<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 June 30, 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 July 31, 2000 was 4,881,247.
<PAGE> 2
TABLE OF CONTENTS
LANDAIR CORPORATION
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income -
Three and six months ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements -
June 30, 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 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Landair Corporation
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------------------
(Unaudited) (Note 1)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8 $ 9
Accounts receivable, less allowance of $815 in 2000 and
$615 in 1999 12,252 16,329
Other current assets 6,548 8,048
--------------------------
Total current assets 18,808 24,386
Property and equipment 108,734 113,560
Less accumulated depreciation and amortization 34,382 30,825
--------------------------
74,352 82,735
Other assets 6,038 4,248
--------------------------
Total assets $ 99,198 $ 111,369
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,464 $ 4,046
Accrued expenses 9,196 9,195
Current portion of long-term debt 7,648 9,732
--------------------------
Total current liabilities 21,308 22,973
Long-term debt, less current portion 26,548 32,970
Deferred income taxes 13,569 13,258
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value:
Authorized shares - 45,000,000
Issued and outstanding shares - 4,881,247 in 2000 and
6,042,148 in 1999 49 60
Additional paid-in capital 38,059 42,939
Retained deficit (335) (831)
--------------------------
Total shareholders' equity 37,773 42,168
--------------------------
Total liabilities and shareholders' equity $ 99,198 $ 111,369
==========================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
Landair Corporation
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------- ----------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenue:
Freight $ 32,974 $ 32,405 $ 66,104 $ 64,335
Operating expenses:
Salaries, wages and employee benefits 10,559 11,683 21,676 22,984
Purchased transportation 9,503 8,848 18,597 16,865
Fuel and fuel taxes 3,053 3,509 6,680 7,069
Depreciation and amortization 3,133 3,415 6,403 6,615
Insurance and claims 1,239 1,812 2,834 3,193
Operating leases 497 424 1,115 806
Other operating expenses 3,396 4,668 6,876 7,633
-------------------------------------------------
31,380 34,359 64,181 65,165
-------------------------------------------------
Income from operations 1,594 (1,954) 1,923 (830)
Other income (expense):
Interest expense (645) (687) (1,421) (1,184)
Other, net 65 5 305 56
-------------------------------------------------
(580) (682) (1,116) (1,128)
-------------------------------------------------
Income (loss) before income taxes 1,014 (2,636) 807 (1,958)
Income taxes (benefit) 379 (910) 311 (653)
-------------------------------------------------
Net income (loss) $ 635 $ (1,726) $ 496 $ (1,305)
=================================================
Income (loss) per share:
Basic $ .11 $ (0.28) $ .08 $ (0.21)
=================================================
Diluted $ .11 $ (0.28) $ .08 $ (0.21)
=================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
Landair Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
-------------------------
June 30, June 30,
2000 1999
-------------------------
(In thousands)
<S> <C> <C>
Cash provided by operations:
Net income (loss) $ 496 $ (1,305)
(Gain)/loss on sale of fixed assets (280) 163
Depreciation and amortization 6,403 6,615
Other, net 6,307 150
-------------------------
12,926 5,623
Investing activities:
Proceeds from disposal of property and equipment 890 5,242
Purchases of property and equipment (420) (20,109)
Acquisition of assets of Laker Express, Inc. -- (14,754)
Other -- 300
-------------------------
470 (29,321)
Financing activities:
Proceeds from long-term debt -- 28,087
Payments of long-term debt (8,506) (5,079)
Repurchase of common stock (4,922) (1,127)
Common stock issued under Stock Purchase Plan 31 23
Exercise of stock options -- 11
-------------------------
(13,397) 21,915
-------------------------
Decrease in cash and cash equivalents $ (1) $ (1,783)
=========================
Non-cash transactions: Issuance of note payable to
Laker Express, Inc. for asset acquisition $ -- $ 400
=========================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
Landair Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 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 and six month periods ended June
30, 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.
Some reclassifications have been made to the prior year financial statements to
conform to the 2000 presentation. These reclassifications had no effect on net
loss as previously reported.
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 $610,000 and $180,000 at June 30, 2000 and 1999, respectively. The
results of operations for the acquired business are included in the condensed
consolidated statements of income from the acquisition date forward.
6
<PAGE> 7
Landair Corporation
Notes to Condensed Consolidated Financial Statements (continued)
3. SHAREHOLDERS' EQUITY
In February 1999, the Board of Directors authorized the repurchase of up to
500,000 shares of the Company's common stock in open market transactions. The
amount and timing of any repurchases are to be at such prices as management of
the Company approves from time to time. As of June 30, 2000, the Company had
repurchased 308,499 shares under the original share repurchase program.
