UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 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 March 31, 1998 - 12,255,101
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M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997............................................. 3
Consolidated Statements of Income for the Three Months Ended
March 31, 1998 and 1997....................................... 5
Consolidated Statement of Stockholders' Equity for the Three
Months Ended March 31, 1998................................... 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997................................. 7
Notes to 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...................................................... 14
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<TABLE>
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc.
Consolidated Balance Sheets
<CAPTION>
March 31 December 31
1998 1997
---------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,902,026 $ 351,919
Accounts receivable:
Trade, net 46,495,250 44,551,316
Officers and employees 887,576 660,370
---------------------------------------
47,382,826 45,211,686
Recoverable income taxes 3,490,510 4,520,917
Deferred income taxes 5,882,000 5,427,000
Prepaid expenses and other 8,728,867 4,979,826
---------------------------------------
Total current assets 67,386,229 60,491,348
Property and equipment:
Land and land improvements 6,246,745 6,221,032
Buildings 30,128,055 30,128,055
Revenue equipment 340,789,433 326,709,385
Service equipment and other 40,639,244 40,089,062
Construction in progress 489,434 114,015
---------------------------------------
418,292,911 403,261,549
Less Accumulated depreciation
and amortization 109,847,632 106,090,776
---------------------------------------
308,445,279 297,170,773
Other assets 6,502,111 4,584,340
---------------------------------------
Total assets $382,333,619 $362,246,461
---------------------------------------
---------------------------------------
</TABLE>
See accompanying notes.
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<TABLE>
M.S. Carriers, Inc.
Consolidated Balance Sheets (continued)
<CAPTION>
March 31 December 31
1998 1997
---------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 5,200,590 $ 5,448,110
Accrued compensation and related
costs 8,019,729 2,343,595
Accrued expenses 9,174,903 8,438,898
Claims payable 15,960,714 14,826,627
Current maturities of
long-term debt 15,247,335 15,737,609
---------------------------------------
Total current liabilities 53,603,271 46,794,839
Long-term debt, less current
maturities 86,146,859 79,977,266
Deferred income taxes 59,800,394 58,083,519
Stockholders' equity:
Common stock
Authorized shares - 20,000,000
Issued and outstanding shares -
12,255,101 at March 31, 1998 and
12,210,601 at December 31, 1997 122,551 122,106
Additional paid-in capital 65,176,440 64,175,260
Retained earnings 119,487,758 115,097,125
Cumulative translation adjustments (2,003,654) (2,003,654)
---------------------------------------
Total stockholders' equity 182,783,095 177,390,837
---------------------------------------
Total liabilities and stockholders'
equity $382,333,619 $362,246,461
---------------------------------------
---------------------------------------
</TABLE>
See accompanying notes.
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<TABLE>
M.S. Carriers, Inc.
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended
March 31
1998 1997
---------------------------------------
<S> <C> <C>
Operating revenues $117,203,825 $ 92,699,990
Operating expenses:
Salaries, wages and benefits 36,455,819 31,566,921
Operations and maintenance 19,398,756 17,720,060
Taxes and licenses 2,545,722 2,470,530
Insurance and claims 5,194,804 4,293,679
Communications and utilities 1,619,945 1,254,897
Depreciation and amortization 11,347,848 9,378,652
Loss (gain) on disposals of revenue
equipment 23,101 (87,590)
Rent and purchased transportation 31,583,149 19,686,370
Other 679,752 523,080
---------------------------------------
108,848,896 86,806,599
---------------------------------------
Operating income 8,354,929 5,893,391
Other expense (income):
Interest expense 1,637,632 1,203,973
Other (197,086) 45,616
---------------------------------------
1,440,546 1,249,589
---------------------------------------
Income before income taxes 6,914,383 4,643,802
Income taxes 2,523,750 1,643,822
---------------------------------------
Net income $ 4,390,633 $ 2,999,980
---------------------------------------
---------------------------------------
Basic earnings per share $0.36 $0.25
---------------------------------------
---------------------------------------
Dilited earnings per share $0.35 $0.25
---------------------------------------
---------------------------------------
</TABLE>
See accompanying notes.
