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, 1996
Commission file Number 0-14781
M.S. CARRIERS, INC.
(Exact name of Registrant as specified in its charter.)
Tennessee 62-1014070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3171 Directors Row, Memphis, TN 38131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 332-2500
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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Outstanding common shares at August 1, 1996 - 11,989,633
<PAGE>
M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item I - Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995.... 3
Consolidated Statements of Income for the Three Months Ended June 30,
1996 and 1995 and the Six Months Ended June 30, 1996 and 1995.......... 5
Consolidated Statement of Stockholders' Equity for the Six Months
Ended June 30, 1996..................................................... 6
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995.................................................. 7
Notes to Consolidated Financial Statements................................ 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 9
Part II - Other Information
Item 1 - Legal Proceedings................................................ 12
Item 2 - Changes in Securities............................................ 12
Item 3 - Defaults Upon Senior Securities.................................. 12
Item 4 - Submission of Matters to a Vote of Security Holders.............. 12
Item 5 - Other Information................................................ 12
Item 6 - Exhibits and Reports on Form 8-K................................. 12
Signatures................................................................ 15
- 2 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
June 30 December 31
1996 1995
_________________________________________
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 358,257 $ 486,459
Accounts receivable:
Trade, net 30,381,506 27,643,708
Officers and employees 1,535,911 1,181,729
____________ ____________
31,917,417 28,825,437
Recoverable income taxes 0 4,277,297
Deferred income taxes 3,532,000 4,136,679
Prepaid expenses and other 5,402,716 5,125,254
____________ ____________
Total current assets 41,210,390 42,851,126
Property, plant and equipment:
Land and land improvements 5,568,043 5,568,043
Buildings 28,885,056 28,589,080
Revenue equipment 249,626,171 254,132,265
Service equipment and other 34,835,722 33,757,292
Construction in progress 3,312,067 3,218,800
____________ ____________
322,227,059 325,265,480
Accumulated depreciation and
amortization 99,317,052 91,407,638
____________ ____________
222,910,007 233,857,842
Other assets 2,724,465 3,225,277
____________ ____________
Total assets $266,844,862 $279,934,245
____________ ____________
____________ ____________
- 3 -
</TABLE>
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<CAPTION>
June 30 December 31
1996 1995
_________________________________________
(Unaudited)
<S> <C> <C>
Liabilities and stockholders'
equity
Current liabilities:
Trade accounts payable $ 4,261,154 $ 4,336,847
Accrued expenses 8,511,024 8,130,784
Claims payable 11,490,146 13,142,682
Income taxes payable 262,209 0
Current maturities of
long-term debt 15,512,637 16,666,155
____________ ____________
Total current liabilities 40,037,170 42,276,468
Long-term debt, less current
maturities 37,902,830 47,376,558
Deferred income taxes 38,833,982 37,757,200
Stockholders' equity:
Common stock, $.01 par value,
Authorized shares - 20,000,000 121,073 124,644
Issued and outstanding shares -
12,107,300 at June 30, 1996 and
12,464,400 at December 31, 1995
Additional paid-in capital 60,323,973 62,076,687
Retained earnings 91,549,545 92,301,919
Equity adjustment from foreign
currency translation (1,923,711) (1,979,231)
____________ ____________
Total stockholders' equity 150,070,880 152,524,019
Total liabilities and stockholders'
equity $266,844,862 $279,934,245
____________ ____________
____________ ____________
</TABLE>
See accompanying notes.
