $2,512 in the 1999 period from $2,503 in the 1998
period.
Salaries, wages, and benefits increased $1.6 million (7.6%) to $23.2
million during the quarter ended June 30, 1999 from $21.6 million in the 1998
period. As a percentage of revenue, salaries, wages, and benefits increased to
43.3% of revenue for the three months ended June 30, 1999, from 43.1% for the
corresponding period of 1998. The increase was primarily attributable to the
fixed cost of wages and benefits for non-driver personnel. The Company
eliminated the positions of over 140 non-driver personnel effective July 16,
1999, and expects a decrease as a percentage of revenue in future periods.(*)
Fuel and fuel taxes increased $0.3 million (3.7%) to $9.6 million
during the quarter ended June 30, 1999 from $9.3 million in the 1998 period. As
a percentage of revenue, fuel and fuel taxes decreased to 17.9% of revenue for
the three months ended June 30, 1999, from 18.5% for the corresponding period of
1998, principally as a result of lower fuel prices in the 1999 period as
compared with the 1998 period.
Operating supplies and expenses increased $0.7 million (11.9%) to $7.4
million during the quarter ended June 30, 1999 from $6.7 million in the 1998
period. As a percentage of revenue, operating supplies and expenses increased to
13.9% of revenue for the three months ended June 30, 1999, from 13.3% for the
corresponding period of 1998, primarily as a result of increased costs of
accident repairs not covered under vehicle warranties. Substantially all of the
Company's tractors are covered by three-year, 500,000-mile warranties.
Taxes and licenses increased $0.1 million (7.5%) to $1.6 million during
the quarter ended June 30, 1999 from $1.5 million for the corresponding period
of 1998. As a percentage of revenue, taxes and licenses remained unchanged at
3.0% of revenue for the three months ended June 30, 1999 and 1998.
Insurance and claims increased $0.6 million (50.1%) to $1.8 million
during the quarter ended June 30, 1999 from $1.2 million for the corresponding
period of 1998. As a percentage of revenue, insurance and claims increased to
3.5% of revenue for the three months ended June 30, 1999, from 2.5% for the
corresponding period of 1998 because of an increase in the number of accidents
experienced by the Company during the quarter.
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
Communications and utilities remained constant at $1.1 million during
each of the quarters ended June 30, 1999 and 1998. As a percentage of revenue,
communications and utilities remained essentially unchanged at 2.1% of revenue
for the three months ended June 30, 1999, compared with 2.2% for the
corresponding period of 1998.
Depreciation and amortization decreased $0.2 million (16.6%) to $1.1
million during the quarter ended June 30, 1999 from $1.3 million during the
quarter ended June 30, 1998. As a percentage of revenue, depreciation and
amortization (adjusted for the net gain on the sale of property and equipment)
decreased to 2.1% of revenue for the three months ended June 30, 1999, from 2.7%
for the corresponding period of 1998. The decrease was primarily attributable to
the use of operating leases rather than capital leases to acquire new equipment
during the last year. The Company realized a net gain of $527,387 on the sale of
property and revenue equipment during the 1999 period compared with a $384,832
net gain during the 1998 period.
Rent increased $1.2 million (15.8%) to $8.7 million during the quarter
ended June 30, 1999 from $7.5 million for the corresponding period of 1998. As a
percentage of revenue, rent increased to 16.2% of revenue for the three months
ended June 30, 1999, from 15.0% for the corresponding period of 1998 as the
Company added new equipment and 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 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 increased
to 102.0% for the three months ended June 30, 1999, from 100.2% for the
corresponding period of 1998.
Net interest expense decreased $10,000 (2.9%) to $335,000 during the
quarter ended June 30, 1999 from $345,000 for the corresponding period of 1998.
As a percentage of revenue, net interest expense remained essentially unchanged
at 0.6% of revenue for the three months ended June 30, 1999, compared with 0.7%
for the corresponding period in 1998.
