<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File No. 000-24615
LANDAIR CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1743549
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
430 AIRPORT ROAD
GREENEVILLE, TENNESSEE 37745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 636-7000
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 [ ]
The number of shares outstanding of the registrant's common stock, $.01 par
value, as of April 28, 2000 was 6,003,648.
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TABLE OF CONTENTS
LANDAIR CORPORATION
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income -
Three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements -
March 31, 2000 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosure of Market Risk 13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities and Use of Proceeds 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Landair Corporation
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------------------
(Unaudited) (Note 1)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9 $ 9
Accounts receivable, less allowance of $713 in 2000 and
$615 in 1999 14,055 16,329
Other current assets 7,290 8,048
---------------------------
Total current assets 21,354 24,386
Property and equipment 112,680 113,560
Less accumulated depreciation and amortization 33,641 30,825
---------------------------
79,039 82,735
Other assets 4,549 4,248
---------------------------
Total assets $ 104,942 $ 111,369
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,706 $ 4,046
Accrued expenses 9,933 9,195
Current portion of long-term debt 8,200 9,732
---------------------------
Total current liabilities 21,839 22,973
Long-term debt, less current portion 28,088 32,970
Deferred income taxes 13,188 13,258
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value:
Authorized shares - 45,000,000
Issued and outstanding shares - 6,003,648 in 2000 and
6,042,148 in 1999 60 60
Additional paid-in capital 42,737 42,939
Retained earnings (deficit) (970) (831)
---------------------------
Total shareholders' equity 41,827 42,168
---------------------------
Total liabilities and shareholders' equity $ 104,942 $ 111,369
===========================
</TABLE>
See notes to condensed consolidated financial statements.
3
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Landair Corporation
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------
March 31, 2000 March 31, 1999
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Operating revenue:
Forward Air, Inc. $ 719 $ 709
Other 32,411 31,221
-------------------------------------
33,130 31,930
Operating expenses:
Salaries, wages and employee benefits 11,117 11,301
Purchased transportation 9,094 8,017
Fuel and fuel taxes 3,407 3,560
Depreciation and amortization 3,270 3,200
Insurance and claims 1,595 1,381
Operating leases 618 382
Other operating expenses 3,700 2,965
-------------------------------------
32,801 30,806
-------------------------------------
Income from operations 329 1,124
Other income (expense):
Interest expense (776) (497)
Other, net 240 51
-------------------------------------
(536) (446)
-------------------------------------
Income (loss) before income taxes (207) 678
Income taxes (benefit) (68) 257
-------------------------------------
Net income (loss) $ (139) $ 421
=====================================
Income (loss) per share:
Basic $ (0.02) $ 0.07
=====================================
Diluted $ (0.02) $ 0.07
=====================================
</TABLE>
See notes to condensed consolidated financial statements.
4
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Landair Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------
March 31, March 31,
2000 1999
--------------------------
(In thousands)
<S> <C> <C>
Cash provided by operations $ 6,426 $ 4,359
Investing activities:
Proceeds from disposal of property and
equipment 655 1,552
Purchases of property and equipment (57) (9,389)
Acquisition of assets of Laker Express, Inc. -- (14,754)
Other (408) 377
-------------------------
190 (22,214)
Financing activities:
Proceeds from long-term debt -- 23,406
Payments of long-term debt (6,414) (7,333)
Repurchase of common stock (202) --
Exercise of stock options -- 11
-------------------------
(6,616) 16,084
-------------------------
Decrease in cash and cash equivalents $ -- $ (1,771)
=========================
Non-cash transaction - Issuance of note payable to
Laker Express, Inc. for asset acquisition $ -- $ 400
=========================
</TABLE>
See notes to condensed consolidated financial statements.
5
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Landair Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Landair Corporation
annual report on Form 10-K for the year ended December 31, 1999.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all of the financial
information and footnotes required by generally accepted accounting principles
for complete financial statements.
