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, 1999
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, 1999 - 12,297,601
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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, 1999 and
December 31, 1998............................................. 3
Consolidated Statements of Income for the Three Months Ended
June 30, 1999 and 1998 and the Six Months Ended
June 30, 1999 and 1998........................................ 5
Consolidated Statement of Stockholders' Equity for the Six
Months Ended June 30, 1999.................................... 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998.................................. 7
Notes to Consolidated Financial Statements...................... 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
Item 3 - Quantitative and Qualitative Disclosure About
Market Risk................................................... 15
Part II - Other Information
Item 1 - Legal Proceedings...................................... 16
Item 2 - Changes in Securities.................................. 16
Item 3 - Defaults Upon Senior Securities........................ 16
Item 4 - Submission of Matters to a Vote of Security Holders.... 16
Item 5 - Other Information...................................... 16
Item 6 - Exhibits and Reports on Form 8-K....................... 16
Signatures...................................................... 18
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<PAGE>
<PAGE>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc.
Consolidated Balance Sheets
<CAPTION>
June 30 December 31
1999 1998
-------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 612,693 $ 1,465,303
Accounts receivable:
Trade, net 64,309,882 54,892,449
Officers and employees 1,713,797 1,285,890
-------------------------------------
66,023,679 56,178,339
Deferred income taxes 7,318,000 7,143,000
Prepaid expenses and other 10,786,520 9,436,180
-------------------------------------
Total current assets 84,740,892 74,222,822
Property and equipment:
Land and land improvements 8,563,092 6,804,552
Buildings 31,507,134 30,128,055
Revenue equipment 472,469,301 444,639,971
Service equipment and other 45,237,275 43,202,780
Construction in progress 4,009,831 2,421,531
-------------------------------------
561,786,633 527,196,889
Less accumulated depreciation
and amortization 143,669,104 128,045,907
-------------------------------------
418,117,529 399,150,982
Other assets 12,972,636 10,635,682
-------------------------------------
Total assets $515,831,057 $484,009,486
-------------------------------------
-------------------------------------
</TABLE>
See accompanying notes.
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<PAGE>
<PAGE>
<TABLE>
M.S. Carriers, Inc.
Consolidated Balance Sheets (continued)
<CAPTION>
June 30 December 31
1999 1998
--------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 6,229,957 $ 14,856,055
Accrued compensation and related
costs 9,308,446 5,066,654
Accrued expenses 17,307,506 11,729,668
Claims payable 18,543,779 18,072,814
Income taxes payable 2,984,120 2,943,883
Current maturities of
long-term debt 25,279,922 27,214,227
--------------------------------------
Total current liabilities 79,653,730 79,883,301
Long-term debt, less current
maturities 160,129,176 146,595,170
Deferred income taxes 57,833,520 53,777,739
Stockholders' equity:
Common stock
Authorized shares - 20,000,000
Issued and outstanding shares -
12,287,601 at June 30, 1999 and
12,260,101 at December 31, 1998 122,876 122,601
Additional paid-in capital 65,761,954 65,269,015
Retained earnings 154,467,310 140,365,314
Cumulative other comprehensive loss (2,137,509) (2,003,654)
--------------------------------------
Total stockholders' equity 218,214,631 203,753,276
--------------------------------------
Total liabilities and stockholders'
equity $515,831,057 $484,009,486
--------------------------------------
--------------------------------------
</TABLE>
See accompanying notes.