The Company's effective combined federal and state income tax rate for
the three months ended June 30, 1999 and 1998 was 37.8%.
As a result of the factors described above, the Company experienced a
net loss of $866,465 for the three months ended June 30, 1999, compared with a
net loss of $270,368 for the corresponding period of 1998.
Nine months ended June 30, 1999 and 1998
Operating revenue increased $12.7 million (8.8%) to $155.9 million for
the nine months ended June 30, 1999, from $143.2 million for the corresponding
period of 1998. The increase in operating revenue was primarily attributable to
a 10.1% increase in weighted average tractors, to 1,617 in the 1999 period from
1,468 in the 1998 period. This increase was partially offset by a 0.9% decrease
in average revenue per tractor per week, to $2,492 in the 1999 period from
$2,514 in the 1998 period.
Salaries, wages, and benefits increased $9.0 million (15.3%) to $67.9
million during the nine months ended June 30, 1999 from $58.9 million in the
1998 period. As a percentage of revenue, salaries, wages, and benefits increased
to 43.6% of revenue for the nine months ended June 30, 1999, from 41.1% for the
corresponding period of 1998. The change is primarily attributable to a driver
wage increase and the cost of employer provided benefits tied to the gross wages
paid to employees. In order to remain competitive in its compensation package to
drivers, the Company raised driver base pay two cents per mile effective January
1, 1998 and again on April 15, 1998. The Company eliminated the positions of
over 140 non-driver personnel effective July 16, 1999, and expects a decrease as
a percentage of revenue in future periods.(*)
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
Fuel and fuel taxes increased $0.3 million (1.1%) to $26.9 million
during the nine months ended June 30, 1999 from $26.6 million in the 1998
period. As a percentage of revenue, fuel and fuel taxes decreased to 17.3% of
revenue for the nine months ended June 30, 1999, from 18.6% for the
corresponding period of 1998, principally as a result of a lower fuel prices
during the 1999 period.
Operating supplies and expenses increased $1.4 million (6.9%) to $21.6
million during the nine months ended June 30, 1999 from $20.2 million in the
1998 period. As a percentage of revenue, operating supplies and expenses
decreased to 13.9% of revenue for the nine months ended June 30, 1999, from
14.1% for the corresponding period of 1998, primarily as a result of decreased
costs of repairs not covered under vehicle warranties and the cost of preparing
equipment for trade.
Taxes and licenses increased $0.6 million (13.8%) to $5.5 million
during the nine months ended June 30, 1999 from $4.9 million for the
corresponding period of 1998. As a percentage of revenue, taxes and licenses
increased to 3.6% of revenue for the nine months ended June 30, 1999, from 3.4%
of revenue for the corresponding period of 1998. This increase is consistent
with the corresponding decrease in average revenue per tractor per week for the
nine months ended March 31, 1999 compared with the corresponding period of 1998.
Insurance and claims increased $0.8 million (19.6%) to $5.0 million
during the nine months ended June 30, 1999 from $4.2 million for the
corresponding period of 1998. As a percentage of revenue, insurance and claims
increased to 3.2% of revenue for the nine months ended June 30, 1999, from 2.9%
for the corresponding period of 1998, principally as a result of an increase in
the number and severity of accidents experienced by the Company during the
period.
Communications and utilities increased $0.4 million (11.9%) to $3.3
million during the nine months ended June 30, 1999 from $2.9 million for the
corresponding period of 1998. As a percentage of revenue, communications and
utilities increased to 2.1% of revenue for the nine months ended June 30, 1999,
compared with 2.0% for the corresponding period of 1998. The fixed costs of
utilities for the Company's terminals and the cost of usage of the Company's
satellite tracking system did not remain proportionate with the decrease in
revenue per tractor.