2. PURCHASE OF ASSETS OF LAKER EXPRESS, INC.
On January 7, 1999, the Company acquired certain operating assets of Laker
Express, Inc. ("Laker"), a truckload dry van carrier based in Indianapolis,
Indiana which operated predominantly in the Midwest in the short- to medium-haul
markets. The purchase price for Laker consisted of approximately $14.8 million
in cash and the issuance of a note payable of $400,000. The source of funds for
the cash consideration paid to Laker was from borrowings under the Company's
credit facilities.
The acquisition was accounted for as a purchase. Identified intangible assets
acquired totaled approximately $1.5 million and are being amortized on a
straight-line basis over a life of five years. Goodwill totaled approximately
$2.6 million and is being amortized on a straight-line basis over a life of 20
years. Accumulated amortization of the identified intangible assets and goodwill
totaled $502,000 and $73,000 at March 31, 2000 and 1999, respectively. The
results of operations for the acquired business are included in the condensed
consolidated statement of income from the acquisition date forward.
3. COMPREHENSIVE INCOME
The Company had no items of other comprehensive income in 2000 or 1999 and,
accordingly, comprehensive income is equivalent to net income.
6
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Landair Corporation
Notes to Condensed Consolidated Financial Statements (continued)
4. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income per
share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended
-------------------------------
March 31, 2000 March 31, 1999
-------------------------------
<S> <C> <C>
Numerator:
Numerator for basic and diluted earnings per
share - net income (loss) $ (139) $ 421
Denominator:
Denominator for basic earnings per share -
weighted-average shares 6,016 6,294
Effect of dilutive stock options 63 122
-------------------------------
Denominator for diluted earnings per share -
adjusted weighted-average shares 6,079 6,416
===============================
Basic earnings (loss) per share $ (0.02) $ 0.07
===============================
Diluted earnings (loss) per share (1) $ (0.02) $ 0.07
===============================
</TABLE>
(1) Diluted loss per share amounts for 2000 have been calculated using the same
denominator as used in the basic loss per share calculation as the
inclusion of dilutive securities in the denominator would have an
antidilutive effect.
5. INCOME TAXES
For the three months ended March 31, 2000 and 1999, the effective income tax
(benefit) rate varied from the statutory federal income tax rate of 34%
primarily as a result of the effect of state income taxes, net of the federal
benefit, and permanent differences.
6. CONTINGENCIES
The primary claims in the Company's business are workers' compensation, property
damage, auto liability and medical benefits. Most of the Company's insurance
coverage provides for self-insurance levels with primary and excess coverage
which management believes is sufficient to adequately protect the Company from
catastrophic claims. In the opinion of management, adequate provision has been
made for all incurred claims up to the self-insured limits, including provision
for estimated claims incurred but not reported.
The Company estimates its self-insurance loss exposure by evaluating the merits
and circumstances surrounding individual known claims, and by performing
hindsight analysis to
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Landair Corporation
Notes to Condensed Consolidated Financial Statements (continued)
determine an estimate of probable losses on claims incurred but not reported.
Such losses could be realized immediately as the events underlying the claims
have already occurred as of the balance sheet dates.
Because of the uncertainty of the ultimate resolution of outstanding claims, as
well as uncertainty regarding claims incurred but not reported, it is possible
that management's provision for these losses could change materially in the near
term. However, no estimate can currently be made of the range of additional loss
that is at least reasonably possible.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the percentage relationship of expense items to
operating revenue for the periods indicated.
