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 September 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 November 1, 1996 - 12,009,633
- 1 -
<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 September 30, 1996
and December 31, 1995. . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income for the Three
Months Ended September 30, 1996 and 1995 and
the Nine Months Ended September 30, 1996 and 1995 . . . . . . . . 5
Consolidated Statement of Stockholders' Equity for
the Nine Months Ended September 30, 1996. . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the Nine
Months Ended September 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. . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
September 30 December 31
1996 1995
____________________________________
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 276,279 $ 486,459
Accounts receivable:
Trade, net 31,358,937 27,643,708
Officers and employees 1,442,671 1,181,729
_____________________________________
32,801,608 28,825,437
Recoverable income taxes 4,277,297
Deferred income taxes 3,298,000 4,136,679
Prepaid expenses and other 4,364,570 5,125,254
____________________________________
Total current assets 40,740,457 42,851,126
Property, plant and equipment:
Land and land improvements 6,091,060 5,568,043
Buildings 30,128,055 28,589,080
Revenue equipment 256,780,112 254,132,265
Service equipment and other 36,550,996 33,757,292
Construction in progress 229,342 3,218,800
_____________________________________
329,779,565 325,265,480
Accumulated depreciation and
amortization 100,727,171 91,407,638
_____________________________________
229,052,394 233,857,842
Other assets 3,512,689 3,225,277
____________________________________
Total assets $273,305,540 $279,934,245
____________________________________
____________________________________
</TABLE>
- 3 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<CAPTION>
September 30 December 31
1996 1995
_____________________________________
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 6,491,685 $ 4,336,847
Accrued expenses 9,653,280 8,130,784
Claims payable 10,839,857 13,142,682
Income taxes payable 1,341,395
Current maturities of
long-term debt 14,838,907 16,666,155
____________________________________
Total current liabilities 43,165,124 42,276,468
Long-term debt, less current maturities 38,368,613 47,376,558
Deferred income taxes 39,793,637 37,757,200
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000 120,096 124,644
Issued and outstanding shares -
12,009,633 at September 30, 1996 and
12,464,400 at December 31, 1995
Additional paid-in capital 59,959,590 62,076,687
Retained earnings 93,871,081 92,301,919
Equity adjustment from foreign
currency translation (1,972,601) (1,979,231)
_____________________________________
Total stockholders' equity 151,978,166 152,524,019
_____________________________________
Total liabilities and stockholders' $273,305,540 $279,934,245
equity _____________________________________
_____________________________________
</TABLE>
See accompanying notes.
- 4 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
____________________________________________________________
<S> <C> <C> <C> <C>
Operating revenues $ 85,822,977 $ 84,326,406 $249,780,482 $250,568,876
Operating expenses:
Salaries, wages and benefits 31,744,986 32,533,431 94,336,135 94,997,826
Operations and maintenance 16,119,444 17,001,491 48,804,729 50,830,687
Taxes and licenses 1,684,384 2,514,021 6,487,765 7,603,309
Insurance and claims 4,029,075 4,018,213 12,561,977 11,674,408
Communications and utilities 1,212,927 1,678,114 3,854,623 4,680,409
Depreciation and amortization 9,078,669 9,818,082 27,516,400 29,015,451
Gain on disposal of revenue
equipment (310,969) (1,544,567)
Rent and purchased transportation 13,989,970 11,215,610 36,889,831 30,987,300
Other 586,346 621,009 1,649,886 1,769,219
_________________________________________________________
78,134,832 79,399,971 230,556,779 231,558,609
_________________________________________________________
Operating income 7,688,145 4,926,435 19,223,703 19,010,267
Other expense (income):
Interest expense 1,110,858 1,008,931 3,623,884 2,942,070
Other (66,537) (92,953) (346,985) (156,811)
_________________________________________________________
1,044,321 915,978 3,276,899 2,785,259
_________________________________________________________
Income before income taxes 6,643,824 4,010,457 15,946,804 16,225,008
Income taxes 2,387,308 1,429,377 5,772,031 5,855,500
_________________________________________________________
Net income $ 4,256,516 $ 2,581,080 $ 10,174,773 $ 10,369,508
_________________________________________________________
_________________________________________________________
Weighted average of common shares
and common stock equivalents 12,205,507 13,055,128 12,294,998 13,071,960
Earnings per share $0.35 $0.20 $0.83 $0.79
_________________________________________________________
_________________________________________________________
</TABLE>
See accompanying notes.
- 5 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Nine Months Ended September 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 10,174,773 10,174,773
Repurchase of Common
Stock (586,100) (5,861) (2,918,778) (8,605,611) (11,530,250)
Issuance of Common
Stock upon Exercise
of Stock Options 131,333 1,313 801,681 802,994
Equity Adjustment
from Foreign
Currency
Translation 6,630 6,630
__________________________________________________________________________________
Balance at September
30, 1996 12,009,633 $120,096 $59,959,590 $93,871,081 $(1,972,601) $151,978,166
__________________________________________________________________________________
__________________________________________________________________________________
</TABLE>
See accompanying notes.
