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 March 31, 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 (April 30, 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
<TABLE>
<S> <C>
PAGE
NUMBER
Item 1. Financial Statements:
Condensed consolidated statements of financial position as of
March 31, 1999 and September 30, 1998 3
Condensed consolidated statements of operations for the three
and six months ended March 31, 1999 and 1998 4
Condensed consolidated statements of cash flows for the six months
ended March 31, 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 14
</TABLE>
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
<TABLE>
<S> <C> <C>
March 31, 1999 September 30, 1998
-------------- ------------------
(Unaudited)
Current Assets:
Cash $ 8,017,727 $ 7,826,365
Receivables, net of allowance for doubtful accounts of
$235,000 and $189,000, respectively 22,913,083 20,250,931
Operating supplies 920,968 1,069,095
Prepaid expenses and other 7,204,350 5,537,548
--------------- ----------------
Total current assets 39,056,128 34,683,939
--------------- -----------------
Property and Equipment, at cost:
Land 8,387,972 8,589,422
Revenue equipment 44,066,945 47,702,977
Buildings and improvements 18,305,474 18,350,370
Office furniture and equipment 8,756,118 8,573,389
--------------- -----------------
79,516,509 83,216,158
Less accumulated depreciation and amortization (19,866,480) (18,598,221)
--------------- -----------------
59,650,029 64,617,937
--------------- -----------------
Other Assets 328,770 223,823
=============== =================
$ 99,034,927 $ 99,525,699
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 14,424,523 $ 7,627,142
Current portion of capitalized lease obligations 434,800 2,030,988
Accounts payable 5,398,853 5,015,049
Accrued liabilities 3,065,756 3,188,404
Accrued claims payable 1,781,502 1,260,827
--------------- -----------------
Total current liabilities 25,105,434 19,122,410
--------------- -----------------
Long-Term Debt, net of current portion 5,252,700 9,102,649
--------------- -----------------
Capitalized Lease Obligations, net of current portion 2,223,882 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 at cost, respectively (1,053,147) (531,547)
Additional paid-in capital 48,277,256 48,277,256
Retained earnings 10,009,094 11,890,367
--------------- -----------------
Total stockholders' equity 57,296,068 59,698,941
--------------- -----------------
$ 99,034,927 $ 99,525,699
=============== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
-------------- -------------- -------------- --------------
Operating Revenue $ 49,271,237 $ 46,149,338 $ 102,263,636 $ 93,155,831
--------------------------------------------------------------------------
Operating Expenses:
Salaries, wages, and benefits 21,784,521 19,351,827 44,735,465 37,363,142
Fuel and fuel taxes 8,367,331 8,262,994 17,302,681 17,360,048
Operating supplies and expenses 7,409,815 7,798,494 14,187,729 13,580,171
Taxes and licenses 1,901,218 1,546,438 3,915,962 3,356,344
Insurance and claims 1,760,834 1,898,971 3,117,309 2,919,698
Communications and utilities 1,106,483 1,060,020 2,150,189 1,845,162
Depreciation and amortization 940,142 1,135,528 2,079,050 2,338,682
Rent 8,716,670 7,200,228 17,121,770 13,112,175
--------------------------------------------------------------------------
Total operating expenses 51,987,014 48,254,500 104,610,155 91,875,422
--------------------------------------------------------------------------
Operating earnings (loss) (2,715,777) (2,105,162) (2,346,519) 1,280,409
Net interest expense 381,347 430,370 678,034 819,245
--------------------------------------------------------------------------
Earnings (loss) before provision for income taxes (3,097,124) (2,535,532) (3,024,553) 461,164
Provision (benefit) for income taxes (1,170,713) (958,431) (1,143,281) 174,320
==========================================================================
Net earnings (loss) $ (1,926,411) $ (1,577,101) $ (1,881,272) $ 286,844
==========================================================================
Net earnings (loss) per common share:
Basic $ (0.32) $ (0.25) $ (0.31) $ 0.05
==========================================================================
Diluted $ (0.32) $ (0.25) $ (0.31) $ 0.04
==========================================================================
Weighted average common shares outstanding:
Basic 6,109,834 6,286,202 6,123,834 6,285,301
==========================================================================
Diluted 6,109,834 6,286,202 6,123,834 6,437,440
==========================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
SIMON TRANSPORTATION SERVICES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