Depreciation and amortization decreased $0.5 million (13.1%) to $3.2
million during the nine months ended June 30, 1999 from $3.7 million for the
corresponding period of 1998. As a percentage of revenue, depreciation and
amortization (adjusted for the net gain on the sale of property and equipment)
decreased to 2.0% of revenue for the nine months ended June 30, 1999, from 2.6%
for the corresponding period of 1998. The decrease was primarily attributable to
the use of operating leases rather than capital leases to acquire new equipment
during the last year. The Company realized a net gain of $1,775,036 on the sale
of property and revenue equipment during the 1999 period compared with a
$1,707,327 net gain during the 1998 period.
Rent increased $5.2 million (25.2%) to $25.8 million during the nine
months ended June 30, 1999 from $20.6 million for the corresponding period of
1998. As a percentage of revenue, rent increased to 16.6% of revenue for the
nine months ended June 30, 1999, from 14.4% for the corresponding period of 1998
as the Company added new equipment and replaced equipment that had been financed
under capital lease arrangements with equipment financed under operating leases.
In addition, the fixed monthly rental payments were not as efficiently spread
over lower revenue per tractor. The Company has utilized operating leases in the
most recent nine months 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 increased
to 102.2% for the nine months ended June 30, 1999, from 99.2% for the
corresponding period of 1998.
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
Net interest expense decreased $0.2 million (13.0%) to $1.0 million
during the nine months ended June 30, 1999 from $1.2 million for the
corresponding period of 1998. As a percentage of revenue, net interest expense
decreased to 0.6% of revenue for the nine months ended June 30, 1999, from 0.8%
of revenue for the corresponding period of 1998 as a result of lower average
debt and capitalized lease balances in the 1999 period compared with the 1998
period.
The Company's effective combined federal and state income tax rate for
the nine months ended June 30, 1999 and 1998 was 37.8%.
As a result of the factors described above, the Company experienced a
net loss of $2,747,737 for the nine months ended June 30, 1999, compared to net
earnings of $16,476 for the corresponding period of 1998.
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, and cash flow from operations. The
Company's primary sources of liquidity currently are cash and cash equivalents,
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 amortization, and deferred income
taxes. The Company's principal uses of cash flow from operations are to increase
prepaid expenses, to service debt or lease payments associated with new revenue
equipment, to purchase property and equipment associated with growth in the
business, and to internally finance accounts receivable associated with growth
in the business. Net cash used in operating activities was $2.9 million for the
nine months ended June 30, 1999. The primary sources of funds were depreciation
of $3.2 million, increases of $1.1 million in accounts payable, $0.3 million in
accrued liabilities and $0.3 million in accrued claims payable. The primary uses
of funds were a net loss of $2.7 million, an increase in accounts receivable of
$3.3 million, $1.7 million to prepay licensing on revenue equipment, and $0.1
million to increase other assets.
Net cash provided by investing activities was $2.5 million for the nine
months ended June 30, 1999, as the Company purchased $3.9 million of new revenue
equipment and furniture and fixtures. The Company sold property and equipment
for $6.4 million. The Company expects capital expenditures for purchased or
leased equipment (primarily for revenue equipment and satellite communications
units), net of revenue equipment sales and trade-ins, to be approximately $17.6
million through calendar 1999.(*)
Net cash used in financing activities was $1.9 million in the 1999
period, consisting primarily of a $6.7 million borrowing on the Company's line
of credit offset by payments of $7.6 million of principal under the Company's
long-term debt and capitalized lease agreements, $0.5 million to repurchase
95,500 shares of the Company's Class A Common Stock, and a $0.5 million increase
in receivables from the sale of revenue equipment. In July 1998, the Board of
Directors authorized the repurchase of up to 500,000 shares of Class A Common
Stock. The repurchases may be made in the open market or otherwise from
time-to-time through September 1999. To date, the Company has repurchased
176,600 shares of Common Stock at an average market price of $5.96 per share for
a total cash outlay of $1.1 million.
The Company's borrowings consist of $6.0 million for revenue equipment
debt and capitalized leases, and $5.1 million for the Company's headquarters in
Salt Lake City and the Atlanta facility. The Company maintains a $10 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 outstanding
borrowings of $6.7 million against the line of credit at June 30, 1999.
