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, 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 November 1, 1999 - 12,301,601
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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 September 30, 1999 and
December 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months Ended
September 30, 1999 and 1998 and the Nine Months Ended
September 30, 1999 and 1998. . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity for the Nine
Months Ended September 30, 1999. . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the Nine Months
Ended September 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 . . . . . . . . . . . . . . . . . . . . . . . . . .14
Part II - Other Information
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . .15
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . .15
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . . .15
Item 4 - Submission of Matters to a Vote of Security Holders . . .15
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . .15
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . .15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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PART I - Financial Information
Item 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Balance Sheets
September 30 December 31
1999 1998
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 351,984 $ 1,465,303
Accounts receivable:
Trade, net 70,775,819 54,892,449
Officers and employees 1,504,262 1,285,890
72,280,081 56,178,339
Recoverable income taxes 1,476,705
Deferred income taxes 8,088,000 7,143,000
Prepaid expenses and other 9,768,109 9,436,180
Total current assets 91,964,879 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 493,997,576 444,639,971
Service equipment and other 46,826,055 43,202,780
Construction in progress 7,533,308 2,421,531
588,427,165 527,196,889
Less accumulated depreciation
and amortization 148,168,863 128,045,907
440,258,302 399,150,982
Other assets 10,816,102 10,635,682
Total assets $543,039,283 $484,009,486
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Balance Sheets (continued)
September 30 December 31
1999 1998
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 6,678,465 $ 14,856,055
Accrued compensation and related
costs 7,895,292 5,066,654
Accrued expenses 15,453,960 11,729,668
Claims payable 20,512,670 18,072,814
Income taxes payable 2,943,883
Current maturities of
long-term debt 24,869,381 27,214,227
Total current liabilities 75,409,768 79,883,301
Long-term debt, less current
maturities 179,520,203 146,595,170
Deferred income taxes 60,965,903 53,777,739
Stockholders' equity:
Common stock
Authorized shares - 20,000,000
Issued and outstanding shares -
12,301,601 at September 30, 1999
and 12,260,101 at December 31, 1998 123,016 122,601
Additional paid-in capital 66,016,158 65,269,015
Retained earnings 163,091,938 140,365,314
Cumulative other comprehensive loss (2,087,703) (2,003,654)
Total stockholders' equity 227,143,409 203,753,276
Total liabilities and stockholders'
equity $543,039,283 $484,009,486
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating revenues $160,434,754 $137,512,075 $456,845,965 $388,340,261
Operating expenses:
Salaries, wages and benefits 47,329,790 41,601,135 137,040,352 119,157,947
Operations and maintenance 25,084,514 21,702,749 71,395,210 62,500,227
Taxes and licenses 3,221,775 2,904,232 10,077,362 8,466,486
Insurance and claims 5,809,919 5,413,697 16,093,332 16,064,764
Communications and utilities 2,096,321 1,710,364 5,843,717 4,993,472
Depreciation and amortization 15,771,947 12,733,205 45,334,754 35,654,901
Loss (gain) on disposals of revenue
equipment 39,371 (448,467) (1,107,426) (647,184)
Rent and purchased transportation 44,206,928 37,789,807 126,396,742 105,132,487
Other 1,325,545 953,911 4,231,119 2,701,941
Total operating expenses 144,886,110 124,360,633 415,305,162 354,025,041
Operating income 15,548,644 13,151,442 41,540,803 34,315,220
Other expense (income):
Interest expense 3,058,774 2,135,936 8,895,696 6,038,641
Other (859,522) (186,036) (2,567,844) (777,921)
2,199,252 1,949,900 6,327,852 5,260,720
Income before income taxes 13,349,392 11,201,542 35,212,951 29,054,500
Income taxes 4,724,764 4,088,562 12,486,327 10,604,891
Net income $ 8,624,628 $ 7,112,980 $22,726,624 $18,449,609
Basic earnings per share $0.70 $0.58 $1.85 $1.51
Diluted earnings per share $0.67 $0.56 $1.77 $1.45
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 1999
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 22,726,624 22,726,624
Exercise of employee
stock options 41,500 415 747,143 747,558
Equity adjustment from
foreign currency
translation ( 84,049) ( 84,049)
Balance at
September 30, 1999 12,301,601 $123,016 $66,016,158 $163,091,938 $(2,087,703) $227,143,409
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 1999
1999 1998
<S> <C> <C>
Operating activities
Net income $22,726,624 $18,449,609
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 45,334,754 35,654,901
Gain on disposals of revenue
equipment (1,107,426) (647,184)
Provision for deferred income taxes 6,243,164 1,388,548
Changes in operating assets and
liabilities:
Accounts receivable (16,101,742) (15,752,372)
Current and other assets (2,073,103) (4,606,568)
Trade accounts payable (8,177,590) (236,410)
Other current liabilities 6,048,903 15,712,642
Net cash provided by operating
activities 52,893,584 49,963,166
Investing activities
Purchases of property and
equipment (94,589,499) (51,864,416)
Proceeds from disposals of property
and equipment 28,531,671 28,212,368
Business acquisition (6,956,000)
Net cash used in investing
activities (66,057,828) (30,608,048)
Financing activities
Net change in revolving line of credit
and proceeds from long-term debt 30,446,454 (4,379,702)
Proceeds from exercise of stock options 747,558 1,094,249
Principal payments on long-term debt
obligations (19,143,087)
(16,180,828)Net cash provided by (used in)
financing activities 12,050,925 (19,466,281)
Decrease in cash and cash
equivalents (1,113,319) (111,163)
Cash and cash equivalents at
beginning of period 1,465,303 351,919
Cash and cash equivalents at end
of period $ 351,984 $ 240,756
Supplemental cash flow disclosure:
Property and equipment acquired
under capitalized lease obligations $ 19,276,820 $58,710,590
See accompanying notes.
