<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 000-23341
MOTOR CARGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0406479
- -------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
845 West Center Street
North Salt Lake, Utah 84054
(801) 936-1111
(Address of principal executive offices and telephone number)
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 such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On April 30, 2000, there were
6,800,840 outstanding shares of the Registrant's Common Stock, no par value.
===============================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 (unaudited) and December 31, 1999 (audited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,795,760 $ 5,508,809
Receivables 15,236,376 16,570,062
Prepaid expenses 2,260,989 2,720,084
Supplies inventory 528,664 568,430
Deferred income taxes 1,723,000 1,723,000
----------- -----------
Total current assets 25,544,789 27,090,385
PROPERTY AND EQUIPMENT, AT COST 99,946,336 99,459,949
Less accumulated depreciation
and amortization 47,328,343 46,644,471
----------- -----------
52,617,993 52,815,478
Other assets
Deferred charges 499,125 606,250
Unrecognized net pension obligation 58,071 58,071
----------- -----------
557,196 664,321
----------- -----------
$78,719,978 $80,570,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
March 31, 2000 (unaudited) and December 31, 1999 (audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligations $ 111,624 $ 109,151
Accounts payable 2,158,374 3,361,660
Accrued liabilities 6,057,389 6,323,095
Accrued claims 1,570,697 1,727,391
Income taxes payable 544,069 119,931
----------- -----------
Total current liabilities 10,442,153 11,641,228
LONG-TERM OBLIGATIONS, less current
maturities 7,251,831 8,020,523
DEFERRED INCOME TAXES 7,267,438 7,267,000
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, no par value; Authorized -
25,000,000 shares - none issued -- --
Common stock, no par value; Authorized -
100,000,000 shares; Issued and outstanding 6,800,840 shares as of March 31,
2000 and 6,925,040 shares as of December 31, 1999
11,294,713 11,849,600
Retained earnings 42,463,843 41,791,833
----------- -----------
53,758,556 53,641,433
----------- -----------
$78,719,978 $80,570,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Operating revenues $ 30,382,899 $ 28,730,830
------------ ------------
Operating expenses
Salaries, wages and benefits 15,474,363 13,930,646
Operating supplies and expenses 4,968,930 4,307,049
Purchased transportation 2,891,056 4,071,468
Operating taxes and licenses 1,155,574 1,057,168
Insurance and claims 977,206 975,176
Depreciation and amortization 2,317,392 2,084,509
Communications and utilities 536,410 432,974
Building rents 862,562 679,232
Other nonrecurring expense 102,596 --
------------ ------------
Total operating expenses 29,286,089 27,538,222
------------ ------------
Operating income 1,096,810 1,192,608
Other income (expense)
Interest expense (54,481) (36,617)
Other, net 66,808 34,215
------------ ------------
12,327 (2,402)
------------ ------------
Earnings before income taxes 1,109,137 1,190,206
Income taxes 437,126 469,000
------------ ------------
Net earnings $ 672,011 $ 721,206
============ ============
Earnings per common share - basic $ 0.10 $ 0.10
============ ============
Weighted-average shares outstanding - basic 6,888,525 6,979,080
============ ============
Earnings per common share - diluted $ 0.10 $ 0.10
============ ============
Weighted-average shares outstanding - diluted 6,888,525 6,979,080
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 672,011 $ 721,206
----------- -----------
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 2,317,393 2,084,509
Provision for losses on receivables 62,000 57,100
Loss (gain) on disposition of
property and equipment (51,712) (1,116)
Deferred income taxes 438 12,952
Charge associated with stock issuance to
officer 23,750 40,000
Changes in assets and liabilities
Receivables 1,271,686 1,000,521
Prepaid expenses 459,095 219,894
Supplies inventory 39,766 7,349
Income taxes payable 424,138 481,846
Other assets 107,125 143
Accounts payable (1,203,286) (572,973)
Accrued liabilities and claims (422,400) (37,323)
----------- -----------
Total adjustments 3,027,993 3,292,902
----------- -----------
Net cash provided by operating
activities 3,700,004 4,014,108
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (2,313,887) (3,387,482)
Proceeds from disposition of property
and equipment 245,690 38,000
----------- -----------
Net cash used in
investing activities (2,068,197) (3,349,482)
----------- -----------
</TABLE>
(Continued)
5
<PAGE> 6
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Three months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from financing activities
Proceeds from issuance of long-term
obligations 10,126,555 --
Principal payments on long-term
obligations (10,892,774) (4,021,966)
Repurchase of shares (578,637) (308,450)
------------ ------------
Net cash used in financing activities (1,344,856) (4,330,416)
------------ ------------
Net increase (decrease) in
cash and cash equivalents 286,951 (3,665,790)
Cash and cash equivalents at beginning of period 5,508,809 7,514,654
------------ ------------
Cash and cash equivalents at end of period $ 5,795,760 $ 3,848,864
============ ============
Supplemental cash flow information
Cash paid during the period for
Interest $ 51,008 $ 36,617
Income taxes 11,550 5,650
</TABLE>
Noncash investing and financing activities
During the first quarter of 1999, in connection with shares issued per the
restricted stock agreement, 2,180 shares valued at $17,440 were withheld by the
Company as tax withholdings.