Additionally during the quarter, the Board of Directors approved the repurchase
of two blocks of the Company's common stock totaling 1,130,281 shares for a
total consideration of approximately $4.7 million.
4. COMPREHENSIVE INCOME
The Company had no items of other comprehensive income in 2000 or 1999 and,
accordingly, comprehensive income is equivalent to net income.
5. 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 Six months ended
------------------- ------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------------- ------------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per
share - net income (loss) $ 635 $(1,726) $ 496 $(1,305)
Denominator:
Denominator for basic earnings per share -
weighted-average shares 5,833 6,150 5,925 6,222
Effect of dilutive stock options 34 52 50 87
------------------- ------------------
Denominator for diluted earnings per share -
adjusted weighted-average shares 5,867 6,202 5,975 6,309
=================== ==================
Basic earnings (loss) per share $ .11 $ (0.28) $ .08 $ (0.21)
=================== ==================
Diluted earnings (loss) per share (1) $ .11 $ (0.28) $ .08 $ (0.21)
=================== ==================
</TABLE>
(1) Diluted loss per share amounts for the 1999 periods 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.
7
<PAGE> 8
Landair Corporation
Notes to Condensed Consolidated Financial Statements (continued)
6. INCOME TAXES
For the three and six months ended June 30, 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.
7. 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 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
<PAGE> 9
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 Six months ended
------------------- ---------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------------- ---------------------
<S> <C> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and employee
benefits 32.0 36.1 32.8 35.7
Purchased transportation 28.8 27.3 28.1 26.2
Fuel and fuel taxes 9.2 10.8 10.1 11.0
Depreciation and amortization 9.5 10.5 9.7 10.3
Insurance and claims 3.8 5.6 4.3 5.0
Operating leases 1.5 1.3 1.7 1.3
Other operating expenses 10.4 14.4 10.4 11.8
------------------- ---------------------
95.2 106.0 97.1 101.3
Income from operations 4.8 (6.0) 2.9 (1.3)
Other income (expense):
Interest expense (1.9) (2.1) (2.1) (1.8)
Other, net 0.1 -- 0.5 0.1
------------------- ---------------------
(1.8) (2.1) (1.6) (1.7)
------------------- ---------------------
Income (loss) before income taxes 3.0 (8.1) 1.3 (3.0)
Income taxes (benefit) 1.1 (2.8) 0.5 (1.0)
------------------- ---------------------
Net income (loss) 1.9% (5.3)% 0.8% (2.0)%
=================== =====================
</TABLE>
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Operating revenue increased by $600,000, or 1.8%, to $33.0 million in the second
quarter of 2000 from $32.4 million in 1999. The increase in operating revenue
resulted primarily from increased equipment utilization during the three months
ended June 30, 2000. During the second quarters of 2000 and 1999, the average
tractors in service, including owner-operators, were 995 and 1,072,
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
--------------------------
June 30, June 30,
2000 1999
--------------------------
(In thousands)
<S> <C> <C>
Truckload fleet $ 21,514 $ 25,515
Dedicated fleet 11,486 7,026
Intrasegment eliminations (26) (136)
--------------------------
Total operating revenue $ 32,974 $ 32,405
==========================
</TABLE>
The operating ratio (operating expenses as a percentage of operating revenue)
was 95.2% for the second quarter of 2000 compared to 106.0% for 1999. The
decrease in the operating ratio in 2000 resulted from a lower operating cost
structure caused by an increase in equipment utilization between periods and
other factors as discussed below.
Salaries, wages and employee benefits were 32.0% of operating revenue in the
second quarter of 2000 compared to 36.1% in 1999. The decrease in salaries,
wages and employee benefits as a percentage of operating revenue resulted
primarily from a decrease in the ratio of Company-operated tractors to
owner-operator tractors. During the second quarter of 2000, average
Company-operated tractors in service were 649 compared to 727 in 1999.
Purchased transportation was 28.8% of operating revenue in the second quarter of
2000 compared to 27.3% in 1999. The increase in purchased transportation as a
percentage of operating revenue in the second quarter of 2000 was primarily
attributable to an increase in the ratio of owner-operator tractors to
Company-operated tractors. Owner-operators represented 34.8% of the Company's
average tractors in service during the second quarter of 2000, up 8.0% over the
1999 period.
Fuel and fuel taxes were 9.2% of operating revenue in the second quarter of 2000
compared to 10.8% in 1999. The decrease in fuel and fuel taxes as a percentage
of operating revenue during the second 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 an 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
9.5% in the second quarter of 2000 compared to 10.5% in 1999. The decrease in
depreciation and amortization as a percentage of operating revenue was primarily
attributable to a decrease in the ratio of Company-operated tractors to
owner-operator tractors coupled with an increase in equipment utilization during
the second quarter of 2000 compared to the prior-year quarter.