</TABLE>
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<PAGE>
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1999
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, 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 Nine Months Ended
September 30 September 30
1999 1998 1999 1999
<S> <C> <C> <C> <C>
Numerator:
Net income available to
common shareholders $ 8,624,628 $7,112,980 $22,726,624 $18,449,609
Denominator:
Weighted-average shares
for basic earnings per
share 12,296,949 12,259,905 12,287,837 12,252,139
Dilutive employee stock
options 551,430 442,726 569,980 505,615
Adjusted weighted-
average shares for
diluted earnings per
share 12,848,379 12,702,631 12,857,817 12,757,754
Basic earnings per
share $0.70 $0.58 $1.85 $1.51
Diluted earnings per
share $0.67 $0.56 $1.77 $1.45
</TABLE>
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<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>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Trucking $147,523 $124,887 $419,238 $352,388
Logistics 17,270 16,329 48,929 45,330
Intersegment
eliminations (4,358) (3,704) (11,321) (9,378)
$160,435 $137,512 $456,846 $388,340
Operating Income:
Trucking $ 15,048 $ 12,841 $40,024 $31,686
Logistics 501 310 1,517 2,629
$ 15,549 $ 13,151 $41,541 $34,315
</TABLE>
4. Comprehensive Income
Comprehensive income for the Company consists of net income and foreign currency
translation adjustments. Total comprehensive income was $8,674,434 and
$7,112,980 for the quarters ending September 30, 1999 and 1998, respectively,
and was $22,642,575 and $18,449,609 for the nine-month periods ending September
30, 1999 and 1998, respectively.
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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
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 29.5% 30.2% 30.0% 30.7%
Operations and maintenance 15.7% 15.8% 15.6% 16.1%
Taxes and licenses 2.0% 2.1% 2.2% 2.2%
Insurance and claims 3.6% 3.9% 3.5% 4.1%
Communications and utilities 1.3% 1.2% 1.3% 1.3%
Depreciation and amortization 9.8% 9.3% 9.9% 9.2%
Loss (gain) on disposals of
revenue equipment - (0.3%) (0.2%) (0.2%)
Rent and purchased
transportation 27.6% 27.5% 27.7% 27.1%
Other 0.8% 0.7% 0.9% 0.7%
Total operating expenses 90.3% 90.4% 90.9% 91.2%
Operating income 9.7% 9.6% 9.1% 8.8%
Interest expense 1.9% 1.5% 2.0% 1.5%
Other income (0.5%) (0.1%) (0.6%) (0.2%)
Income before income taxes 8.3% 8.2% 7.7% 7.5%
Income Taxes 2.9% 3.0% 2.7% 2.7%
Net income 5.4% 5.2% 5.0% 4.8%
</TABLE>
Results of Operations
Operating revenues for the first nine months of 1999 increased $68.5 million,
or 17.6%, to $456.8 million compared with $388.3 million for the same period
in the prior year. For the quarter ended September 30, 1999, operating
revenues increased $22.9 million, or 16.7%, to $160.4 million compared
with $137.5 million for the same quarter of 1998. The Company's increase in
revenues was due primarily to increased capacity and increased trucking
revenues. The Company's fleet increased to 4,286 tractors at September 30, 1999
from 3,503 at September 30, 1998, an increase of 783 tractors.
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The sources of the Company's operating revenues were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Trucking Revenues:
Domestic Irregular Route $ 91,672 $ 81,378 $264,443 $236,744
International Irregular Route(1) 34,218 29,110 96,361 81,543
Dedicated Route 21,633 14,399 58,434 34,101
Total Trucking Revenues $147,523 $124,887 $419,238 $352,388
Logistics Revenues 17,270 16,329 48,929 45,330
Intersegment Eliminations (4,358) (3,704) (11,321) (9,378)
Total Operating Revenues $160,435 $137,512 $456,846 $388,340
</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 Nine Months Ended
September 30 September 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Trucking Segment 89.8% 89.7% 90.5% 91.0%
Logistics Segment 97.1% 98.1% 96.9% 94.2%
Total Company 90.3% 90.4% 90.9% 91.2%
</TABLE>
Salaries, wages and benefits decreased to 30.0% and 29.5% of operating revenues
for the nine-month and three-month periods ending September 30, 1999, from 30.7%
and 30.2% for the same periods in 1998. These decreases were due primarily to
the increased use of owner-operators and increased logistics revenues during
1999. The Company had 1,294 owner-operators at September 30, 1999 compared to
945 at September 30, 1998.