<TABLE>
<CAPTION>
Three months ended
-------------------------------------
March 31, 2000 March 31, 1999
-------------------------------------
<S> <C> <C>
Operating revenue:
Forward Air, Inc. 2.2% 2.2%
Other 97.8 97.8
-------------------------------------
100.0 100.0
Operating expenses:
Salaries, wages and employee
benefits 33.6 35.4
Purchased transportation 27.4 25.1
Fuel and fuel taxes 10.3 11.2
Depreciation and amortization 9.9 10.0
Insurance and claims 4.8 4.3
Operating leases 1.8 1.2
Other operating expenses 11.2 9.3
-------------------------------------
99.0 96.5
Income from operations 1.0 3.5
Other income (expense):
Interest expense (2.3) (1.6)
Other, net 0.7 0.2
-------------------------------------
(1.6) 1.4
-------------------------------------
Income (loss) before income taxes (0.6) 2.1
Income taxes (benefit) (0.2) 0.8
-------------------------------------
Net income (loss) (0.4)% 1.3%
=====================================
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Operating revenue increased by $1.2 million, or 3.8%, to $33.1 million in the
first quarter of 2000 from $31.9 million in 1999. During the first quarters of
2000 and 1999, the average tractors in service, including owner-operators, were
1,043 and 1,087, respectively.
9
<PAGE> 10
The sources of the Company's operating revenue within the Company's one
reportable segment were as follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
March 31, 2000 March 31, 1999
------------------ ------------------
(In thousands)
<S> <C> <C>
Truckload fleet $ 22,146 $ 25,237
Dedicated fleet 11,022 6,835
Intrasegment eliminations (38) (142)
------------------ ------------------
Total operating revenue $ 33,130 $ 31,930
================== ==================
</TABLE>
The operating ratio (operating expenses as a percentage of operating revenue)
was 99.0% for the first quarter of 2000 compared to 96.5% for 1999. The increase
in the operating ratio in 2000 was due primarily to higher fuel costs, higher
equipment maintenance expenses, and other factors as discussed below.
Salaries, wages and employee benefits were 33.6% of operating revenue in the
first quarter of 2000 compared to 35.4% in 1999. The decrease in salaries, wages
and employee benefits as a percentage of operating revenue was due primarily to
a decrease in the ratio of Company-operated tractors to owner-operator
tractors, which was partially offset by an increase in the equipment utilization
between periods. During the first quarter of 2000, average Company-operated
tractors in service were 702 compared to 779 in 1999.
Purchased transportation was 27.4% of operating revenue in the first quarter of
2000 compared to 25.1% in 1999. The increase in purchased transportation as a
percentage of operating revenue in the first quarter of 2000 was primarily
attributable to an increase in the ratio of owner-operator tractors to
Company-operated tractors. During the first quarters of 2000 and 1999,
approximately 341 and 308, respectively, of the Company's average tractors in
service were contracted through owner-operators.
Fuel and fuel taxes were 10.3% of operating revenue in the first quarter of 2000
compared to 11.2% in 1999. The decrease in fuel and fuel taxes as a percentage
of operating revenue during the first quarter of 2000 resulted primarily from a
decrease in the ratio of Company-operated tractors to owner-operator tractors
during the period, partially offset by a 22% increase in the average fuel price
per gallon between periods. Fuel cost is net of fuel surcharges collected from
customers.
Depreciation and amortization expense as a percentage of operating revenue was
9.9% in the first quarter of 2000 compared to 10.0% in 1999. The decrease in
depreciation and amortization as a percentage of operating revenue is
attributable to a decrease in the ratio of Company-operated tractors to
owner-operator tractors during the first quarter of 2000 compared to the
prior-year quarter, partially offset by a higher unit tractor depreciation as
the Company decreased the average age of its fleet during 2000.
10
<PAGE> 11
Insurance and claims were 4.8% of operating revenue in the first quarter of 2000
compared to 4.3% in 1999. The increase in insurance and claims expense is due
primarily to an increase in the frequency and severity of accidents during the
first quarter of 2000 compared with 1999.
Operating leases were 1.8% of operating revenue in the first quarter of 2000
compared to 1.2% in 1999. The increase in operating leases as a percentage of
operating revenue during 2000 is attributed to an increase in rent for revenue
equipment between periods.
Other operating expenses, a large component of which relates to equipment
maintenance, were 11.2% of operating revenue in the first quarter of 2000
compared to 9.3% in 1999. The increase in other operating expenses as a
percentage of operating revenue is primarily attributed to an increase in
equipment maintenance expense in the first quarter of 2000 coupled with an
increase in commissions paid to sales agents.