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<PAGE>
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $153,596,736 $133,624,361 $296,411,211 $250,828,186
Operating expenses:
Salaries, wages and benefits 45,412,447 41,100,993 89,710,562 77,556,812
Operations and maintenance 23,436,715 21,398,722 46,310,696 40,797,478
Taxes and licenses 3,168,266 3,016,532 6,855,587 5,562,254
Insurance and claims 5,482,793 5,456,263 10,283,413 10,651,067
Communications and utilities 2,073,928 1,663,163 3,747,396 3,283,108
Depreciation and amortization 14,965,941 11,573,848 29,562,807 22,921,696
Gain on disposals of
revenue equipment (333,460) (221,818) (1,146,797) (198,717)
Rent and purchased transportation 43,339,037 35,759,531 82,189,814 67,342,680
Other 1,388,888 1,068,278 2,905,574 1,748,030
-----------------------------------------------------------------
Total operating expenses 138,934,555 120,815,512 270,419,052 229,664,408
-----------------------------------------------------------------
Operating income 14,662,181 12,808,849 25,992,159 21,163,778
Other expense (income):
Interest expense 2,936,302 2,265,073 5,836,922 3,902,705
Other (1,248,666) (394,799) (1,708,322) (591,885)
-----------------------------------------------------------------
1,687,636 1,870,274 4,128,600 3,310,820
-----------------------------------------------------------------
Income before income taxes 12,974,545 10,938,575 21,863,559 17,852,958
Income taxes 4,605,963 3,992,579 7,761,563 6,516,329
-----------------------------------------------------------------
Net income $ 8,368,582 $ 6,945,996 $ 14,101,996 $ 11,336,629
-----------------------------------------------------------------
-----------------------------------------------------------------
Basic earnings per share $0.68 $0.57 $1.15 $0.93
-----------------------------------------------------------------
-----------------------------------------------------------------
Diluted earnings per share $0.65 $0.54 $1.10 $0.89
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
See accompanying notes.
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<PAGE>
<PAGE>
<TABLE>
M.S. Carriers, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1999
<CAPTION>
Cumulative
Common Stock Paid-In Retained Other Compre-
Shares Amount Capital Earnings hensive Loss Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1999 12,260,101 $122,601 $65,269,015 $140,365,314 $(2,003,654) $203,753,276
Net income 14,101,996 14,101,996
Exercise of employee
stock options 27,500 275 492,939 493,214
Equity adjustment from
foreign currency
translation (133,855) (133,855)
---------------------------------------------------------------------------------
Balance at June
30, 1999 12,287,601 $122,876 $65,761,954 $154,467,310 $(2,137,509) $218,214,631
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
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<PAGE>
<PAGE>
<TABLE>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30
1999 1998
-----------------------------------------
<S> <C> <C>
Operating activities
Net income $14,101,996 $11,336,629
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 29,562,807 22,921,696
Gain on disposals of revenue
equipment (1,146,797) (198,717)
Provision for deferred income taxes 3,880,781 3,213,267
Changes in operating assets and
liabilities:
Accounts receivable (9,845,340) (7,694,266)
Current and other assets (3,821,149) (4,118,890)
Trade accounts payable (8,626,098) 1,015,201
Other current liabilities 10,330,832 9,065,223
-----------------------------------------
(20,335,036) 24,203,514
Net cash provided by operating
activities 34,437,032 35,540,143
Investing activities
Purchases of property and
equipment (50,443,566) (58,873,872)
Proceeds from disposals of property
and equipment 15,307,034 20,756,508
Business acquisition (6,956,000)
-----------------------------------------
Net cash used in investing
activities (35,136,532) (45,073,364)
Financing activities
Net change in revolving line of credit
and proceeds from long-term debt 12,411,455 18,823,146
Proceeds from exercise of stock options 493,214 1,081,781
Principal payments on long-term debt
obligations (13,057,779) (10,228,480)
-----------------------------------------
Net cash provided by (used in)
financing activities (153,110) 9,676,447
-----------------------------------------
Increase (decrease) in cash and cash
equivalents (852,610) 143,226
Cash and cash equivalents at
beginning of period 1,465,303 351,919
-----------------------------------------
Cash and cash equivalents at end
of period $ 612,693 $ 495,145
-----------------------------------------
-----------------------------------------
</TABLE>
See accompanying notes.
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<PAGE>
<PAGE>
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1999
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, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. 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,
1998.