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<TABLE>
M.S. Carriers, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)
<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 4,390,633 4,390,633
Exercise of employee
stock options 44,500 445 1,001,180 1,001,625
-------------------------------------------------------------------------------
Balance at March
31, 1998 12,255,101 $122,551 $65,176,440 $119,487,758 $(2,003,654) $182,783,095
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
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<TABLE>
M.S. Carriers, Inc.
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Three Months Ended
March 31
1998 1997
-----------------------------------
<S> <C> <C>
Operating activities
Net income $ 4,390,633 $ 2,999,980
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 11,347,848 9,378,652
Loss (gain) on disposals of revenue
equipment 23,101 (87,590)
Other 34,539 75,087
Deferred income taxes 1,261,875 816,911
Changes in operating assets and
liabilities:
Accounts receivable (2,171,140) (5,468,419)
Current and other assets (3,036,405) (2,093,753)
Trade accounts payable (247,520) (2,215,975)
Other current liabilities 5,712,139 3,012,383
------------------------------------
Net cash provided by operating
activities 17,315,070 6,417,276
Investing activities
Purchases of property and
equipment (23,866,143) (24,141,515)
Proceeds from disposals of property
and equipment 11,550,501 6,826,786
Business acquisition (6,956,000)
-----------------------------------
Net cash used in investing
activities (19,271,642) (17,314,729)
Financing activities
Net change in revolving line of
credit obligations 8,092,000 50,659,000
Proceeds from issuance of common stock 1,001,625
Principal payments on long-term debt
obligations (5,586,946) (40,313,184)
-----------------------------------
Net cash provided by (used in)
financing activities 3,506,679 (10,345,816)
-----------------------------------
Increase (decrease) in cash and cash
equivalents 1,550,107 (551,637)
Cash and cash equivalents at
beginning of period 351,919 1,153,993
-----------------------------------
Cash and cash equivalents at end
of period $ 1,902,026 $ 602,356
-----------------------------------
-----------------------------------
</TABLE>
See accompanying notes.
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M.S. Carriers, Inc.
Notes to Consolidated Financial Statements (Unaudited)
March 31, 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 three month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. 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
March 31
1998 1997
-------------------------
<S> <C> <C>
Numerator:
Net income available to common
shareholders $ 4,390,633 $2,999,980
-------------------------
-------------------------
Denominator:
Weighted-average shares for basic
earnings per share 12,239,807 12,009,633
Dilutive employee stock options 469,945 82,372
--------------------------
Adjusted weighted average shares for
diluted earnings per share 12,709,752 12,092,005
-------------------------
-------------------------
Basic earnings per share $0.36 $0.25
-------------------------
-------------------------
Diluted earnings per share $0.35 $0.25
-------------------------
-------------------------
</TABLE>
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<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 Ended March 31
1998 1997
---------------------------
<S> <C> <C>
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 31.1% 34.0%
Operations and maintenance 16.6% 19.1%
Taxes and licenses 2.2% 2.7%
Insurance and claims 4.4% 4.6%
Communications and utilities 1.4% 1.4%
Depreciation and amortization 9.7% 10.1%
Loss (gain) on disposals of revenue equipment - (0.1%)
Rent and purchased transportation 26.9% 21.2%
Other 0.6% 0.6%
---------------------------
Total operating expenses 92.9% 93.6%
---------------------------
Operating income 7.1% 6.4%
Interest expense 1.4% 1.3%
Other expense (income) (0.2%) 0.1%
---------------------------
1.2% 1.4%
---------------------------
Income before income taxes 5.9% 5.0%
Income taxes 2.2% 1.8%
---------------------------
Net income 3.7% 3.2%
---------------------------
---------------------------
</TABLE>
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<PAGE>
Results of Operations
Operating revenues for the first three months of 1998 increased
$24.5 million, or 26.4%, to $117.2 million compared with $92.7
million for the same period in the prior year. The Company's
increase in revenues was due primarily to increased capacity and
increased logistic revenues. Total trucking revenues during the
first quarter of 1998 increased 23.3% compared to the same period
of 1997 and logistics revenues during the first quarter of 1998
increased 67.4% compared to the same period of 1997.
The Company's fleet increased to 3,405 tractors at March 31, 1998
from 2,602 at March 31, 1997, an increase of 803 tractors. In
March 1998, the Company concluded the purchase of certain assets
relating to the U.S. operations of Challenger Motor Freight which
added 195 tractors and 481 trailers to its fleet.
