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, 1998
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 Director's 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, 1998 - 12,259,601
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<PAGE>
M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997............................................. 3
Consolidated Statements of Income for the Three Months Ended
June 30, 1998 and 1997 and the Six Months Ended
June 30, 1998 and 1997........................................ 5
Consolidated Statement of Stockholders' Equity for the Six
Months Ended June 30, 1998.................................... 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997.................................. 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...................................................... 15
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<PAGE>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
June 30 December 31
1998 1997
-----------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 495,145 $ 351,919
Accounts receivable:
Trade, net 51,693,592 44,551,316
Officers and employees 1,212,360 660,370
------------------------------------------
52,905,952 45,211,686
Recoverable income taxes 3,234,853 4,520,917
Deferred income taxes 6,040,000 5,427,000
Prepaid expenses and other 7,795,523 4,979,826
------------------------------------------
Total current assets 70,471,473 60,491,348
Property and equipment:
Land and land improvements 6,554,355 6,221,032
Buildings 30,128,055 30,128,055
Revenue equipment 357,071,318 326,709,385
Service equipment and other 41,055,916 40,089,062
Construction in progress 862,821 114,015
-------------------------------------------
435,672,465 403,261,549
Accumulated depreciation and
amortization 113,777,494 106,090,776
-------------------------------------------
321,894,971 297,170,773
Other assets 7,972,210 4,584,340
-------------------------------------------
Total assets $400,338,654 $362,246,461
===========================================
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<CAPTION>
June 30 December 31
1998 1997
----------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 6,463,311 $ 5,448,110
Accrued compensation and related
cost 8,890,689 2,343,595
Accrued expenses 9,373,517 8,438,898
Claims payable 16,410,137 14,826,627
Current maturities of
long-term debt 17,872,258 15,737,609
----------------------------------------
Total current liabilities 59,009,912 46,794,839
Long-term debt, less current
maturities 89,609,709 79,977,266
Deferred income taxes 61,909,786 58,083,519
Stockholders' equity:
Common stock, $.01 par value, 122,596 122,106
Authorized shares - 20,000,000
Issued and outstanding shares -
12,259,601 at June 30, 1998 and
12,210,601 at December 31, 1997
Additional paid-in capital 65,256,551 64,175,260
Retained earnings 126,433,754 115,097,125
Equity Adjustment from Foreign
Currency Translation (2,003,654) (2,003,654)
-----------------------------------------
Total stockholders' equity 189,809,247 177,390,837
-----------------------------------------
Total liabilities and stockholders'
equity $400,338,654 $362,246,461
=========================================
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $133,624,361 $101,511,950 $250,828,186 $194,211,940
Operating expenses:
Salaries, wages and benefits 41,100,993 33,145,629 77,556,812 64,712,550
Operations and maintenance 21,398,722 16,231,237 40,797,478 33,951,297
Taxes and licenses 3,016,532 2,612,613 5,562,254 5,083,143
Insurance and claims 5,456,263 4,661,828 10,651,067 8,955,507
Communications and utilities 1,663,163 1,335,397 3,283,108 2,590,294
Depreciation and amortization 11,573,848 9,653,107 22,921,696 19,031,759
Loss (Gain) on disposals of
revenue equipment (221,818) 25,413 (198,717) (62,177)
Rent and purchased transportation 35,759,531 24,305,286 67,342,680 43,991,656
Other 1,068,278 451,877 1,748,030 974,957
---------------------------------------------------------------
Total Operating Expenses 120,815,512 92,422,387 229,664,408 179,228,986
---------------------------------------------------------------
Operating income 12,808,849 9,089,563 21,163,778 14,982,954
Other expense (income):
Interest expense 2,265,073 1,399,031 3,902,705 2,603,004
Other (394,799) (1,514) (591,885) 44,102
---------------------------------------------------------------
1,870,274 1,397,517 3,310,820 2,647,106
---------------------------------------------------------------
Income before income taxes 10,938,575 7,692,046 17,852,958 12,335,848
Income taxes 3,992,579 2,790,178 6,516,329 4,434,000
---------------------------------------------------------------
Net income $ 6,945,996 $ 4,901,868 $ 11,336,629 $ 7,901,848
===============================================================
Common shares and common stock
equivalents 12,874,427 12,448,571 12,801,681 12,444,208
Earnings per share $0.54 $0.39 $0.89 $0.63
===============================================================
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1998
<CAPTION>
Cumulative
Common Stock Paid-In Retained Translation
Shares Amount Capital Earnings Adjustments Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1998 12,210,601 $122,106 $64,175,260 $115,097,125 $(2,003,654) $177,390,837
Net Income 11,336,629 11,336,629
Exercise of
employee stock
options 49,000 490 1,081,291 1,081,781
-------------------------------------------------------------------------------
Balance at June