- 4 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
____________________________________________________________
<S> <C> <C> <C> <C>
Operating revenues $ 84,267,277 $ 84,541,100 $163,957,505 $166,242,470
Operating expenses:
Salaries, wages and benefits 31,318,578 31,072,636 62,591,149 62,464,395
Operations and maintenance 16,273,653 16,798,796 32,685,285 33,865,691
Taxes and licenses 2,408,614 2,617,212 4,803,381 5,089,288
Insurance and claims 4,235,512 4,030,613 8,532,902 7,656,195
Communications and utilities 1,284,465 1,522,238 2,641,696 3,002,295
Depreciation and amortization 8,978,577 9,852,236 18,437,731 19,197,369
Gain on disposal of revenue
equipment (774,582) - (1,233,598) -
Rent and purchased transportation 12,311,371 10,825,064 22,899,861 19,771,690
Other 574,082 502,765 1,063,540 1,148,210
____________ ____________ ___________ ____________
76,610,270 77,221,560 152,421,947 152,195,133
____________ ____________ ___________ ____________
Operating income 7,657,007 7,319,540 11,535,558 14,047,337
Other expense (income):
Interest expense 1,224,552 1,018,854 2,513,026 1,933,139
Other (124,828) (35,176) (280,448) (100,353)
____________ ____________ ____________ ____________
1,099,724 983,678 2,232,578 1,832,786
____________ ____________ ____________ ____________
Income before income taxes 6,557,283 6,335,862 9,302,980 12,214,551
Income taxes 2,364,097 2,311,123 3,384,723 4,426,123
____________ ____________ ____________ ____________
Net income $ 4,193,186 $ 4,024,739 $ 5,918,257 $ 7,788,428
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Common shares and Common stock
equivalents 12,379,679 13,079,508 12,427,996 13,090,662
Earnings per share $0.34 $0.31 $0.48 $0.59
____________ ____________ ___________ ___________
____________ ____________ ___________ ___________
</TABLE>
See accompanying notes.
- 5 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1996
<CAPTION>
Equity
Adjustment
From
Additional Foreign
Common Stock Paid-In Retained Currency
Shares Amount Capital Earnings Translation Total
__________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1996 12,464,400 $124,644 $62,076,687 $92,301,919 ($1,979,231) $152,524,019
Net Income 5,918,257 5,918,257
Repurchase of Common
Stock (463,100) (4,631) (2,306,238) (6,670,631) (8,981,500)
Issuance of Common
Stock upon Exercise
of Stock Options 106,000 1,060 553,524 554,584
Equity Adjustment
from Foreign
Currency 55,520 55,520
__________________________________________________________________________________
Balance at June
30, 1996 12,107,300 $121,073 $60,323,973 $91,549,545 ($1,923,711) $150,070,880
__________________________________________________________________________________
__________________________________________________________________________________
</TABLE>
See accompanying notes.
- 6 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30
1996 1995
___________________________________________
<S> <C> <C>
Operating activities
Net income $ 5,918,257 $ 7,788,428
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 18,437,731 19,197,369
Gain on disposal of revenue
equipment (1,233,598) -
Other 205,694 107,874
Provision for deferred income taxes 1,681,461 2,172,045
Changes in operating assets and
liabilities:
Accounts receivable (3,091,980) 4,869,241
Current and other assets 4,158,275 (3,113,001)
Trade accounts payable (75,693) 111,352
Other current liabilities (817,889) (339,149)
____________ ____________
19,264,001 23,005,731
Net cash provided by operating
activities 25,182,258 30,794,159
Investing activities
Purchases of property, plant and
equipment (12,624,767) (37,742,895)
Proceeds from disposals of property
and equipment 6,368,469 385,939
_____________ ____________
Net cash used in investing
activities (6,256,298) (37,356,956)
Financing activities
Proceeds from revolving line of
credit and long-term debt 50,189,787
Proceeds from exercise of stock
options 554,584
Decrease in Equity due to repurchase
of Common Stock (8,981,500)
Principal payments on revolving
line of credit and long-term debt (60,817,033) (8,247,349)
_____________ _____________
Net cash used in
financing activities (19,054,162) (8,247,349)
Increase (decrease) in cash and cash
equivalents (128,202) (14,810,146)
Cash and cash equivalents at
beginning of period 486,459 30,806,731
_____________ _____________
Cash and cash equivalents at end
of period $ 358,257 $ 15,996,585
_____________ ______________
_____________ ______________
</TABLE>
See accompanying notes.