---------------------------------------------
<S> <C> <C>
March 31, 1999 March 31, 1998
---------------- ----------------
Cash Flows From Operating Activities:
Net earnings $ (1,881,272) $ 286,844
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization 2,079,051 2,338,682
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net (2,662,152) 1,363,947
Decrease (increase) in operating supplies 148,127 (171,204)
Increase in prepaid expenses and other (1,666,802) (2,069,695)
Increase in other assets (104,947) (80,320)
Increase in accounts payable 383,804 672,030
Decrease in accrued liabilities (122,648) (1,880,215)
Increase in accrued claims payable 520,675 304,657
---------------------------------------------
Net cash (used in) provided by operating activities (3,306,164) 764,726
---------------------------------------------
Cash Flows From Investing Activities:
Purchase of property and equipment (2,967,289) (6,797,880)
Proceeds from the sale of property and equipment 5,856,145 8,786,800
---------------------------------------------
Net cash provided by investing activities 2,888,856 1,988,920
---------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt -- 2,900,000
Principal payments on long-term debt (3,752,568) (3,483,119)
Borrowings under line-of-credit agreement 6,700,000 --
Principal payments under capitalized lease obligations (1,817,162) (5,303,204)
Decrease in receivable from sale of equipment -- 478,500
Purchase of treasury stock (521,600) --
Net proceeds from issuance of Class A common stock -- 32,220
---------------------------------------------
Net cash provided by (used in) financing activities 608,670 (5,375,603)
---------------------------------------------
Net Increase (Decrease) In Cash 191,362 (2,621,957)
Cash at Beginning of Period 7,826,365 12,766,001
---------------------------------------------
Cash at End of Period $ 8,017,727 $ 10,144,044
=============================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 728,481 $ 1,006,188
Cash paid during the period for income taxes 29,467 667,137
Supplemental Schedule of Noncash Investing and Financing Activities:
Sale of equipment in exchange for receivable paid after
period end $ -- $ 610,000
</TABLE>
See accompanying notes to 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, 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 Annual Report on 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.
Note 2: Net Loss Per Common Share
Basic net loss per common share ("Basic EPS") excludes
dilution and is computed by dividing net loss by the weighted
average number of common shares outstanding during the period.
Diluted net loss per common share ("Diluted EPS") reflects the
potential dilution that could occur if stock options or other
contracts to issue common stock were exercised or converted
into common stock. The computation of Diluted EPS does not
assume exercise or conversion of securities that would have an
antidilutive effect on net loss per common share.
Options to purchase 1,048,900 and 726,824 shares of common
stock at weighted average exercise prices of $13.97 and $17.87
per share as of March 31, 1999 and 1998, respectively, were
not included in the computation of Diluted EPS. The inclusion
of the options would have been antidilutive, thereby
decreasing net loss per common share.
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 second fiscal
quarters and first six months of its 1999 and 1998 fiscal years, respectively.
Results of Operations
Three months ended March 31, 1999 and 1998
Operating revenue increased $3.1 million (6.8%) to $49.2 million for
the three months ended March 31, 1999, from $46.1 million for the corresponding
period of 1998. The increase in operating revenue was primarily attributable to
a 10.0% increase in weighted average tractors, to 1,595 in the 1999 period from
1,450 in the corresponding 1998 period. This increase was partially offset by a
decrease in average revenue per tractor per week, to $2,390 in the 1999 period
from $2,450 in the 1998 period.
Salaries, wages, and benefits increased $2.4 million (12.6%) to $21.8
million during the quarter ended March 31, 1999 from $19.4 million in the 1998
period. As a percentage of revenue, salaries, wages, and benefits increased to
44.2% of revenue for the three months ended March 31, 1999, from 41.9% 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 April
15, 1998.
Fuel and fuel taxes increased $.1 million (1.3%) to $8.4 million during
the quarter ended March 31, 1999 from $8.3 million in the 1998 period. As a
percentage of revenue, fuel and fuel taxes decreased to 17.0% of revenue for the
three months ended March 31, 1999, from 17.95% for the corresponding period of
1998, principally as a result of lower fuel prices.