10
<PAGE> 11
Insurance and claims were 3.8% of operating revenue in the second quarter of
2000 compared to 5.6% in 1999. The decrease in insurance and claims expense as a
percentage of operating revenue was a result of decreased frequency and severity
of accidents which was partially offset by higher insurance premiums during the
second quarter of 2000 compared with 1999.
Operating leases were 1.5% of operating revenue in the second quarter of 2000
compared to 1.3% in 1999. The increase in operating leases as a percentage of
operating revenue during 2000 was attributed to an increase in rent for revenue
equipment between periods.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.4% of operating revenue in the second quarter of 2000
compared to 14.4% in 1999. The decrease in other operating expenses as a
percentage of operating revenue was primarily attributed to a decrease in
commissions paid to sales agents.
Interest expense was $645,000, or 1.9% of operating revenue in the second
quarter of 2000 compared to $687,000 or 2.1% in 1999. The decrease was caused by
lower average net borrowings during 2000 resulting primarily from the Company's
efforts to reduce its debt levels partially offset by higher interest rates.
The combined federal and state effective tax rate for the second quarter of 2000
was 37.4% compared to a tax benefit of 34.5% for 1999.
As a result of the foregoing factors, net income for the second quarter of 2000
increased by approximately $2.4 million from a net loss of $1.7 million during
the 1999 period. Net earnings for the 2000 period were $635,000.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Operating revenue increased by $1.8 million, or 2.7%, to $66.1 million in the
first six months of 2000 from $64.3 million in 1999. This increase was a result
of improved equipment utilization partially offset by a decrease in the average
tractors in service. During the first six months of 2000 and 1999, the average
tractors in service, including owner-operators, were 1,020 and 1,080,
respectively.
The sources of the Company's operating revenue within the Company's one
reportable segment were as follows:
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
June 30, June 30,
2000 1999
--------------------------
(In thousands)
<S> <C> <C>
Truckload fleet $ 43,660 $ 50,752
Dedicated fleet 22,508 13,861
Intrasegment eliminations (64) (278)
--------------------------
Total operating revenue $ 66,104 $ 64,335
==========================
</TABLE>
11
<PAGE> 12
The operating ratio (operating expenses as a percentage of operating revenue)
was 97.1% for the first six months of 2000 compared to 101.3% for 1999. The
decrease in the operating ratio in 2000 resulted primarily from the factors
discussed below.
Salaries, wages and employee benefits were 32.8% of operating revenue in the
first six months of 2000 compared to 35.7% in 1999. The decrease in salaries,
wages and employee benefits as a percentage of operating revenue resulted
primarily from a decrease in the ratio of Company-operated tractors to
owner-operator tractors. During the first six months of 2000, average
Company-operated tractors in service were 676 compared to 753 in 1999.
Purchased transportation was 28.1% of operating revenue in the first six months
of 2000 compared to 26.2% in 1999. The increase in purchased transportation as a
percentage of operating revenue in the first six months of 2000 was primarily
attributable to an increase in the ratio of owner-operator tractors to
Company-operated tractors. Owner-operators represented 33.7% of the Company's
average tractors in service during the six months ended June 30, 2000, an
increase of 11.2% over the prior year period.
Fuel and fuel taxes were 10.1% of operating revenue in the first six months of
2000 compared to 11.0% in 1999. The decrease in fuel and fuel taxes as a
percentage of operating revenue during the second quarter of 2000 resulted
primarily from a decrease in the ratio of Company-operated tractors to
owner-operator tractors during the period. This decrease was partially offset by
an increase in the average fuel price per gallon between periods, net of fuel
surcharges collected from customers.
Depreciation and amortization expense as a percentage of operating revenue was
9.7% in the first six months of 2000 compared to 10.3% in 1999. The decrease in
depreciation and amortization as a percentage of operating revenue was primarily
attributable to a decrease in the ratio of Company-operated tractors to
owner-operator tractors coupled with an increase in equipment utilization during
the first six months of 2000 compared to the prior year.
Insurance and claims were 4.3% of operating revenue in the first six months of
2000 compared to 5.0% in 1999. The decrease in insurance and claims expense as a
percentage of operating revenue was a result of decreased frequency and severity
of accidents which was partially offset by higher insurance premiums during the
first six months of 2000 compared with 1999.
Operating leases were 1.7% of operating revenue in the first six months of 2000
compared to 1.3% in 1999. The increase in operating leases as a percentage of
operating revenue during 2000 was attributed to an increase in rent for revenue
equipment between periods.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.4% of operating revenue in the first six months of 2000
compared to 11.8% in 1999. The decrease in other operating expenses as a
percentage of operating revenue was primarily attributed to a decrease in
commissions paid to sales agents.