<TABLE>
<CAPTION>
The sources of the Company's revenues were as follows:
Three Months Ended
March 31
1998 1997
--------------------
(in thousands)
<S> <C> <C>
Domestic Linehaul $ 64,637 $44,678
Interline Service - Mexico 9,886 8,791*
Dedicated 8,852 6,601
Regional 22,819 26,054*
Logistics 11,010 6,576
--------------------
Total $117,204 $92,700
--------------------
--------------------
</TABLE>
*Interline Service - Mexico revenue was restated for 1997 to
include international freight carried by regional trucks.
Regional revenue for 1997 was reduced by the same amount.
The operating ratio (operating expenses as a percentage of revenues) for
the first three months of 1998 was 92.9% compared to 93.6% for
the same period of 1997.
Salaries, wages and benefits decreased to 31.1% of operating
revenues for the three month period ending March 31, 1998 from 34.0% for the
same period in 1997. This decrease was due primarily to the owner-operator
tractors representing a larger percentage of the average number
of total tractors in service during the first quarter of 1998
compared to the first quarter of
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1997, which caused a shift in operating expenses as amounts
paid to owner-operators are recorded as purchased transportation. The Company
had 902 owner-operators at March 31, 1998 compared to 588 at
March 31, 1997.
Operations and maintenance expenses decreased to 16.6% of
operating revenues for the three month period ending March 31, 1998
from 19.1% for the same period in 1997. This decrease was due primarily
from the increased use of owner-operators by the Company.
Depreciation and amortization was 9.7% and 10.1% of operating
revenues for the first three months of 1998 and 1997,
respectively. The decrease was primarily attributable to the
increased use of owner-operators.
Rent and purchased transportation increased to 26.9% of operating
revenues in the first three months of 1998 compared to 21.2% for the same
period in 1997 primarily as a result of the increased use of
owner-operators by the Company and increased expense relating to
logistic operations.
Interest expense was $1,637,632 for the first quarter of 1998
compared to $1,203,973 for the same period in 1997. The increase in interest
expense was due primarily from average debt outstanding being
significantly higher during the first quarter of 1998 as compared
to the first quarter of 1997.
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 three month period ending March 31, 1998, the Company
had expenditures, net of sales, of $12,315,642 million for
purchases of property and equipment. The Company funded these
purchases of property and equipment through cash on hand, cash
from operations and the Company's bank lines of credit. Net cash
provided by operating activities was $17,315,070 million and net
cash provided by financing activities was $3,506,679 million.
The Company has bank lines of credit providing for borrowings
of up to $80 million, with interest at the lower of the banks'
corporate prime rate or the 30-day LIBOR rate plus .45%. At
March 31, 1998 there was $56.6 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
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<PAGE>
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
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
No matters were submitted to a vote of security holders during
the first quarter of 1998.
Item 5. Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) The exhibits filed as a part of this report are listed below:
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<PAGE>
Exhibit Page Number of 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).
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<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
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 March 31, 1998.
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)
s/Dwight M. Bassett
Date: May 15, 1998
Dwight M. Bassett
Director of Accounting
(Chief Accounting Officer of the
Company)
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<PAGE>
H:\ELINK\MSCFORMS\1Q10Q98.LIV
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF MARCH 31,1998, AND
THE RELATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH
31,1998, 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> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,902,026
<SECURITIES> 0
<RECEIVABLES> 47,923,250
<ALLOWANCES> 1,428,000
<INVENTORY> 0
<CURRENT-ASSETS> 67,386,229
<PP&E> 418,292,911
<DEPRECIATION> 109,847,632
<TOTAL-ASSETS> 382,333,619
<CURRENT-LIABILITIES> 53,603,271
<BONDS> 86,146,859
<COMMON> 122,551
0
0
<OTHER-SE> 182,660,544
<TOTAL-LIABILITY-AND-EQUITY> 382,333,619
<SALES> 0
<TOTAL-REVENUES> 117,203,825
<CGS> 0
<TOTAL-COSTS> 108,848,896
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,637,632
<INCOME-PRETAX> 6,914,383
<INCOME-TAX> 2,523,750
<INCOME-CONTINUING> 4,390,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,390,633
<EPS-PRIMARY> .36
<EPS-DILUTED> .35
</TABLE>