2. Net Income Per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
-------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income available to
common shareholders $8,368,582 $6,945,996 $14,101,996 $11,336,629
-------------------------------------------------
-------------------------------------------------
Denominator:
Weighted-average shares
for basic earnings per
share 12,285,315 12,256,486 12,283,292 12,248,192
Dilutive employee stock
options 614,001 617,941 579,242 553,489
-------------------------------------------------
Adjusted weighted-
average shares for
diluted earnings per
share 12,899,316 12,874,427 12,862,534 12,801,681
-------------------------------------------------
-------------------------------------------------
Basic earnings per
share $0.68 $0.57 $1.15 $0.93
-------------------------------------------------
-------------------------------------------------
Diluted earnings per
share $0.65 $0.54 $1.10 $0.89
-------------------------------------------------
-------------------------------------------------
<PAGE>
</TABLE>
-8-
<PAGE>
3. Industry Segments
The Company's two reportable segments are trucking operations and logistics.
These segments are classified primarily by the type of services they provide.
Performance of the segments is generally evaluated by their operating income.
Summarized segment information is as follows:
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
-----------------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Trucking $140,819 $121,308 $271,715 $227,501
Logistics 16,300 15,007 31,655 29,001
Intersegment
eliminations (3,522) (2,691) (6,959) (5,674)
-----------------------------------------------------
$153,597 $133,624 $296,411 $250,828
-----------------------------------------------------
-----------------------------------------------------
Operating Income:
Trucking $ 14,157 $ 11,714 $24,979 $19,482
Logistics 505 1,095 1,013 1,682
-----------------------------------------------------
$ 14,662 $ 12,809 $25,992 $21,164
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
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<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 Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
-------------------------------------
<S> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 29.6% 30.7% 30.3% 30.9%
Operations and maintenance 15.3% 16.0% 15.6% 16.3%
Taxes and licenses 2.1% 2.3% 2.3% 2.2%
Insurance and claims 3.6% 4.1% 3.5% 4.3%
Communications and utilities 1.3% 1.2% 1.2% 1.3%
Depreciation and amortization 9.7% 8.7% 10.0% 9.1%
Gain on disposals of
revenue equipment (.2%) (.2%) (.4%) (.1%)
Rent and purchased transportation 28.2% 26.8% 27.7% 26.9%
Other .9% .8% 1.0% .7%
-------------------------------------
Total operating expenses 90.5% 90.4% 91.2% 91.6%
-------------------------------------
Operating income 9.5% 9.6% 8.8% 8.4%
Interest expense 1.9% 1.7% 2.0% 1.5%
Other income (.8%) (.3%) (.6%) (.2%)
-------------------------------------
Income before income taxes 8.4% 8.2% 7.4% 7.1%
Income taxes 3.0% 3.0% 2.6% 2.6%
-------------------------------------
Net income 5.4% 5.2% 4.8% 4.5%
-------------------------------------
-------------------------------------
</TABLE>
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<PAGE>
<PAGE>
Results of Operations
Operating revenues for the first six months of 1999 increased $45.6
million, or 18.2%, to $296.4 million compared with $250.8 million for
the same period in the prior year. For the quarter ended June 30, 1999,
operating revenues increased $20.0 million, or 15.0%, to $153.6 million
compared with $133.6 million for the same quarter of 1998. These
increases in revenues were due primarily to increased capacity and
increased trucking revenues. The Company's fleet increased to 4,003
tractors at June 30, 1999 from 3,401 at June 30, 1998, an increase
of 602 tractors.
The sources of the Company's operating revenues were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Trucking Revenues:
Domestic Irregular Route $ 89,798 $ 80,848 $172,771 $157,366
International Irregular Route(1) 32,433 29,555 62,143 52,433
Dedicated Route 18,588 10,905 36,801 17,702
------------------------------------------
Total Trucking Revenues $140,819 $121,308 $271,715 $227,501
Logistics Revenues 16,300 15,007 31,655 29,001
Intersegment Eliminations (3,522) (2,691) (6,959) (5,674)
------------------------------------------
Total Operating Revenues $153,597 $133,624 $296,411 $250,828
------------------------------------------
------------------------------------------
</TABLE>
(1) The definition of International Irregular Route Trucking Revenues has
been changed to include loads originating or terminating at Laredo, TX,
Brownsville, TX, El Paso, TX, Nogales, AZ, San Diego, CA, and
Calexico, CA. Revenues in the International Irregular Route Trucking
and the Domestic Irregular Route Trucking categories have been restated
for 1998 to conform with this definition.