Interest expense was $776,000, or 2.3% of operating revenue, in the first
quarter of 2000 compared to $497,000 or 1.6% in 1999. The increase was due to
higher average net borrowings during 2000 primarily resulting from the
acquisition of assets from Laker in January 1999.
The combined federal and state effective benefit for the first quarter of 2000
was 32.9% compared to a tax rate of 37.9% for 1999.
As a result of the foregoing factors, net income decreased by $560,000 from net
earnings of $421,000 to a loss of $139,000.
Liquidity and Sources of Capital
The continued growth of the Company, and the nature of its operations, have
required significant investment in new equipment. The Company has historically
financed revenue equipment purchases with cash flows from operations, and
through borrowing under credit agreements with financial institutions and
equipment manufacturers. Working capital needs have generally been met with cash
flows from operations and borrowings under credit agreements. Net cash provided
by operating activities of the Company was $6.4 million for the first three
months of 2000 compared with $4.4 million in the same period of 1999.
Net cash provided by investing activities was approximately $190,000 in the
first three months of 2000 compared with net cash used in investing activities
of $22.2 million in the same period of 1999. Investing activities consisted
primarily of the acquisition of revenue equipment and enhanced management
information systems during the first three months of 2000 and 1999, and the
acquisition of assets from Laker and the purchase of a terminal facility during
the first three months of 1999.
Net cash used in financing activities was $6.6 million in the first three months
of 2000 compared with net cash provided by financing activities of $16.1 million
in the same period of 1999. Financing activities consisted primarily of the
continued financing of revenue equipment and the
11
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acquisition of assets from Laker during the first three months of 1999, coupled
with repayment of long-term debt and capital leases during the first three
months of 2000 and 1999.
The Company's credit facilities include a working capital line of credit and two
equipment financing facilities. Subject to maintenance of financial covenants
and ratios, these credit facilities permit the Company to borrow up to $15.0
million under the working capital line of credit and $28.6 million under the
equipment financing facilities. Interest rates for advances under the facilities
vary based on covenants related to total indebtedness, cash flows, results of
operations and other ratios. The facilities bear interest at LIBOR plus 0.75% to
2.0% and are secured by accounts receivable and certain revenue equipment. The
Company's working capital line of credit expires in April 2001 and the two
equipment financing facilities expire in September 2000 and December 2000.
Availability under the line of credit is reduced by the amount of outstanding
letters of credit. Among other restrictions, the terms of the line of credit
require maintenance of certain levels of net worth and other financial ratios.
As of March 31, 2000, the Company had $2.1 million of borrowings and $4.9
million of letters of credit outstanding under the working capital line of
credit facility and $20.1 million of borrowings outstanding under the equipment
financing facilities.
The Company expects to finance its normal operating requirements and planned
revenue equipment purchases through available borrowing capacity under existing
lines of credit, future borrowings under installment notes for revenue
equipment, operating lease financing and cash generated by operations. In the
future, the Company will continue to have significant capital requirements,
which may require the Company to seek additional borrowings or to access capital
markets. The availability of debt financing or equity capital will depend upon
the Company's financial condition and results of operations as well as
prevailing market conditions and other factors over which the Company has little
or no control.
Impact of Year 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $14,000 during the first quarter of 1999 in connection
with remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the Year 2000 and will address any latent Year 2000
matters that may arise.
12
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Forward-Looking Statements
The Company, or its executive officers and directors on behalf of the Company,
may from time to time make written or oral "forward-looking statements." Written
forward-looking statements may appear in documents filed with the Securities and
Exchange Commission, in press releases and in reports to shareholders. Oral
forward-looking statements may be made by the Company's executive officers and
directors on behalf of the Company to the press, potential investors, securities
analysts and others. The Private Securities Litigation Reform Act of 1995
contains a safe harbor for forward-looking statements. The Company relies on
this safe harbor in making such disclosures. In connection with this safe harbor
provision, the Company is hereby identifying important factors that could cause
actual results to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company. Without limitation, factors that
might cause such a difference include economic factors such as recessions,
inflation, higher interest rates, downturns in customer business cycles,
competition, surplus inventories, loss of a major customer, fuel price
increases, the Company's lack of prior operating history as an independent
entity, the inability of the Company's information systems to handle increased
volume of freight, and the lack of availability and/or insufficient compensation
of qualified drivers and independent owner-operators needed to serve the
Company's transportation needs. The Company disclaims any intent or obligation
to update these forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The Company is exposed to market risk from changes in interest rates and
commodity prices. To reduce such risks, the Company selectively uses forward
purchase contracts for fuel. All such forward purchase transactions are
authorized and executed pursuant to clearly defined procedures.