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The interim consolidated financial information included herein is
unaudited; however, the information reflects all adjustments (consisting
of normal recurring adjustments) that are, in the opinion of management,
necessary to the fair presentation of the consolidated financial
position, results of operations, and cash flows for the interim periods.
The consolidated financial statements should be read in conjunction with
the Notes to consolidated financial statements included in the audited
consolidated financial statements for Motor Cargo Industries, Inc. (the
"Company") for the year ended December 31, 1999 which are included in
the Company's Annual Report on Form 10-K for such year (the "1999
10-K"). Results of operations for interim periods are not necessarily
indicative of annual results of operations. The consolidated balance
sheet at December 31, 1999, was extracted from the Company's audited
consolidated financial statements contained in the 1999 10-K, and does
not include all disclosures required by generally accepted accounting
principles for annual consolidated financial statements.
EARNINGS PER SHARE
Basic earnings per common share are based on the weighted average number
of common shares outstanding during each such period. Diluted earnings
per common share are based on shares outstanding (computed under basic
EPS) and dilutive potential common shares. Potential common shares
included in dilutive earnings per share calculations include stock
options granted but not exercised.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31, 2000
EARNINGS SHARES EARNINGS
(NUMERATOR) (DENOMINATOR) PER-SHARE
----------- ------------ ---------
<S> <C> <C> <C>
BASIC EPS
Net earnings $672,011 6,888,525 $0.10
=====
EFFECT OF DILUTIVE
SECURITIES
Stock options
- -
-------- ---------
DILUTED EPS
Net earnings $672,011 6,888,525 $0.10
======== ========= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31, 1999
EARNINGS SHARES EARNINGS
(NUMERATOR) (DENOMINATOR) PER-SHARE
----------- ------------ ---------
<S> <C> <C> <C>
BASIC EPS
Net earnings $721,206 6,979,080 $0.10
=====
EFFECT OF DILUTIVE
SECURITIES
Stock options
- -
-------- ---------
DILUTED EPS
Net earnings $721,206 6,979,080 $0.10
======== ========= =====
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's
consolidated financial condition, liquidity and capital resources and results of
operations. This analysis should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (the "1999 10-K").
This section contains certain forward-looking statements that involve
risks and uncertainties, including statements regarding the Company's plans,
objectives, goals, strategies and financial performance. The Company's actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of factors set forth under "Cautionary
Statement for Forward-Looking Information" below and elsewhere in this report.
OVERVIEW
Motor Cargo Industries, Inc. (the "Company") is a regional
less-than-truckload ("LTL") carrier which provides transportation and logistics
services to shippers within the Company's service region. The Company's service
region is the western United States, including Arizona, California, Colorado,
Idaho, New Mexico, Oregon, Texas, Utah and Washington. The Company transports
general commodities, including consumer goods, packaged foodstuffs, electronics,
computer equipment, apparel, hardware, industrial goods and auto parts for a
diversified customer base. The Company offers a broad range of services,
including expedited scheduling and full temperature-controlled service. Through
its wholly-owned subsidiary, MC Distribution Services, Inc. ("MCDS"), the
Company also provides customized logistics, warehousing and distribution
management services.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in the Company's consolidated
statements of earnings:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
------ ------
<S> <C> <C>
Operating revenues 100.0% 100.0%
------ ------
Operating expenses
Salaries, wages and benefits 50.9 48.5
Operating supplies and expenses 16.4 15.0
Purchased transportation 9.5 14.2
Operating taxes and licenses 3.8 3.7
Insurance and claims 3.2 3.4
Depreciation and amortization 7.6 7.2
Communications and utilities 1.8 1.5
Building rents 2.9 2.4
Other nonrecurring expense 0.3 -
------ ------
Total operating expenses 96.4 95.9
----- -----
Operating income 3.6 4.1
Other income (expense)
Interest expense (0.2) (0.1)
Other, net 0.2 0.1
------ ------
Earnings before income taxes 3.6 4.1
Income taxes 1.4 1.6
------ ------
Net earnings 2.2% 2.5%
====== ======
</TABLE>
8
<PAGE> 9
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Operating revenues increased 5.8% to $30.4 million for the three months
ended March 31, 2000, compared to $28.7 million for the first three months of
1999. The increase was primarily attributable to an improved yield due to
increased rates and a reduction in lower yield freight as a percentage of total
tonnage. The number of shipments during the first quarter of 2000 decreased by
1.2% to 232,332, compared to 235,212 for the first quarter of 1999. Tonnage
increased by 1.2% to 127,823 compared to 126,262 for the first quarter of 1999.