- 6 -
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine Months Ended
September 30
1996 1995
___________________________________________
<S> <C> <C>
Operating activities
Net income $ 10,174,773 $ 10,369,508
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 27,516,400 29,015,451
Gain on disposal of revenue
equipment (1,544,567)
Other 231,891 161,648
Provision for deferred income taxes 2,875,116 2,850,445
Changes in operating assets and
liabilities:
Accounts receivable (3,976,171) 3,101,617
Current and other assets 4,525,308 (2,449,798)
Trade accounts payable 2,154,838 (613,015)
Other current liabilities 561,066 1,105,316
____________ ____________
32,343,881 33,171,664
____________ ____________
Net cash provided by operating
activities 42,518,654 43,541,172
Investing activities
Purchases of property, plant and
equipment (32,803,834) (59,033,026)
Proceeds from disposal of property
and equipment 11,637,449 485,000
_____________ ____________
Net cash used in investing
activities (21,166,385) (58,548,026)
Financing activities
Proceeds from revolving line of
credit and long-term debt 86,872,515
Proceeds from exercise of stock
options 802,994
Repurchase of Common Stock (11,530,250)
Principal payments on revolving
line of credit and long-term debt (97,707,708) (12,439,375)
_____________ _____________
Net cash used in
financing activities (21,562,449) (12,439,375)
_____________ _____________
Decrease in cash and cash
equivalents (210,180) (27,446,229)
Cash and cash equivalents at
beginning of period 486,459 30,806,731
_____________ _____________
Cash and cash equivalents at end
of period $ 276,279 $ 3,360,502
_____________ ______________
_____________ ______________
</TABLE>
See accompanying notes.
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<PAGE>
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1996
1. Basis of Presentation
The accompanying unaudited 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 nine-month period ended September 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 Nine Months Ended
September 30 September 30
1996 1995 1996 1995
__________________________ ___________________________
<S> <C> <C> <C> <C>
Average common shares outstanding 11,998,281 12,878,300 12,161,280 12,878,300
Common stock equivalents 207,226 176,828 133,718 193,660
____________ ____________ ____________ ____________
Average common shares and common
stock equivalents 12,205,507 13,055,128 12,294,998 13,071,960
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income $ 4,256,516 $ 2,581,080 $ 10,174,773 $ 10,369,508
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income per common and
equivalent share $0.35 $0.20 $0.83 $0.79
____________ ____________ ____________ ___________
____________ ____________ ____________ ___________
</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 $2,560,000 and an increase in net income of
$1,608,000 or $0.13 per share for the first nine 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 September 30, 1996.
- 8 -
<PAGE>
Item 2. 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 Nine Months Ended
September 30 September 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 37.0 38.6 37.8 37.9
Operations and maintenance 18.8 20.2 19.5 20.3
Taxes and licenses 2.0 3.0 2.6 3.0
Insurance and claims 4.7 4.8 5.0 4.6
Communications and utilities 1.4 2.0 1.5 1.9
Depreciation and amortization 10.6 11.6 11.0 11.6
Gain on disposal of revenue equipment (0.4) (0.6)
Rent and purchased transportation 16.3 13.3 14.8 12.4
Other 0.6 0.7 0.7 0.7
________________________________________________________________
Total operating expenses 91.0 94.2 92.3 92.4
________________________________________________________________
Operating income 9.0 5.8 7.7 7.6
Interest expense (1.3) (1.2) (1.4) (1.2)
Other income 0.1 0.1 0.1 0.1
____________________________ ______________________________
Income before income taxes 7.8 4.7 6.4 6.5
Income Taxes 2.8 1.7 2.3 2.4
___________________________ ______________________________
Net income 5.0% 3.0% 4.1% 4.1%
___________________________ ______________________________
___________________________ ______________________________
</TABLE>
- 9 -
<PAGE>
Results of Operations
Operating revenues for the first nine months of 1996 decreased 0.3% from
the same period in the prior year. For the quarter ended September 30,
1996, operating revenues increased 1.8% from the same quarter of 1995.
The Company's slight decline in year to date revenues was due primarily to
over capacity of equipment, soft market conditions and the adverse weather
experienced in the first quarter. Market conditions began to improve
during the second quarter of 1996 and the improvement continued during
the quarter ended September 30, 1996.