- 7 -
<PAGE>
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1996
1. Basis of Presentation
The accompanying unaudited 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 six
month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. For
further information and a listing of the Company's significant accounting
policies, refer to the financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
2. Net Income Per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
__________________________ ___________________________
<S> <C> <C> <C> <C>
Average common shares outstanding 12,205,487 12,878,300 12,251,504 12,878,300
Common stock equivalents 174,192 201,208 176,492 212,362
____________ ____________ ____________ ____________
Average common shares and common
stock equivalents 12,379,679 13,079,508 12,427,996 13,090,662
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income $ 4,193,186 $ 4,024,739 $ 5,918,257 $ 7,788,428
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income per common and
equivalent share $0.34 $0.31 $0.48 $0.59
____________ ____________ ____________ ___________
____________ ____________ ____________ ___________
</TABLE>
3. Change in Accounting Estimate
Effective February 1, 1996, the Company changed the estimated salvage value
of substantially all of its trailers to more accurately reflect market
conditions. This change in accounting estimate resulted in a decrease in
depreciation expense of $1,600,000 and an increase in net income of
$1,005,000 or $.08 per share for the first six months of 1996 and a decrease
in depreciation expense of $960,000 and an increase in net income of
$603,000 or $.05 per share for the quarter ended June 30, 1996.
- 8 -
<PAGE>
M.S. Carriers, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.
<TABLE>
<CAPTION>
Percentage of Operating Revenues
Three Months Ended June 30 Six Months Ended June 30
1996 1995 1996 1995
_____________________________ ______________________________
<S> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 37.2% 36.7% 38.2% 37.6%
Operations and maintenance 19.3% 19.9% 19.9% 20.4%
Taxes and licenses 2.9% 3.1% 2.9% 3.1%
Insurance and claims 5.0% 4.8% 5.2% 4.6%
Communications and utilities 1.5% 1.8% 1.6% 1.8%
Depreciation and amortization 10.6% 11.6% 11.2% 11.5%
Gain on disposal of revenue equipment ( .9%) - (.7%) -
Rent and purchased transportation 14.6% 12.8% 14.0% 11.9%
Other .7% .6% .7% .7%
____________________________ ______________________________
Total operating expenses 90.9% 91.3% 93.0% 91.6%
____________________________ ______________________________
Operating income 9.1% 8.7% 7.0% 8.4%
Interest expense 1.4% 1.2% 1.5% 1.2%
Other expense (income) (.1%) - (.2%) (.1%)
____________________________ ______________________________
Income before income taxes 7.8% 7.5% 5.7% 7.3%
Income Taxes 2.8% 2.7% 2.1% 2.6%
___________________________ ______________________________
Net income 5.0% 4.8% 3.6% 4.7%
___________________________ ______________________________
___________________________ ______________________________
</TABLE>
- 9 -
<PAGE>
Results of Operations
Operating revenues for the first six months of 1996 decreased 1.4% from the
same period in the prior year. For the quarter ended June 30, 1996, operating
revenues decreased .3% from the same quarter of 1995. The Company's decline
in year to date revenues was due primarily to over capacity of equipment,
soft market conditions and the effect of adverse weather experienced in the
first quarter. Market conditions improved during the quarter ended
June 30, 1996 but revenues were slightly less compared to the same quarter
of 1995 because the Company's fleet of tractors was slightly less in
the quarter ended June 30, 1996 than in the same quarter of 1995.
The sources of the Company's revenues were as follows:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
______________________ _____________________
(in thousands) (in thousands)
Domestic Linehaul $41,914 $42,894 $81,951 $81,154
Interline Service-Mexico 7,635 6,677 15,292 13,771
Dedicated 6,873 4,491 13,197 8,522
Regional 22,869 25,510 44,210 53,840
Logistics 4,976 4,969 9,308 8,955
_______ ________ _______ _______
Total $84,267 $84,541 $163,958 $166,242
The operating ratio (operating expenses as a percentage of revenues)
for the first six months of 1996 was 93.0% compared to 91.6% for the
same period of 1995 and was 90.9% for the second quarter of 1996
compared to 91.3% for the same quarter in 1995. The favorable comparison
for the second quarter resulted primarily from increased utilization
of revenue equipment and from cost control procedures implemented by
the Company during the year.