Operating supplies and expenses decreased $.4 million (5.0%) to $7.4
million during the quarter ended March 31, 1999 from $7.8 million in the 1998
period. As a percentage of revenue, operating supplies and expenses decreased to
15.0% of revenue for the three months ended March 31, 1999, from 16.9% for the
corresponding period of 1998, primarily as a result of decreased costs of
repairs not covered under vehicle warranties and the decreased cost of preparing
equipment for trade. During the 1998 period, the Company accelerated the
disposition of its remaining 48-foot trailers to take advantage of an
opportunity to acquire 53-foot trailers and standardize its fleet with all
53-foot trailers.
Taxes and licenses increased $.4 million (22.9%) to $1.9 million during
the quarter ended March 31, 1999 from $1.5 million for the corresponding period
of 1998. As a percentage of revenue, taxes and licenses increased to 3.9% of
revenue for the three months ended March 31, 1999 from 3.4% for the
corresponding period of 1998. Since taxes and licenses are a relatively fixed
cost, the increase as a percentage of revenue is consistent with the
corresponding decrease in average revenue per tractor per week for the quarter
ended March 31, 1999 compared with the corresponding period of 1998. In
addition, the Company accrued additional property taxes in the 1999 period
associated with the Salt Lake and Atlanta terminals.
Insurance and claims decreased $.1 million (7.3%) to $1.8 million
during the quarter ended March 31, 1999 from $1.9 million for the corresponding
period of 1998. As a percentage of revenue, insurance and claims decreased to
3.6% of revenue for the three months ended March 31, 1999, from 4.1% for the
- -----------------
(*) May contain "forward-looking" statements.
<PAGE>
corresponding period of 1998 because of a decrease in the number and severity of
accidents experienced by the Company during the quarter.
Communications and utilities remained essentially constant at $1.1
million during each period. As a percentage of revenue, communications and
utilities were 2.2% of revenue for the three months ended March 31, 1999,
compared with 2.3% of revenue for the corresponding period of 1998.
Depreciation and amortization decreased $.2 million (17.2%) to $.9
million during the quarter ended March 31, 1999 from $1.1 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 1.9% of revenue for the three months ended March 31, 1999, from
2.5% 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
$626,083 on the sale of property and revenue equipment during the 1999 period
compared with a $635,023 net gain during the 1998 period.
Rent increased $1.5 million (21.1%) to $8.7 million during the quarter
ended March 31, 1999 from $7.2 million for the corresponding period of 1998. As
a percentage of revenue, rent increased to 17.7% of revenue for the three months
ended March 31, 1999, from 15.6% 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, as a result of the decrease in average revenue per tractor per week,
the fixed monthly rental payments resulted in higher rent as a percentage of
revenue. 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 105.5% for the three months ended March 31, 1999, from 104.6% for the
corresponding period of 1998.
Net interest expense decreased $49,000 (11.4%) to $381,000 during the
quarter ended March 31, 1999 from $430,000 for the corresponding period of 1998.
As a percentage of revenue, net interest expense decreased to 0.8% of revenue
for the three months ended March 31, 1999, from 0.9% for the corresponding
period in 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 three months ended March 31, 1999 and 1998 was 37.8%.
As a result of the factors described above, the Company experienced a
net loss of $1,926,411 for the three months ended March 31, 1999, compared with
a net loss of $1,577,101 for the corresponding period of 1998.
Six months ended March 31, 1999 and 1998
Operating revenue increased $9.1 million (9.8%) to $102.3 million for
the six months ended March 31, 1999, from $93.2 million for the corresponding
period of 1998. The increase in operating revenue was primarily attributable to
a 12.0% increase in weighted average tractors, to 1,597 in the 1999 period from
1,426 in the corresponding 1998 period. This increase was partially offset by a
decrease in average revenue per tractor per week, to $2,482 in the 1999 period
from $2,519 in the 1998 period.
Salaries, wages, and benefits increased $7.3 million (19.7%) to $44.7
million during the six months ended March 31, 1999 from $37.4 million in the
1998 period. As a percentage of revenue, salaries, wages, and benefits increased
to 43.7% of revenue for the six months ended March 31, 1999, from 40.1% for the
- -----------------
(*) May contain "forward-looking" statements.
<PAGE>
corresponding period of 1998. The change is primarily attributable to two
separate increases in the driver base pay per mile effective January 1, 1998 and
April 15, 1998, and the cost of employer provided benefits tied to the gross
wages paid to employees.