Of the $30.4 million in operating revenues for the three months ended
March 31, 2000, $1,093,000 was attributable to the Company's warehousing and
distribution company, MCDS. This represents an increase in revenues for MCDS
from $849,000 during the first quarter of 1999, which was attributable to growth
in the volume of services provided to existing customers.
As a percentage of operating revenues, salaries, wages and benefits
increased to 50.9% for the first quarter of 2000 from 48.5% for the first
quarter of 1999. This 2.4% increase was due primarily to an increase in linehaul
driver wages and benefits associated with shifting to the use of more Company
drivers and less use of purchased transportation. The use of more Company
drivers resulted in a reduction in the expense incurred by the Company for
purchased transportation.
Purchased transportation decreased to 9.5% of operating revenues for the
quarter ended March 31, 2000 as compared to 14.2% for the same period of 1999.
This 4.7% reduction was the result of replacing a portion of purchased
transportation with Company drivers and equipment. Corresponding increases were
incurred in expense categories related to drivers and equipment such as wages,
benefits, operating supplies and expenses, depreciation, licenses and taxes.
Operating supplies and expenses increased to 16.4% of operating revenues
for the quarter ended March 31, 2000 compared to 15.0% for the same period in
1999. While expenses were reduced in various categories, these reductions were
more than offset by the increased cost of fuel and the additional expenses
associated with the operation and maintenance of company-owned equipment used
instead of purchased transportation. The additional costs associated with the
increased price of fuel represented approximately 2.2% of revenue for the first
quarter of 2000. Although the Company has implemented a fuel surcharge to reduce
the impact of rising fuel costs, increased fuel prices can nevertheless have an
adverse effect on the operations and profitability of the Company due to the
difficulty of imposing and collecting the surcharge.
Building rents increased to 2.9% of revenue for the first quarter of
2000 as compared to 2.4% for the same quarter of 1999. This increase was due
primarily to lease payments for additional facilities in Fremont, California and
Boise, Idaho as well as continuing lease payments on unused facilities in
Chicago, Illinois, Benicia, California and Boise, Idaho.
The results of operations for the first quarter of 2000 reflect a
nonrecurring expense of approximately $100,000 relating to legal and accounting
fees incurred in connection with a potential transaction that the Company
decided not to pursue.
Total operating expenses increased to 96.4% of operating revenues for
the three months ended March 31, 2000 from 95.9% for the same period in 1999.
As a percentage of revenue, net earnings decreased 0.3% to $672,000 for
the three months ended March 31, 2000, compared to $721,000 for the same period
in 1999. Although net earnings decreased, net earnings per weighted average
share outstanding remained unchanged at $0.10 for the first quarter of both 2000
and 1999. Weighted average shares outstanding was slightly lower during the
first quarter of 2000, compared to the first quarter of 1999, due to the
repurchase of shares by the Company pursuant to its share repurchase program.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are funds provided by
operations and bank borrowings. Net cash provided by operating activities was
approximately $3.7 million for the first three months of 2000 compared to $4.0
million for the corresponding period in 1999. Net cash provided by operating
activities is primarily attributable to the Company's earnings before
depreciation and amortization expense.
Capital expenditures totaled approximately $2.3 million during the first
three months of 2000 compared to $3.4 million in the comparable period of 1999.
For the three months ended March 31, 2000, $1.6 million of the $2.3 million of
capital expenditures consisted of replacement tractors. For the three months
ended March 31, 1999, $2.4 million of the $3.4 million of capital expenditures
consisted of land, buildings, yard and fuel tank acquisitions and improvements.