The operating ratio (operating expenses as a percentage of operating
revenues) for the trucking and logistics segments and the Company's
total business were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---------------------------------------------
<S> <C> <C> <C> <C>
Trucking Segment 89.9% 90.3% 90.8% 91.4%
Logistics Segment 96.9% 92.7% 96.8% 94.2%
Total Company 90.5% 90.4% 91.2% 91.6%
</TABLE>
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<PAGE>
<PAGE>
Salaries, wages and benefits decreased to 30.3% and 29.6% of
operating revenues for the six-month and three-month periods
ending June 30, 1999, from 30.9% and 30.7% for the same periods
in 1998. These decreases were due primarily to the increased
use of owner-operators and increased logistics revenues in 1999.
The Company had 1,176 owner-operators at June 30, 1999 compared
to 887 at June 30, 1998.
Operations and maintenance expenses decreased to 15.6% and 15.3%
of operating revenues for the six-month and three-month periods
ending June 30, 1999 from 16.3% and 16.0% for the same periods
in 1998. These decreases were due primarily to the increased use
of owner-operators and increased logistics revenues in 1999.
Insurance and claims decreased to 3.5% and 3.6% of operating revenues
for the six-month and three-month periods ended June 30, 1999 from
4.3% and 4.1% for the same periods ended June 30, 1998. These
decreases were due primarily to improved accident claims experience
during 1999.
Depreciation and amortization was 10.0% of operating revenues for the
first six months of 1999 compared to 9.1% for the same period in 1998
and 9.7% of operating revenues for the quarter ended June 30, 1999,
compared to 8.7% for the same quarter of 1998. These increases were
attributable primarily to the increased use of leased owner-operators
during 1999. The Company capitalizes the tractors which are leased
to the owner-operators and depreciate the same. The Company had 340
leased owner-operators at June 30, 1999 compared to 117 at June 30, 1998.
Rent and purchased transportation increased to 27.7% of operating
revenues in the first six months of 1999 compared to 26.9% for the
same period of 1998 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 28.2% of
operating revenues for the quarter ended June 30, 1999, from 26.8% for
the same quarter in 1998 for the same reasons.
Interest expense was $5,836,922 and $2,936,302 for the six-month and
three-month periods ended June 30, 1999 compared to $3,902,705 and
$2,265,073 for the same periods in 1998. These increases in interest
expense were due primarily from average debt outstanding being
significantly higher during 1999 as compared to 1998.
Other income was $1,248,666 for the quarter ended June 30, 1999 compared
to $394,799 for the same quarter of 1998. This increase in other
income was attributable primarily to Transportes Easo S.A. de C.V.,
a Mexican trucking company in which the Company has a 50% investment.
Liquidity and Capital Resources
The Company's business has required significant investment in new
equipment and office and terminal facilities. The Company has financed
these investments largely from cash provided by operating activities,
secured and unsecured borrowings, and unsecured credit facilities during
the past three years.
During the six month period ending June 30, 1999, the Company had
expenditures, net of equipment sales, of $35.1 million for purchases of
property and equipment. The Company funded these purchases of property
and equipment through cash on hand and cash provided by operating
activities. Net cash provided by operating activities was $34.4 million.
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<PAGE>
The Company has bank lines of credit providing for borrowings of up to
$80 million, with interest at the lower of the bank's corporate prime
rate or the 30-day LIBOR rate plus .45%. At June 30, 1999 there was
$71.0 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 provided by operating
activities, 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.
Year 2000 Issues
The Company continues to assess the potential impact of the Year 2000 on
the Company's internal business systems and operations. The Company's
Year 2000 initiatives have included (i) testing and upgrading internal
business systems and facilities; (ii) contacting key suppliers, vendors
and customers to determine their Year 2000 compliance status; (iii)
testing the interfacing of the Company's internal information technology
(IT) systems with the IT systems of its principal customers and other
third parties with whom the Company has material relationships; and (iv)
developing contingency plans.