Fuel and fuel taxes decreased $.1 million (0.3%) to $17.3 million
during the six months ended March 31, 1999 from $17.4 million in the 1998
period. As a percentage of revenue, fuel and fuel taxes decreased to 16.9% of
revenue for the six months ended March 31, 1999, from 18.6% for the
corresponding period of 1998, principally as a result of lower fuel prices.
Operating supplies and expenses increased $.6 million (4.5%) to $14.2
million during the six months ended March 31, 1999 from $13.6 million in the
1998 period. As a percentage of revenue, operating supplies and expenses
decreased to 13.9% of revenue for the six months ended March 31, 1999, from
14.6% for the corresponding period of 1998, primarily as a result of decreased
costs of repairs not covered under vehicle warranties and the decreased cost of
preparing equipment for trade.
Taxes and licenses increased $.5 million (16.7%) to $3.9 million during
the six months ended March 31, 1999 from $3.4 million for the corresponding
period of 1998. As a percentage of revenue, taxes and licenses increased to 3.8%
of revenue for the six months ended March 31, 1999, from 3.6% 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 six months ended March
31, 1999 compared with the corresponding period of 1998.
Insurance and claims increased $.2 million (6.8%) to $3.1 million
during the six months ended March 31, 1999 from $2.9 million for the
corresponding period of 1998. As a percentage of revenue, insurance and claims
decreased to 3.0% of revenue for the six months ended March 31, 1999, from 3.1%
for the corresponding period of 1998 because of a decrease in the number and
severity of accidents experienced by the Company during the period.
Communications and utilities increased $.3 million (16.5%) to $2.1
million during the six months ended March 31, 1999 from $1.8 million for the
corresponding period of 1998. As a percentage of revenue, communications and
utilities remained essentially constant at 2.1% of revenue for the six months
ended March 31, 1999, compared with 2.0% of revenue for the corresponding period
of 1998.
Depreciation and amortization decreased $.3 million (11.1%) to $2.0
million during the six months ended March 31, 1999 from $2.3 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 six months ended March 31, 1999, from 2.5%
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 $1,247,649 on the sale
of property and revenue equipment during the 1999 period compared with a
$1,322,496 net gain during the 1998 period.
Rent increased $4.0 million (30.6%) to $17.1 million during the six
months ended March 31, 1999 from $13.1 million for the corresponding period of
1998. As a percentage of revenue, rent increased to 16.7% of revenue for the six
months ended March 31, 1999, from 14.1% 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, as a result of the decrease in average revenue per tractor per
week, the fixed monthly rental payments resulted in higher rent as a percentage
of revenue. The Company has utilized operating leases in the most recent six
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.(*)
- -----------------
(*) May contain "forward-looking" statements.
<PAGE>
As a result of the foregoing, the Company's operating ratio increased
to 102.3% for the six months ended March 31, 1999, from 98.6% for the
corresponding period of 1998.
Net interest expense decreased $.1 million (17.2%) to $.7 million
during the six months ended March 31, 1999 from $.8 million for the
corresponding period of 1998. As a percentage of revenue, net interest expense
decreased to 0.7% of revenue for the six months ended March 31, 1999, from 0.9%
for the corresponding period in 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 six months ended March 31, 1999 and 1998 was 37.8%.
As a result of the factors described above, the Company experienced a
net loss of $1,881,272 for the six months ended March 31, 1999, compared with
net earnings of $286,844 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 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 used in
operating activities was $3.3 million for the six months ended March 31, 1999.
The primary sources of funds were increases of $.4 million in accounts payable
and $.5 million in claims payable, and a decrease in operating supplies of $.1
million. The primary uses of funds were a net loss of $1.9 million offset by
depreciation of $2.0 million, $1.7 million to prepay licensing on revenue
equipment, an increase of $2.7 million in accounts receivable, and an increase
in other assets of $.1 million.
Net cash provided by investing activities was $2.9 million for the six
months ended March 31, 1999, as the Company purchased $3.0 million of new
revenue equipment and furniture and fixtures. The Company sold revenue equipment
for $5.9 million. The Company expects capital expenditures (primarily for
revenue equipment, and satellite communications units), net of revenue equipment
sales and trade-ins, to be approximately $44.0 million through calendar 1999.
Net cash provided by financing activities was $.6 million in the 1999
period, consisting primarily of a $6.7 million borrowing on the Company's line
of credit, payments of $5.6 million of principal under the Company's long-term
debt and capitalized lease agreements, and $.5 million to repurchase 95,500
shares of the Company's Class A Common Stock. 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 $1,053,000.