Net cash used in financing activities was $1.3 million for the three
months ended March 31, 2000 compared to $4.3 million for the comparable period
of 1999. At March 31, 2000, total borrowings under long-term obligations totaled
approximately $7.3 million.
The Company is a party to a loan agreement with Zions First National
Bank ("Zions") that provides for a revolving line of credit in an amount not
exceeding $5 million. The loan agreement provides for the issuance of letters of
credit and may be used for this purpose, as well as to fund the working capital
needs of the Company. As of March 31, 2000, there was zero outstanding balance
under this revolving line of credit.
Zions has also provided a second revolving line of credit to the Company
in an amount not to exceed $20 million. The Company intends to use amounts
available under this credit facility, to purchase equipment and needed terminal
facilities. As of March 31, 2000, there was $6.0 million outstanding under this
facility.
All amounts outstanding under the two loan facilities described above
accrue interest at a variable rate established from time to time by Zions. The
Company does have the option, however, to request that specific advances accrue
interest at a fixed rate quoted by Zions subject to certain prepayment
restrictions. All amounts outstanding under the two loan facilities are
collateralized by the Company's inventory, chattel paper, accounts receivable
and equipment now owned or hereafter acquired by the Company.
The Company anticipates that cash from operations and available
borrowing will be sufficient to fund operations through next year.
SEASONALITY
The Company experiences some seasonal fluctuations in freight volume.
Historically, the Company's shipments decrease during the winter months. In
addition, the Company's operating expenses historically have been higher in the
winter months due to decreased fuel efficiency and increased maintenance costs
for revenue equipment in colder weather.
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions by the Company and other
information that is not historical information. When used in this report, the
words "estimates," "expects," "anticipates," "forecasts," "plans," "intends,"
"believes" and variations of such words or similar expressions are intended to
identify forward-looking statements. Additional forward-looking statements may
be made by the Company from time to time. All such subsequent forward-looking
statements, whether written or oral and whether made by or on behalf of the
Company, are also expressly qualified by these cautionary statements.
The Company's forward-looking statements are based upon the Company's
current expectations and various assumptions. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in the Company's
records and other data available from third parties, but there can be no
assurance that management's expectations, beliefs and projections will result or
be achieved or accomplished. The Company's forward-looking statements apply only
as of the date made. The Company
10
<PAGE> 11
undertakes no obligation to publicly update or revise forward-looking statements
which may be made to reflect events or circumstances after the date made or to
reflect the occurrence of unanticipated events.
There are a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in, contemplated by or
underlying the forward-looking statements contained in this report. These risks
include, but are not limited to, economic factors and fuel price fluctuations,
the availability of employee drivers and independent contractors, risks
associated with geographic expansion, capital requirements, claims exposure and
insurance costs, competition and environmental hazards. Each of these risks and
certain other uncertainties are discussed in more detail in the 1999 10-K. There
may also be other factors, including those discussed elsewhere in this report,
that may cause the Company's actual results to differ from the forward-looking
statements. Any forward-looking statements made by or on behalf of the Company
should be considered in light of these factors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use financial instruments for trading purposes and
is not a party to any derivative financial instruments or derivative commodity
instruments. The Company is exposed to a variety of market risks, including the
effects of changes in interest rates and fuel prices. The Company's short-term
and long-term financing is generally at variable rates; however, these
obligations may be repaid or converted to a fixed rate at the Company's option.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report.
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for which this
report is filed.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOTOR CARGO INDUSTRIES, INC.
/s/ Lynn H. Wheeler
---------------------------------------------
LYNN H. WHEELER
Vice President of Finance and
Chief Financial Officer
(Authorized Signatory and
Principal Financial and Accounting Officer)
Date May 12, 2000
13
<PAGE> 14
INDEX TO EXHIBITS
Exhibits
27 Financial Data Schedule.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,796
<SECURITIES> 0
<RECEIVABLES> 15,236
<ALLOWANCES> 0
<INVENTORY> 529
<CURRENT-ASSETS> 25,545
<PP&E> 99,946
<DEPRECIATION> 47,328
<TOTAL-ASSETS> 78,720
<CURRENT-LIABILITIES> 10,442
<BONDS> 0
0
0
<COMMON> 11,295
<OTHER-SE> 42,464
<TOTAL-LIABILITY-AND-EQUITY> 78,720
<SALES> 30,383
<TOTAL-REVENUES> 30,383
<CGS> 0
<TOTAL-COSTS> 29,286
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 1,109
<INCOME-TAX> 437
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 672
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