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
Management believes that available borrowings under the line of credit,
and future borrowings under installment notes payable or lease arrangements for
revenue equipment will allow the Company to continue to meet its working capital
requirements, anticipated capital expenditures, and obligations under debt and
capitalized and operating leases at least through calendar year 1999.(*)
Year 2000 Compliance
The Company has completed a review of each of its core systems to
determine year 2000 compliance. The Company's billing, dispatch, EDI, fueling,
payroll, telephone, vehicle maintenance, and yard and equipment inventory
systems and all other critical hardware and software systems were designed to be
year 2000 compliant from inception. The Company has also completed its review
and assessment of the year 2000 compliance status of its facilities and
equipment. All facilities and systems are year 2000 compliant with the possible
exception of some older personal computers. These computers do not perform date
critical job functions. The Company will continue to replace these units during
the normal course of business.(*)
In April 1999, the Company installed a new mainframe to handle its core
operating systems. The Company acquired the new computer as part of its normal
course of business. The prior machine continues to serve as a backup system.
Both computers, peripherals and all operating software have been extensively
tested by Company personnel and we believe all are year 2000 compliant.(*)
The Company relies on Qualcomm to provide the satellite tracking system
necessary to track the location of its equipment, and to provide dispatch and
routing information to its drivers. The Company has been informed that the
software utilized by Qualcomm and the Company is fully year 2000 compliant. The
Company utilizes Comdata to transmit payroll funds to its drivers and to allow
drivers to purchase fuel outside of the Company's terminal locations. The
Company has been informed that the software and systems utilized by Comdata and
the Company is fully year 2000 compliant. The Company also interacts with many
of its vendors through electronic data interchange (EDI). Although the Company
is year 2000 compliant in its EDI applications, we cannot and do not guarantee
the year 2000 compliance of our business partners' systems.(*)
The Company has incurred internal staff costs necessary to review and
further year 2000 compliance of its core operating systems. Because the systems
were designed to be year 2000 compliant since inception, the costs have not had
a material effect on the Company's financial position or results of operations.
The Company also incurred additional internal staff time to complete its
compliance review of non-core systems embedded in facilities and equipment.
These non-core systems include microcontrollers contained in tractor engines and
other components, refrigeration units, and terminal facilities. The costs of
such review were not incremental since they represented the redeployment of
existing information technology resources. (*)
The Company believes that the most likely worse case scenario is the
failure of some third party provided services. The Company anticipates that the
risks related to its core and non-core systems will be mitigated by ongoing
assessment and correction of the systems. The primary risk to operations is
service disruption from third-party providers that supply satellite
communication, telephone, fueling and financial services. Any disruption of
these critical services would hinder the Company's ability to receive, process
and track its freight or communicate with its customers and drivers.(*)
A failure of the satellite communication system could have a materially
adverse effect on the Company's business and results of operations. The Company
is relying on the contingency plan established by Qualcomm to prevent the
interruption of business. As an additional backup, the Company plans to use its
existing telephone systems to dispatch its equipment and provide support to its
drivers in the event of a complete satellite system failure. In the event of EDI
failures on the part of our customers, the Company plans to use its telephone
and facsimile system to receive load tenders from its customers. The Company
would switch to paper invoices for its customers unable to use EDI. Management
believes that the Company's current state of readiness, the nature of the
Company's business, and the availability of the contingency plans minimizes year
2000 risks. Management does not foresee significant liability to third parties
if the Company's systems are not year 2000 compliant.(*)
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
The principal market risks to which the Company is exposed are
fluctuation in fuel prices and interest rates on our debt financing.
We are not engaged in any fuel hedging transactions. Thus, we are
exposed to fluctuations in fuel prices but are not exposed to any market risk
involving hedging costs.