12
<PAGE> 13
Interest expense was $1.4 million, or 2.1% of operating revenue in the first six
months of 2000 compared to $1.2 million or 1.8% in 1999. The increase was caused
by higher average net borrowings during 2000 resulting primarily from the
acquisition of assets from Laker in January 1999.
The combined federal and state effective tax rate for the first six months of
2000 was 38.5% compared to a benefit of 33.4% for 1999.
As a result of the foregoing factors, net income increased by approximately $1.8
million from a net loss of $1.3 million to net earnings of $496,000.
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 $12.9 million for the six month
period ended June 30, 2000 compared with $5.6 million in the same period of
1999.
Net cash provided by investing activities was approximately $470,000 in the six
month period ended June 30, 2000, compared with net cash used in investing
activities of $29.3 million in the same period of 1999. Investing activities for
the six month period ended June 30, 1999, consisted primarily of the acquisition
of revenue equipment, the acquisition of assets from Laker and the purchase of a
terminal facility.
Net cash used in financing activities was $13.4 million during the six month
period ended June 30, 2000, compared with net cash provided by financing
activities of $21.9 million in the same period of 1999. Financing activities
during the six month period ended June 30, 2000, consisted of the repayment of
$8.5 million of long-term debt and the repurchase of $4.9 million of the
Company's common stock. During the same period in 1999, financing activities
consisted primarily of the financing of revenue equipment, acquisition of assets
from Laker and the purchase of a terminal facility.
The Company's credit facilities include a working capital line of credit and
equipment financing facilities with equipment manufacturers and banks. Subject
to maintenance of financial covenants and ratios, the bank 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 bank facilities vary based on covenants related to
total indebtedness, cash flows, results of operations and other ratios. The bank
facilities bear interest at LIBOR plus 0.75% to 2.0% and are secured by accounts
receivable and certain revenue equipment. The availability for additional
borrowings under the working capital line of credit expire in April 2002 and the
bank equipment financing facilities expire in September 2000 and December 2000.
13
<PAGE> 14
Availability under the line of credit is reduced by the amount of outstanding
letters of credit. As of June 30, 2000, the Company had $1.8 million of
borrowings and $4.9 million of letters of credit outstanding under the working
capital line of credit facility and $22.4 million of borrowings outstanding
under the bank 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 six months 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.
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 inability of the Company's information systems to handle
increased volume of freight, and the lack of availability and/or
14
<PAGE> 15
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 June 30, 2000 and 1999, the fair value of the Company's total variable rate
debt was estimated to be approximately $24.0 million and $34.8 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 $99,000 and $113,000 for the six months ended June 30, 2000 and
1999. This amount was determined by considering the impact of the hypothetical
interest rate increase on the Company's borrowing cost at the June 30, 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 sensitivity caused by market fluctuations,
the Company from time to time will enter into forward purchase contracts. At
June 30, 2000, the Company had no outstanding commitments to purchase fuel. At
June 30, 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.
15
<PAGE> 16
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
The annual meeting of shareholders of the Company was held on May 22, 2000, for
the purpose of electing six directors and approving the appointment of
independent auditors for 2000.
Shareholders elected each director nominee for a one-year term expiring at the
2001 annual meeting. The vote for each director was as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Jerry T. Armstrong 5,798,344 36,766
Gen. Duane H. Cassidy 5,798,344 36,766
C. John Langley, Jr. 5,798,344 36,766
Scott M. Niswonger 5,705,944 129,166
C. Tim Roach 5,705,944 129,166
Richard H. Roberts 5,795,944 39,166
</TABLE>
The appointment of Ernst & Young LLP as independent auditors for 2000 was
ratified and approved as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
5,834,288 656 166
</TABLE>
16
<PAGE> 17
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 filed a report on Form 8-K on June 19,
2000, to report the repurchase by the Company of 1,130,281 shares of the
common stock of the Company. See Note 3 to the Condensed Consolidated
Financial Statements.
17
<PAGE> 18
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: August 8, 2000 By: /s/ Andrew J. Mantey
----------------------------------------
Andrew J. Mantey
Chief Financial Officer
and Senior Vice President
18
<PAGE> 19
EXHIBIT INDEX
Exhibit No.
-----------
10.1 First Amendment to the Amended and Restated
Non-Employee Director Stock Option Plan
*10.2 Stock Purchase Agreement between the registrant
and East Tennessee Foundation dated as of
June 2, 2000
27.1 Financial Data Schedule - Period Ended
June 30, 2000 (Electronic Filing Only)
* Filed as Exhibit A to the Schedule 13D/A filed by East Tennessee Foundation
on June 27, 2000.