Salaries, wages and benefits increased to 38.2% and 37.2% of
operating revenues for the six-month and three-month periods
ending June 30, 1996, from 37.6% and 36.7% for the same periods
in 1995. These increases were due primarily to a slight decrease
in revenue per mile which causes the expense ratios to increase.
Operations and maintenance expenses decreased to 19.9% of
operating revenues for the first six months of 1996 from 20.4%
for the same period in 1995, due primarily from the increased use
of owner-operators by the Company.
Insurance and claims increased to 5.2% and 5.0% of operating
revenues for the six-month and three-month periods ended June 30,
1996, from 4.6% and 4.8% for the same periods ended June 30,
1996. These increases were due primarily to adjustments to
reflect increased liability related to claims incurred in prior
periods.
- 10 -
<PAGE>
Depreciation and amortization was 11.2% of operating revenues for
the first six months of 1996 compared to 11.5% for the same
period in 1995 and 10.6% of operating revenues for the quarter
ended June 30, 1996, compared to 11.6% for the same quarter of
1995. These decreases resulted from a change in accounting
estimate to increase the estimated salvage value of substantially
all of the Company's trailers to more accurately reflect market
conditions and the increased use of owner-operators.
The Company reported gains equal to .7% and .9% of operating
revenues from the disposal of revenue equipment during the six-month
and three-month periods ended June 30, 1996, compared to no
reported gains during the same periods of 1995. In the past, the
Company elected not to recognize gain from the disposal of revenue
equipment rather the Company reduced basis of new additions of
revenue equipment.
Rent and purchased transportation increased to 14% of operating
revenues in the first six months of 1996 compared to 11.9% for
the same period of 1995 primarily as a result of the increased
use of owner-operators by the Company and increased expenses
relating to logistics operations. Rent and purchased
transportation were 14.6% of operating revenues for the quarter
ended June 30, 1996, compared to 12.8% for the same quarter in
1995.
Net income for the quarter ended June 30, 1996 increased 4.1% over
net income for the same quarter of 1995; however, earnings
per share increased to $.34 from $.31 due to the stock repurchase
plan of the Company which resulted in fewer shares of common
stock outstanding at June 30, 1996 as compared to June 30, 1995.
Liquidity and Capital Resources
The Company's business has required significant investments in new equipment
and office and terminal facilities, historically financed through cash from
operations, secured borrowings, unsecured credit facilities, and capital
markets. During the three month period ending June 30, 1996, the Company
expended (net of trade-ins and equipment sales) in excess of $6.2 million
for purchases of property, plant and equipment.
From time to time, the Company has and may continue to repurchase shares
of its common stock. The timing and amount of such repurchases depend
on the market conditions and other factors. During the first six months
of 1996, the Company repurchased 463,100 of its shares at an aggregate cost
of $9.0 million.
- 11 -
<PAGE>
The Company funded these purchases of property, plant and equipment and
the repurchase of its common shares through cash from operations.
The Company has a bank line of credit providing for borrowings of up to
$30,000,000, with interest at the lower of the bank's corporate prime
rate or the 30-day LIBOR rate plus .45%. At June 30, 1996 there was
$10.9 million outstanding under this line of credit. Management expects
to maintain this line of credit for an indefinite period.
The Company expects to finance its normal operating requirements and future
revenue equipment purchases through cash from operations and the Company's
bank line of credit.