The sources of the Company's revenues were as follows:
<TABLE>
<CAPTION
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
_____________________________________________________________
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Domestic Linehaul $39,371 $41,339 $121,321 $122,492
Interline Service -
Mexico 8,115 6,947 23,407 20,718
Dedicated 7,263 6,520 20,460 15,042
Regional 24,773 24,853 68,983 78,693
_____________________________________________________________
Total Trucking 79,522 79,659 234,171 236,945
Logistics 6,301 4,667 15,609 13,624
_____________________________________________________________
Total Company $85,823 $84,326 $249,780 $250,569
_____________________________________________________________
_____________________________________________________________
</TABLE>
The operating ratio (operating expenses as a percentage of revenues) for
the first nine months of 1996 was 92.3% compared to 92.4% for the same
period of 1995 and was 91.0% for the third quarter of 1996 compared to 94.2%
for the same quarter in 1995.
Salaries, wages and benefits decreased to 37.8% and 37.0% of operating
revenues for the nine-month and three-month periods ended September 30, 1996,
from 37.9% and 38.6% for the same periods in 1995. The decrease in the
three-month period was due primarily to the increase in the number of
owner-operators used by the Company during the third quarter of 1996.
Operations and maintenance expenses decreased to 19.5% and 18.8% of operating
revenues for the nine-month and three-month periods ended September 30,
1996, from 20.3% and 20.2% for the same periods in 1995, due primarily
to the increased use of owner-operators by the Company during 1996.
Taxes and licenses decreased to 2.6% and 2.0% of operating revenues for
the nine-month and three-month periods ended September 30, 1996, from 3.0%
and 3.0% for the same periods ended September 30, 1995. These decreases
were due primarily to various tax refunds recorded during the third quarter
of 1996.
- 10 -
<PAGE>
Communications and utilities decreased to 1.5% and 1.4% of operating
revenues for the nine-month and three-month periods ended September 30,
1996, from 1.9% and 2.0% for the same periods ended September 30, 1995.
This was due to cost control measures implemented during 1996.
Depreciation and amortization was 11.0% of operating revenues for the
first nine months of 1996 compared to 11.6% for the same period in 1995 and
10.6% of operating revenues for the quarter ended September 30, 1996,
compared to 11.6% for the same quarter of 1995. These decreases
resulted from the increased use of owner-operators and 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.
The Company reported gains equal to 0.6% and 0.4% of operating revenues from
the disposal of revenue equipment during the nine-month and three-month
periods ended September 30, 1996, compared to no reported gains during the
same periods of 1995. In the past, the Company did not recognize gains
from the disposal of revenue equipment rather the Company reduced the
basis of new additions of revenue equipment.
Rent and purchased transportation increased to 14.8% of operating revenues
in the first nine months of 1996 compared to 12.4% for the same period of
1995 and 16.3% of operating revenues for the quarter ended September 30,
1996, compared to 13.3% for the same quarter in 1995. These increases were
the result of the increased use of owner-operators by the Company and
increased expenses relating to logistics operations.
Net income for the quarter ended September 30, 1996 increased 64.9% over
net income for the same quarter of 1995; however, earnings per share
increased to $.35 from $.20, or 75.0%, due to the increase in net income
and the stock repurchase plan of the Company which resulted in fewer
shares of common stock outstanding during the quarter ended September 30,
1996 as compared to the quarter ended September 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 nine-month period ending September 30, 1996, the
Company expended (net of trade-ins and equipment sales) in excess of $21.1
million for purchases of property, plant and equipment.
During the third quarter of 1996, the Company completed its stock repurchase
plan which was announced in November 1995. During the first nine months
of 1996, the Company repurchased 586,100 of its shares at an aggregate cost
of $11.5 million.
The Company funded these purchases of property, plant and equipment and the
repurchase of its common shares through cash from operations and unsecured
credit facilities. 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 September 30,
1996 there was $14.8 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, the Company's
bank line of credit and secured borrowings.
- 11 -
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
No matters were submitted to a vote of security holders during the third
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 1993 Incentive Plan for Designated Incorporated by reference
Key Employees from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.8 1996 Stock Option Plan Incorporated by reference
from registrant's Proxy
Statement dated April 4,
1996.
11 Statement regarding computation of 8
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 September 30, 1996.
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)
Date: November 14, 1996 s/ M.J. Barrow
M.J. Barrow, Senior Vice President
(Chief Financial Officer of the
Company)
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND
THE RELATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 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> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 276,279
<SECURITIES> 0
<RECEIVABLES> 31,924,860
<ALLOWANCES> 565,923
<INVENTORY> 0
<CURRENT-ASSETS> 40,740,457
<PP&E> 329,779,565
<DEPRECIATION> 100,727,171
<TOTAL-ASSETS> 273,305,540
<CURRENT-LIABILITIES> 43,165,124
<BONDS> 39,793,637
<COMMON> 120,096
0
0
<OTHER-SE> 151,858,070
<TOTAL-LIABILITY-AND-EQUITY> 273,305,540
<SALES> 0
<TOTAL-REVENUES> 85,822,977
<CGS> 0
<TOTAL-COSTS> 78,134,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,110,858
<INCOME-PRETAX> 6,643,824
<INCOME-TAX> 2,387,308
<INCOME-CONTINUING> 4,256,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,256,516
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