The Company's State of Readiness
The Company has completed its assessment of its IT systems for Year 2000
compliance. During this assessment, the Company identified certain
software applications that had to be modified or updated for IT systems
to be Year 2000 compliant. The Company has obtained or will obtain such
modifications and updates. The Company believes that all of its critical
IT systems, with one exception, are Year 2000 compliant. The Company
anticipates all critical IT systems will be Year 2000 compliant by
August 31, 1999. The Company will continue periodic testing and
verification that its critical IT systems are Year 2000 compliant.
The Company has also assessed and identified embedded technology contained
in the Company's non-IT systems. As part of the Company's review of its
Year 2000 issues, the Company has developed questionnaires relating to
Year 2000 compliance for its significant suppliers and vendors. The
Company is obtaining verification of the Year 2000 readiness of this
imbedded technology from its vendors and suppliers. The Company continues
to follow-up and monitor the Year 2000 compliance progress of its
significant suppliers and vendors.
During the first quarter of 1999, the Company commenced testing the
interfacing of the Company's IT systems with the IT systems of certain
of its principal customers and other third parties with whom the Company
has material relationships. The Company will continue this testing in an
effort to minimize operating disruptions due to Year 2000 issues. At
present, the Company has not identified any material customer or vendor
which will not be Year 2000 compliant.
-13-
<PAGE>
Estimated Costs to Address Year 2000 Issues
To date, costs incurred in connection with Year 2000 issues have not been
material. Management estimates that the total Year 2000 project costs
will not have a material impact on the Company's results of operation,
liquidity or financial condition. Except for expenditures for capital
items, Year 2000 project costs are being expensed and are funded through
cash from operations. The Company has not yet deferred any IT project due
to its Year 2000 efforts.
Risks of the Company's Year 2000 Issues
Virtually every aspect of the Company's trucking and logistics operations
might be disrupted if the Company's systems or the systems of the
Company's material customers, suppliers or vendors are not Year 2000
compliant. While the Company is attempting to minimize any negative
consequences arising from Year 2000 issues, there can be no assurance that
Year 2000 issues will not have a material adverse impact on the Company's
business, operations or financial condition. Moreover, while the Company
expects that upgrades to its IT systems will be completed in a timely
manner, there can be no assurances that the Company will not encounter
unexpected costs or delays. Further, if any of the Company's significant
customers, suppliers or vendors experience business disruptions due to
Year 2000 issues, the Company might be adversely affected. At present,
the Company is not able to determine whether there would be a material
impact on the Company's results of operations, liquidity or financial
condition if the Company's material customers and vendors are not Year
2000 compliant.
Contingency Plans
The Company will formulate a specific contingency plan at that point in
time when the Company does not believe that a material customer, supplier
or vendor will be Year 2000 compliant. As the Company anticipates that
all its material customers, suppliers and vendors will be Year 2000
compliant, the Company has not yet established a specific contingency
plan. However, as a general precaution, the Company has documented manual
procedures to be implemented if the IT systems of certain of its material
customers, suppliers or vendors fail and has made arrangements for its
employees to be on call should the Company experience unanticipated
disruptions.
Forward-Looking Statements
Certain statements and information included herein constitute "forward-
looking statements" within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among other things, the ability to develop and implement
operational and financial systems to manage growing operations; the
ability to acquire and integrate businesses and the risks associated with
such businesses; the ability to obtain financing on acceptable terms to
finance the Company's operations and growth; competition within the
industry; the ability to attract and retain quality drivers, and other
factors contained in the Company's filings with the Securities and
Exchange Commission.
-14-
<PAGE>
Item 3. Quantitative And Qualitative Disclosure About Market Risk
Interest Rate Risk
The Company has market risk exposure to changing interest rates. The
Company's policy is to manage interest rates through the use of a
combination of fixed and floating rate debt. Interest rate swaps may be
used to adjust interest rate exposure based on market conditions. These
swaps are entered into with a group of financial institutions with
investment grade credit ratings, thereby minimizing the risk of credit
loss. At June 30, 1999, the fair value of the Company's total long-term
debt is approximately $185 million, using yields obtained for similar
types of borrowing arrangements and taking into consideration the
underlying terms of the debt. Market risk is estimated as the potential
change in fair value resulting from a hypothetical ten percent decrease in
interest rates and amounts to $496,000 at June 30, 1999.