Operations and maintenance expenses decreased to 15.6% and 15.7% of operating
revenues for the nine-month and three-month periods ending September 30, 1999
from 16.1% and 15.8% for the same periods in 1998. These decreases were due
primarily to the increased use of owner-operators and increased logistics
revenues during 1999.
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<PAGE>
Insurance and claims decreased to 3.5% and 3.6% of operating revenues for the
nine-month and three-month periods ended September 30, 1999 from 4.1% and 3.9%
for the same periods ended September 30, 1998. These decreases were due
primarily to improved accident claims experience during 1999.
Depreciation and amortization was 9.9% of operating revenues for the first nine
months of 1999 compared to 9.2% for the same period in 1998 and 9.8% of
operating revenues for the quarter ended September 30, 1999, compared to 9.3%
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 508 leased owner-operators at September 30, 1999
compared to 199 at September 30, 1998.
Rent and purchased transportation increased to 27.7% of operating revenues in
the first nine months of 1999 compared to 27.1% 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 27.6% of operating revenues for the quarter ended
September 30, 1999, from 27.5% for the same quarter in 1998 for the same
reasons.
Interest expense was $8,895,696 and $3,058,774 for the nine-month and
three-month periods ended September 30, 1999 compared to $6,038,641 and
$2,135,936 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 $2,567,844 and $859,522 for the nine-month and three-month
periods ended September 30, 1999 compared to $777,921 and $186,036 for the same
periods in 1998. These increases in other income were attributable primarily to
Transportes Easo S.A. de C.V., a Mexican trucking company in which the Company
has a 50% ownership interest.
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 nine-month period ending September 30, 1999, the Company had
expenditures, net of equipment sales, of $66.1 million for purchases of property
and equipment. The Company funded these purchases of property and equipment
through cash on hand, cash provided by operating activities and borrowings under
the Company's bank lines of credit. Net cash provided by operating activities
was $52.9 million and net cash provided by financing activities was $12.1
million.
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 September 30, 1999 there was $69 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
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<PAGE>
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. All of the Company's mission critical internal IT systems have been
tested and are now 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 has obtained
verification of the Year 2000 readiness of this imbedded technology from its
significant vendors and suppliers. The Company will continue to verify 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.
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 operations, 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, 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
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<PAGE>
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 key operations personnel to be on site
throughout the New Year's weekend to address any 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.
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 September 30, 1999, the fair value of
the Company's total long-term debt is approximately $204 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 $425,000 at September 30, 1999.
At September 30, 1999, the Company had $141 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 September 30, 1999 rates for the next twelve
months, the increase in interest expense would be approximately $382,000. 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 September 30, 1999.
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<PAGE>
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 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 September 30, 1999 level for the next
twelve months, the Company would have an increase in fuel expense of
approximately $338,000 as a result of the fuel price swaps on the notional
800,000 gallons per month. However, the Company should be able to purchase fuel
in the spot market for the same hypothetical ten percent decrease and should
save approximately $338,000 in fuel expense over the same twelve month period.
The increase in cost due to the fuel price swap and the decrease in cost due to
lower prices in the spot market should offset each other to where the net cost
for fuel for the Company would be unchanged.
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
None
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:
-15-
<PAGE>
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).
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).
-16-
<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 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) On September 23, 1999, the Company filed a Form 8-K reporting the election
of Edward A. Labry, III to the Company's Board of Directors.
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 15, 1999
/s/ Dwight M. Bassett
Dwight M. Bassett
Vice President
(Chief Accounting Officer of the
Company)
-17-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF SEPTEMBER 30,1999, AND
THE RELATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER
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> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 351,984
<SECURITIES> 0
<RECEIVABLES> 73,557,397
<ALLOWANCES> 2,781,578
<INVENTORY> 0
<CURRENT-ASSETS> 91,964,879
<PP&E> 588,427,165
<DEPRECIATION> 148,168,863
<TOTAL-ASSETS> 543,039,283
<CURRENT-LIABILITIES> 75,409,768
<BONDS> 179,520,203
<COMMON> 123,016
0
0
<OTHER-SE> 227,020,808
<TOTAL-LIABILITY-AND-EQUITY> 543,039,283
<SALES> 0
<TOTAL-REVENUES> 160,434,754
<CGS> 0
<TOTAL-COSTS> 144,886,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,058,774
<INCOME-PRETAX> 13,349,392
<INCOME-TAX> 4,724,764
<INCOME-CONTINUING> 8,624,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,624,628
<EPS-BASIC> .70
<EPS-DILUTED> .67
</TABLE>