30, 1998 12,259,601 $122,596 $65,256,551 $126,433,754 $(2,003,654) $189,809,247
===============================================================================
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30
1998 1997
------------------------------------
<S> <C> <C>
Operating activities
Net income $11,336,629 $ 7,901,848
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 22,921,696 19,031,759
Gain on disposals of revenue
equipment (198,717) (62,177)
Provision for deferred income taxes 3,213,267 2,194,000
Changes in operating assets and
liabilities:
Accounts receivable (7,694,266) (9,088,031)
Current and other assets (4,118,890) 1,024,757
Trade accounts payable 1,015,201 3,291,070
Other current liabilities 9,065,223 6,608,018
------------------------------------
24,203,514 22,999,396
Net cash provided by operating
activities 35,540,143 30,901,244
Investing activities
Purchases of property and
equipment (58,873,872) (48,827,357)
Proceeds from disposals of property
and equipment 20,756,508 12,453,518
Business acquisition (6,956,000)
------------------------------------
Net cash used in investing
activities (45,073,364) (36,373,839)
Financing activities
Net change in revolving line of
credit and proceeds from long term debt 18,823,146 82,712,000
Proceeds from exercise of stock options 1,081,781
Principal payments on long-term debt (10,228,480) (78,091,430)
------------------------------------
Net cash provided by (used in)
financing activities 9,676,447 4,620,570
------------------------------------
Increase in cash and cash
equivalents 143,226 (852,025)
Cash and cash equivalents at
beginning of period 351,919 1,153,993
------------------------------------
Cash and cash equivalents at end
of period $ 495,145 $ 301,968
====================================
</TABLE>
See accompanying notes.
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<PAGE>
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1998
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, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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,
1997.
2. Net Income Per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
--------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income availalbe to
common shareholders $6,945,996 $4,901,868 $11,336,629 $7,901,848
==================================================
Denominator:
Weighted-average shares
for basic earnings per
share 12,256,486 12,009,633 12,248,192 12,009,633
Dilutive employee stock
options 617,941 438,938 553,489 434,575
--------------------------------------------------
Adjusted weighted-
average shares for
diluted earnings per
share 12,874,427 12,448,571 12,801,681 12,444,208
==================================================
Basic earnings per
share $0.57 $0.41 $0.93 $0.66
==================================================
Diluted earnings per
share $0.54 $0.39 $0.89 $0.63
==================================================
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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.
Percentage of Operating Revenues
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
-------------------------------------
<S> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 30.7% 32.7% 30.9% 33.3%
Operations and maintenance 16.0% 16.0% 16.3% 17.5%
Taxes and licenses 2.3% 2.6% 2.2% 2.6%
Insurance and claims 4.1% 4.6% 4.3% 4.6%
Communications and utilities 1.2% 1.3% 1.3% 1.3%
Depreciation and amortization 8.7% 9.5% 9.1% 9.8%
Loss (Gain) on disposals of (.2%) - (.1%) -
revenue equipment
Rent and purchased transportation 26.8% 23.9% 26.9 22.7%
Other .8% .5% .7% .5%
-------------------------------------
Total operating expenses 90.4% 91.1% 91.6% 92.3%
-------------------------------------
Operating income 9.6% 8.9% 8.4% 7.7%
Interest expense 1.7% 1.4% 1.5% 1.3%
Other expense (income) (.3%) - (.2%) -
-------------------------------------
Income before income taxes 8.2% 7.5% 7.1% 6.4%
Income taxes 3.0% 2.7% 2.6% 2.3%
-------------------------------------
Net income 5.2% 4.8% 4.5% 4.1%
=====================================
</TABLE>
-9-
<PAGE>
Results of Operations
Operating revenues for the first six months of 1998 increased $56.6 million, or
29.2%, to $250.8 million compared with $194.2 million for the same period in the
prior year. For the quarter ended June 30, 1998, operating revenues increased
$32.1 million, or 31.6%, to $133.6 million compared with $101.5 million for the
same quarter of 1997. The Company's increase in revenues was due primarily to
increased demand from customers, business acquisitions, expansion of the
Company's fleet and increased logistics revenues. The Company's fleet increased
to 3,401 tractors at June 30, 1998 from 2,615 at June 30, 1997, an increase of
786 tractors.
<TABLE>
<CAPTION>
The sources of the Company's revenues were as follows:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
-------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Domestic Linehaul $ 73,792 $ 46,154 $140,432 $90,830
Interline Service - Mexico 12,505 8,799 22,445 16,315
Dedicated 10,905 6,850 17,702 13,454
Regional 24,106 31,376 46,922 58,705
Logistics 12,316 8,333 23,327 14,908
-------------------------------------------
Total $133,624 $101,512 $250,828 $194,212
===========================================
</TABLE>
The operating ratio (operating expenses as a percentage of revenues) for
the first six months of 1998 was 91.6% compared to 92.3% for the same
period of 1997 and was 90.4% for the second quarter of 1998 compared to 91.1%
for the same quarter in 1997.