The principal market risks (i.e., the risk of loss arising from adverse
changes in market rates and prices) to which we are exposed are interest rates
on our debt financing. Our variable rate debt consists of a revolving line of
credit, an unsecured term loan and an equipment finance term loan carrying
interest rates tied to LIBOR or the Eurodollar rate. These variable interest
rates expose us to the risk that interest rates may rise. At June 30, 1999,
assuming borrowing equal to the $6.7 million drawn on the line of credit and
$5.9 million on other outstanding variable rate loans, a one percentage point
increase in the LIBOR and Eurodollar rate would increase our annual interest
expense by approximately $126,000. The balance of our equipment financing
carries fixed interest rates and includes term notes payable and capitalized
leases totaling approximately $7.8 million. These fixed interest rates expose us
to the risk that interest rates may fall. A one percentage point decline in
interest rates would have the effect of increasing the premium we pay over
market interest rates by one percentage point or approximately $78,000 annually.
- ------------------------------------------
(*) May contain forward looking statements
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its officers and directors have
been named as defendants in a securities class action filed in the
United States District Court for the District of Utah, Caprin v. Simon
Transportation Services, Inc., et al., No. 2:98CV 863K (filed December
3, 1998). Plaintiffs in this action allege that defendants made
material misrepresentations and omissions during the period February
13, 1997 through April 2, 1998 in violation of Sections 11, 12(2) and
15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
The Company intends to vigorously defend this action.
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
10.1 * Outside Director Stock Option Plan.
10.2 * Incentive Stock Plan.
10.3 * 401(k) Plan.
10.4 # Loan Agreement (Line of Credit) dated April 29, 1996 between
U.S. Bank of Utah and Simon Transportation Services Inc.
11 Schedule of Computation of Net Income Per Share
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: August 6, 1999 By: /s/ Alban B. Lang
----------------------------------- -----------------------------------
(Signature)
Alban B. Lang
Treasurer, Chief Operating Officer
and Chief Financial Officer
<TABLE>
<CAPTION>
SIMON TRANSPORTATION SERVICES INC.
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited)
For the Three Months Ended For the Nine Months Ended
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic and Diluted: June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
Common shares outstanding beginning of period: 6,109,834 6,286,364 6,180,334 6,283,674
Common share equivalents:
Employee stock options exercised:
Basic -- 63 -- 1,908
Diluted -- 63 -- 1,908
Common shares repurchased:
Basic -- -- (61,167) --
Diluted -- -- (61,167) --
--------------------------------------------------------------------------
Number of common shares and common
Share equivalents outstanding
Basic 6,109,834 6,286,427 6,119,167 6,285,582
==========================================================================
Diluted 6,109,834 6,286,427 6,119,167 6,285,582
==========================================================================
Net earnings (loss) $ (866,465) $ (270,368) $ (2,747,737) $ 16,476
Net earnings (loss) per common share
and common share equivalent
Basic $ (0.14) $ (0.04) $ (0.45) $ 0.00
==========================================================================
Diluted $ (0.14) $ (0.04) $ (0.45) $ 0.00
==========================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted
from the Company's condensed consolidated financial statements
and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Jun-30-1999
<CASH> 5,510,677
<SECURITIES> 0
<RECEIVABLES> 24,326,343
<ALLOWANCES> (260,352)
<INVENTORY> 578,881
<CURRENT-ASSETS> 37,806,899
<PP&E> 80,511,544
<DEPRECIATION> (21,556,466)
<TOTAL-ASSETS> 97,091,374
<CURRENT-LIABILITIES> 26,175,483
<BONDS> 5,329,444
0
0
<COMMON> 62,865
<OTHER-SE> 56,366,739
<TOTAL-LIABILITY-AND-EQUITY> 97,091,374
<SALES> 0
<TOTAL-REVENUES> 155,862,817
<CGS> 0
<TOTAL-COSTS> 159,267,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,012,779
<INCOME-PRETAX> (4,417,584)
<INCOME-TAX> (1,669,847)
<INCOME-CONTINUING> (2,747,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,747,737)
<EPS-BASIC> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