PART II - Other Information
Item 1. Legal Proceedings
The Company is involved in certain ordinary routine litigation incidental
to its business. The Company does not expect that the outcome of any of
these proceedings will have a material adverse effect upon the Company's
operations or its financial position.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders on May 3, 1996, Michael
S. Starnes, Carl J. Mungenast, James W. Welch, M.J. Barrow, Robert P. Hurt,
Morris H. Fair and Jack H. Morris, III, were re-elected as directors upon
a vote of 10,557,309 for, 0 against and 345,134 abstaining. The Company's
1996 Stock Option Plan was approved at the meeting upon a vote of 7,393,215
for, 1,917,945 against and 138,239 abstaining. No other matters were
submitted to a vote of security holders during the second quarter of 1996.
Item 5. Other Information
None
- 12 -
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) The exhibits filed as a part of this report are listed below:
Exhibit Page Number or Incorporation
Number Description By Reference
3(i).1 Restated Charter of M.S. Carriers, Incorporated by reference from
Inc. exhibits to the registrant's
Registration Statement on Form
S-1 (Registration Number
33-12070).
3(i).2 Articles of Amendment to Charter Incorporated by reference from
of M.S. Carriers, Inc. exhibits to the registrant's
Registration Statement on Form
S-3 (Registration Number
33-63280).
3(ii) Amended and Restated By-Laws of M.S. Incorporated by reference from
Carriers, Inc. exhibits to the registrant's
Registration Statement on
Form S-3 (Registration Number
33-63280).
10.1 Incentive Stock Option Plan Incorporated by reference from
exhibits to the registrant's
Registration Statement on
Form S-1 (Registration Number
33-12070).
10.2 Amendment to Incentive Stock Option Incorporated by reference from
Plan exhibits to the registrant's
Registration Statement on
Form S-1 (Registration Number
33-12070).
10.3 1993 Stock Option Plan Incorporated by reference from
exhibits to the registrant's
Registration Statement on
Form S-3 (Registration Number
33-63280).
10.4 Non-Employee Directors Stock Option Incorporated by reference
Plan from registrant's Proxy
Statement dated March 31, 1995.
10.5 Employment Agreements with James W. Incorporated by reference
Welch, M.J. Barrow and Robert P. from exhibits to the
Hurt registrant's Statement on
Form S-1 (Registration
Number 33-12070).
- 13 -
<PAGE>
10.6 Employment Agreement with Michael S. Incorporated by reference
Starnes from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.7 Employment Agreement with Carl J. Incorporated by reference
Mungenast from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.8 1993 Incentive Plan for Designated Incorporated by reference
Key Employees from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.9 1996 Stock Options Plan Incorporated by reference
from registrant's Proxy
Statement dated April 4,
1996.
11 Statement regarding computation of 9
per share earnings
27 Financial Data Schedule NOT INCLUDED WITH PAPER FILING
(b) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
- 14 -
<PAGE>
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.
M.S. Carriers, Inc.
(Registrant)
August 14, 1996 s/ Dwight Bassett
Date
Dwight Bassett, Controller
(Chief Accounting Officer of the
Company)
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF JUNE 30, 1996, AND
THE RELATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1996,
AND THE NOTES RELATED THERETO AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 358,257
<SECURITIES> 0
<RECEIVABLES> 31,024,931
<ALLOWANCES> 643,425
<INVENTORY> 0
<CURRENT-ASSETS> 41,210,390
<PP&E> 322,227,059
<DEPRECIATION> 99,317,052
<TOTAL-ASSETS> 266,844,862
<CURRENT-LIABILITIES> 40,037,170
<BONDS> 37,902,830
<COMMON> 121,073
0
0
<OTHER-SE> 149,949,807
<TOTAL-LIABILITY-AND-EQUITY> 266,844,862
<SALES> 0
<TOTAL-REVENUES> 84,267,277
<CGS> 0
<TOTAL-COSTS> 76,610,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,224,552
<INCOME-PRETAX> 6,557,283
<INCOME-TAX> 2,364,097
<INCOME-CONTINUING> 4,193,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,193,186
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