At June 30, 1999, the Company had $117.6 million of variable-rate debt.
The Company has entered into interest rate swaps which convert floating
rates to fixed rates for a total notional amount of $70 million. If
interest rates on the Company's variable-rate debt, after considering
interest rate swaps, were to increase by ten percent from their June 30,
1999 rates for the next twelve months, the increase in interest expense
would be approximately $240,000. The potential change in fair value of
the Company's interest rate swaps resulting from a hypothetical ten
percent decrease in interest rates would not be material to the Company's
financial position at June 30, 1999.
Commodity Derivative Product Exposure
The Company has market exposure to changing diesel fuel prices. The
Company's policy is to manage fuel price exposure through the use of a
combination of spot price purchases, fixed price contracts from vendors
and commodity derivative products. Currently, the Company has entered
into fuel price swaps which convert floating spot fuel prices to fixed
fuel prices for a notional amount of 800,000 gallons per month through
May 31, 2000 (which represents approximately 18% of fuel consumed by
Company owned fleet operations at the current capacity and fleet
configuration). If the fuel index on which these derivatives are based
were to decrease ten percent from its June 30, 1999 level for the next
twelve months, the Company would have an increase in fuel expense of
$352,000 as a result of the fuel price swaps on the notional 800,000
gallons per month.
-15-
<PAGE>
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 7, 1999, Michael S.
Starnes, James W. Welch, M.J. Barrow, Morris H. Fair and Jack H. Morris, III
were re-elected as directors upon the following vote:
For Against Abstaining
Michael S. Starnes 9,872,263 36,200 35,175
James W. Welch 9,872,263 36,200 35,175
M.J. Barrow 9,872,263 36,200 35,175
Morris H. Fair 9,872,263 36,200 35,175
Jack H. Morris, III 9,872,263 36,200 35,175
No other matters were submitted to a vote of security holders during the
second quarter of 1999.
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:
Exhibit Page Number or Incorporation
Number Description By Reference
3(i).1 Restated Charter of M.S. Carriers, Incorporated by reference
Inc. from exhibits to the
registrant's Registration
Statement on Form S-1
(Registration Number
33-12070).
-16-
<PAGE>
3(i).2 Articles of Amendment to Charter Incorporated by reference
of M.S. Carriers, Inc. from 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
Carriers, Inc. from 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
Plan from 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).
10.6 Employment Agreement with Michael S. Incorporated by reference
Starnes from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
-17-
<PAGE>
10.7 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 June 30, 1999.
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: August 16, 1999
/s/ Dwight M. Bassett
Dwight M. Bassett
Vice President
(Chief Accounting Officer of the
Company)
-18-
<PAGE>
H:\ELINK\MSCFORMS\2Q10Q99.WP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF JUNE 30,1999, AND
THE RELATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND SIX
MONTHS ENDED JUNE 30,1999, 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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 612,693
<SECURITIES> 0
<RECEIVABLES> 66,738,514
<ALLOWANCES> 2,428,632
<INVENTORY> 0
<CURRENT-ASSETS> 84,740,892
<PP&E> 561,786,633
<DEPRECIATION> 143,669,104
<TOTAL-ASSETS> 515,831,057
<CURRENT-LIABILITIES> 79,653,730
<BONDS> 160,129,716
<COMMON> 122,876
0
0
<OTHER-SE> 218,214,631
<TOTAL-LIABILITY-AND-EQUITY> 515,831,057
<SALES> 0
<TOTAL-REVENUES> 153,596,736
<CGS> 0
<TOTAL-COSTS> 138,934,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,936,302
<INCOME-PRETAX> 12,974,545
<INCOME-TAX> 4,605,963
<INCOME-CONTINUING> 8,368,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 8,368,582
<EPS-BASIC> .68
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