The Company's borrowings consist of $9.4 million for revenue equipment
debt and capitalized leases, and $6.2 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
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(*) May contain "forward-looking" statements.
<PAGE>
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 March 31, 1999.
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 fiscal year 1999.(*)
Year 2000 Compliance
The Company has completed a review of each of its core systems to
determine year 2000 (Y2K) 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 Y2K compliant from inception. The Company is currently reviewing
the Y2K compliance status of its facilities and equipment. The Company expects
to complete this review and have taken actions toward making each non-core
system Y2K compliant by June 1999.(*)
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 Y2K 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 Comdata expects to be fully Y2K compliant by June
1999. The Company also interacts with many of its vendors through electronic
data interchange (EDI). Although the Company is Y2K compliant in its EDI
applications, we cannot and do not guarantee the Y2K compliance of our business
partners' systems.(*)
The Company has incurred internal staff costs necessary to review and
further Y2K compliance of its core operating systems. Because the systems were
designed to be Y2K compliant since inception, the costs have not had a material
effect on the Company's financial position or results of operations. The Company
will incur 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 are not
expected to be incremental since they represent the redeployment of existing
information technology resources. Because of the relatively young age of its
facilities and equipment, the Company does not expect to find non-core systems
that need to be replaced to further Y2K compliance.(*)
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 Y2K
risks. Management does not foresee significant liability to third parties if the
Company's systems are not Y2K compliant.(*)
- -----------------
(*) May contain "forward-looking" statements.
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
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 March 31, 1999, assuming
borrowing equal to the $6.7 million drawn on the line of credit and $7.1 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 $138,000. The balance of our equipment financing carries fixed
interest rates and includes term notes payable and capitalized leases totaling
approximately $8.5 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 $85,000 annually.
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.
- -----------------
(*) 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 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
10.2 * 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.
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.
<PAGE>
(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: May 14, 1999 By: /s/ Alban B. Lang
-------------------- -----------------
(Signature)
Alban B. Lang
Treasurer, Chief Operating Officer
and Chief Financial Officer
SIMON TRANSPORTATION SERVICES INC.
SCHEDULE OF COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic and Diluted: March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
-------------- -------------- -------------- --------------
Common shares outstanding beginning of period: 6,109,834 6,285,784 6,180,334 6,283,674
Common share equivalents:
Employee stock options outstanding:
Basic -- -- -- --
Diluted -- -- -- 152,139
Employee stock options exercised:
Basic -- 418 -- 1,627
Diluted -- 418 -- 1,627
Common shares repurchased:
Basic -- -- (56,500) --
Diluted -- -- (56,500) --
--------------------------------------------------------------------------
Number of common shares and common
share equivalents outstanding:
Basic 6,109,834 6,286,202 6,123,834 6,285,301
==========================================================================
Diluted 6,109,834 6,286,202 6,123,834 6,437,440
==========================================================================
Net earnings (loss) $ (1,926,411) $ (1,577,101) $ (1,881,272) $ 286,844
Net earnings (loss) per common share
and common share equivalent:
Basic $ (0.32) $ (0.25) $ (0.31) $ 0.05
==========================================================================
Diluted $ (0.32) $ (0.25) $ (0.31) $ 0.04
==========================================================================
</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> 6-mos
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Mar-31-1999
<CASH> 8,017,727
<SECURITIES> 0
<RECEIVABLES> 23,148,435
<ALLOWANCES> (235,352)
<INVENTORY> 633,146
<CURRENT-ASSETS> 39,056,128
<PP&E> 79,516,509
<DEPRECIATION> (19,866,480)
<TOTAL-ASSETS> 99,034,927
<CURRENT-LIABILITIES> 25,105,434
<BONDS> 7,476,582
0
0
<COMMON> 62,865
<OTHER-SE> 57,233,203
<TOTAL-LIABILITY-AND-EQUITY> 99,034,927
<SALES> 0
<TOTAL-REVENUES> 102,263,636
<CGS> 0
<TOTAL-COSTS> 104,610,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678,034
<INCOME-PRETAX> (3,024,553)
<INCOME-TAX> (1,143,281)
<INCOME-CONTINUING> (1,881,272)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,881,272)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