Interest Rates
At March 31, 2000 and 1999, the fair value of the Company's total variable rate
debt was estimated to be approximately $25.1 million and $27.9 million,
respectively, which approximated carrying value based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. At
these borrowing levels, a hypothetical 10% adverse change in interest rates on
the debt would increase interest expense and decrease income before income taxes
by approximately $45,000 in the first three months of 2000 and 1999. These
amounts were determined by considering the impact of the hypothetical interest
rate increase on the Company's borrowing cost at the March 31, 2000 and 1999
borrowing levels.
Commodities
The availability and price of fuel are subject to fluctuations due to factors
such as seasonality, weather, government programs and policies, and changes in
global production. To reduce price
13
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sensitivity caused by market fluctuations, the Company from time to time will
enter into forward purchase contracts. At March 31, 2000, the Company had no
outstanding commitments to purchase fuel. At March 31, 1999, the Company had
commitments to purchase approximately $544,000 of fuel, representing
approximately 6% of its estimated 1999 annual fuel requirements.
The above market risk discussion and the estimated amounts presented are
forward-looking statements of market risk based on the assumed occurrence of
certain adverse market conditions. Actual results in the future may differ
materially from those projected due to actual developments in the market.
14
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(a) Exhibits - The response to this portion of Item 6 is submitted as a
separate section of this report.
(b) Reports on Form 8-K - The Company did not file any reports on Form 8-K
during the three months ended March 31, 2000.
15
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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.
Landair Corporation
Date: May 5, 2000 By: /s/ Edward W. Cook
--------------------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
16
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EXHIBIT INDEX
Exhibit No.
-----------
10.1 First Amendment to the Transition Services
Agreement, dated as of February 4, 2000,
between Forward Air Corporation and
the registrant
27.1 Financial Data Schedule - Period Ended
March 31, 2000 (Electronic Filing Only)
17
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT
to the
TRANSITION SERVICES AGREEMENT
Between
FORWARD AIR CORPORATION
f/k/a Landair Services, Inc.
and
LANDAIR CORPORATION
This First Amendment to the Transition Services Agreement (this
"Agreement"), dated as of February 4, 2000, is made and entered into by and
between FORWARD AIR CORPORATION ("Forward Air"), a Tennessee corporation and
LANDAIR CORPORATION ("Landair"), a Tennessee corporation.
WHEREAS, Forward Air and Landair entered into that certain Transition
Services Agreement, dated as of September 18, 1998 (the "Original Agreement"),
which provided for, among other things, the continued providing of services by
the parties to the Original Agreement;
WHEREAS, the parties over time have agreed to continue certain services
and to terminate certain services and, in connection with the termination of
future services the parties wish to specifically provide for the terms and
conditions and the allocation of certain costs in connection with the
termination of certain services under the Original Agreement; and
WHEREAS, the parties now desire to amend the Original Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter expressed, and subject to the satisfaction or waiver of
the conditions hereof, the parties hereto agree as follows:
1
<PAGE> 2
1. Continuation of Certain Services. The parties understand and agree to
continue the joint services set forth on Attachment A to this Agreement for a
period of 18 months, subject to the termination provisions set forth in the
Original Agreement and as modified by this Agreement.