Salaries, wages and benefits decreased to 30.9% and 30.7% of operating revenues
for the six-month and three-month periods ending June 30, 1998, from 33.3% and
32.7% for the same periods in 1997. These decreases were due primarily to the
increased use of owner-operators. The Company had 887 owner-operators at June
30, 1998 compared to 586 at June 30, 1997.
Operations and maintenance expenses decreased to 16.3% of operating revenues for
the six-month period ending June 30, 1998 from 17.5% for the same periods in
1996 due primarily to the increased use of owner-operators by the Company.
Insurance and claims decreased to 4.3% and 4.1% of operating revenues for the
six-month and three-month periods ended June 30, 1998 from 4.6% for the same
periods ended June 30, 1997. These decreases were due primarily to the
increased logistics revenues received by the Company in 1998.
-10-
<PAGE>
Depreciation and amortization was 9.1% of operating revenues for the first six
months of 1998 compared to 9.8% for the same period in 1997 and 8.7% of
operating revenues for the quarter ended June 30, 1998, compared to 9.5% for the
same quarter of 1997. These decreases resulted primarily from the increased use
of owner-operators and increased logistics revenues.
Rent and purchased transportation increased to 26.9% of operating revenues in
the first six months of 1998 compared to 22.7% for the same period of 1997
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 increased to 26.8% of operating revenues for the quarter ended
June 30, 1998, from 23.9% for the same quarter in 1996 for the same reasons.
Liquidity and Capital Resources
The Company's business has required significant investment in new equipment and
office and terminal facilities, historically financed through cash from
operations, secured borrowings, unsecured credit facilities and capital markets.
During the six month period ending June 30, 1998, the Company had expenditures,
net of equipment sales, of $38.1 million for purchases of property and equipment
and $6.9 million related to a business acquisition. The Company funded these
purchases of property and equipment and the business acquisition through cash on
hand, cash from operations and the Company's bank lines of credit. Net cash
provided by operating activities was $35.5 million and net cash provided by
financing activities was $9.7 million.
The Company has bank lines of credit providing for borrowings of up to $68.9
million, with interest at the lower of the bank's corporate prime rate or the
30-day LIBOR rate plus .45%. At June 30, 1998 there was $46.5 million
outstanding under these lines of credit. Management expects to maintain these
lines of credit for an indefinite period.
The Company expects to finance its normal operating requirements and planned
revenue equipment purchases through cash from operations, the Company's bank
lines of credit and secured borrowings. 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.
-11-
<PAGE>
Impact of Year 2000
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. Management estimates
that the total year 2000 project costs will not have a material impact on the
Company's results of operations, financial position or capital resources.
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 1, 1998, Michael S.
Starnes, James W. Welch, M.J. Barrow, Morris H. Fair, Jack H. Morris, III, and
Carl J. Mungenast were re-elected as directors upon the following vote:
For Against Abstaining
Michael S. Starnes 11,500,863 4,041 83,083
James W. Welch 11,504,050 854 83,083
M.J. Barrow 11,504,246 658 83,083
Morris H. Fair 11,504,357 547 83,083
Jack H. Morris, III 11,501,038 3,866 83,083
Carl J. Mungenast 11,497,346 7,558 83,083
No other matters were submitted to a vote of security holders during the second
quarter of 1998.
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.
-13-
<PAGE>
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).
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 registrant's Proxy
Statement dated April 4,
1996
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 June 30, 1998.
-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, 1998
Date S/Dwight M. Bassett
Dwight M. Bassett,
Director of Accounting
(Chief Accounting Officer of the
Company)
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<PAGE>
H:\ELINK\MSCFORMS\2Q10Q98.TXT
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF JUNE 30,1998, AND
THE RELATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE
30,1998, 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-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 495,145
<SECURITIES> 0
<RECEIVABLES> 53,357,329
<ALLOWANCES> 1,663,737
<INVENTORY> 0
<CURRENT-ASSETS> 70,471,473
<PP&E> 435,672,465
<DEPRECIATION> 113,777,494
<TOTAL-ASSETS> 400,338,654
<CURRENT-LIABILITIES> 59,009,912
<BONDS> 89,609,709
<COMMON> 122,596
0
0
<OTHER-SE> 189,686,651
<TOTAL-LIABILITY-AND-EQUITY> 400,338,654
<SALES> 0
<TOTAL-REVENUES> 133,624,361
<CGS> 0
<TOTAL-COSTS> 120,815,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,265,073
<INCOME-PRETAX> 10,938,575
<INCOME-TAX> 3,992,579
<INCOME-CONTINUING> 6,945,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,945,996
<EPS-PRIMARY> .57
<EPS-DILUTED> .54
</TABLE>