2. Allocation of Cost for Shared Assets. The parties understand and agree
that the past and future obligations to provide certain services (the
"Services") required under the terms of the Original Agreement has required and
will continue to require either or both parties to acquire equipment and/or make
capital investments in certain assets (the "Joint Services Assets") which are
needed or required to provide services. The parties to the Original Agreement
further understand and agree that in the event of a termination of any Service
that requires the use of Joint Services Assets, the investment in the Joint
Services Assets will need to be settled and resolved as between the parties to
the Original Agreement. In the event of a termination of all or a portion of the
Services under the Original Agreement prior to the full depreciation or
amortization of the Joint Services Assets used to provide such services, the
parties agree that they will settle and resolve all obligations on any Joint
Services Assets that have not been fully amortized or depreciated at the time of
any such termination as follows:
(i) Joint Services Assets not owned by Party Requesting Termination.
In the event the party requesting termination of any Services does not own
the Joint Services Assets used to provide such Services, the party
requesting termination shall pay to the owner of such Joint Services
Assets an amount equal to the pro rata portion of the then remaining book
value of any Joint Services Asset as then set forth on the books of the
owner (such pro rata portion to be determined based on the allocation of
Service costs and expenses as then in effect) and, the party thus
receiving payment shall be entitled to keep the Joint Services Asset; and
(ii) Joint Services Assets owned by Party Requesting Termination. In
the event the party requesting termination of Services owns the Joint
Services Assets
2
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related to the terminated Services, then the party requesting termination
shall be entitled to payment from the party not requesting termination of
the Services. The payment for the Joint Services Assets utilized in
connection with the terminated Services shall be calculated as follows:
The termination payment shall be in an amount equal to a pro
ration of the book value as set forth in Section 2(i) above times
two thirds.
3. Agreed Basis for Joint Services Assets. The parties agree that the
shared assets which constitute Joint Services Assets, and their respective
approximate book values as of December 31, 1999 are as set forth on Attachment A
to this Agreement. The parties further agree that they will not acquire any
further Joint Services Assets without the written agreement of each other.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
FORWARD AIR CORPORATION
By: /s/ Edward W. Cook
Title: CFO
LANDAIR CORPORATION
By: /s/ C. Tim Roach
Title: President/COO
3
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ATTACHMENT A
ASSETS TO BE ALLOCATED
DECEMBER 31, 1999
FORWARD AIR
<TABLE>
<CAPTION>
Service NBV Allocation Methodology
- -------------------------------- ----------- --------------------------------------
<S> <C> <C>
Accounts Payable $ 11,000 * Based upon number of checks processed
Payroll 199,000 Based upon number of employees
Human Resources and
Benefit Plan Administration 7,000 * Based upon number of employees
Settlement 7,000 * Based upon number of owner-operators
Accounting 52,000 50% to Landair and Forward Air
Legal 2,000 * 50% to Landair and Forward Air
General Administration 97,000 50% to Landair and Forward Air
Information Technology 987,000 50% to Landair and Forward Air
Corporate Headquarters
Leasehold Improvements 115,000 50% to Landair and Forward Air
LANDAIR
Safety 57,000
Licensing/Permitting/Fuel Tax 44,000
Insurance/Claims 17,000 *
Recruiting/Retention 7,000 *
Training Center 2,000 *
</TABLE>
*Due to the immateriality of the amounts involved, no allocation of assets is
proposed for cost centers under $25,000.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LANDAIR
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) FOR MARCH 31, 2000
AND CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 14,768
<ALLOWANCES> 713
<INVENTORY> 0
<CURRENT-ASSETS> 21,354
<PP&E> 112,680
<DEPRECIATION> 33,641
<TOTAL-ASSETS> 104,942
<CURRENT-LIABILITIES> 21,839
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 41,767
<TOTAL-LIABILITY-AND-EQUITY> 104,942
<SALES> 0
<TOTAL-REVENUES> 33,130
<CGS> 0
<TOTAL-COSTS> 32,801
<OTHER-EXPENSES> (240)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 776
<INCOME-PRETAX> (207)
<INCOME-TAX> (68)
<INCOME-CONTINUING> (139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
