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, 2000
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 (November 1, 2000):
Common stock, $.01 per share: 11,150,001 shares
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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, 2000 and
December 31, 1999. . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months Ended
September 30, 2000 and 1999 and the Nine Months Ended
September 30, 2000 and 1999. . . . . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity for the Nine
Months Ended September 30, 2000. . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . .16
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<TABLE>
<CAPTION>
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc.
Consolidated Balance Sheets
September 30 December 31
2000 1999
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 271,701 $ 242,606
Accounts receivable:
Trade, net 94,558,401 74,235,169
Other 4,541,060
Officers and employees 1,744,739 1,372,312
100,844,200 75,607,481
Recoverable income taxes 2,457,502 4,391,692
Deferred income taxes 9,366,152 9,558,000
Prepaid expenses and other 9,325,320 6,627,602
Total current assets 122,264,875 96,427,381
Property and equipment:
Land and land improvements 10,711,735 8,563,092
Buildings 33,859,641 33,853,177
Revenue equipment 559,379,619 538,170,367
Service equipment and other 54,440,071 50,764,814
Construction in progress 11,761,093 7,051,494
670,152,159 638,402,944
Less accumulated depreciation
and amortization 190,450,530 157,129,859
479,701,629 481,273,085
Other assets 20,215,831 13,832,915
Total assets $622,182,335 $591,533,381
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Balance Sheets (continued)
September 30 December 31
2000 1999
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 5,741,550 $ 7,300,275
Accrued compensation and related
costs 7,937,312 5,625,679
Accrued expenses 15,059,283 16,562,822
Claims payable 19,434,093 19,914,990
Current maturities of
long-term debt 70,640,901 39,189,255
Total current liabilities 118,813,139 88,593,021
Long-term debt, less current
maturities 231,010,964 202,404,874
Deferred income taxes 68,991,940 65,325,276
Stockholders' equity:
Common stock
Authorized shares - 20,000,000
Issued and outstanding shares -
11,150,001 at September 30, 2000
12,301,601 at December 31, 1999 111,500 123,016
Additional paid-in capital 60,235,453 66,222,158
Retained earnings 165,757,110 170,952,739
Notes receivable from officers (851,719) -
Cumulative other comprehensive loss (1,886,052) (2,087,703)
Total stockholders' equity 223,366,292 235,210,210
Total liabilities and stockholders'
equity $622,182,335 $591,533,381
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Operating revenues $176,112,824 $160,434,754 $520,284,832 $456,845,965
Operating expenses:
Salaries, wages and benefits 60,098,973 47,329,790 171,052,677 137,040,352
Operations and maintenance 35,790,402 25,084,514 95,283,993 71,395,210
Taxes and licenses 3,749,124 3,221,775 11,010,319 10,077,362
Insurance and claims 5,723,035 5,809,919 16,098,188 16,093,332
Communications and utilities 2,411,742 2,096,321 6,627,798 5,843,717
Depreciation and amortization 16,960,522 15,771,947 53,685,035 45,334,754
Loss (gain) on disposals of revenue
equipment (388,160) 39,371 (880,053) (1,107,426)
Rent and purchased transportation 39,447,360 44,206,928 128,407,708 126,396,742
Other 1,573,528 1,325,545 4,272,121 4,231,119
Total operating expenses 165,366,526 144,886,110 485,557,786 415,305,162
Operating income 10,746,298 15,548,644 34,727,046 41,540,803
Other expense (income):
Interest expense 4,687,587 3,058,774 13,268,125 8,895,696
Other (206,222) (859,522) (1,452,531) (2,567,844)
4,481,365 2,199,252 11,815,594 6,327,852
Income before income taxes 6,264,933 13,349,392 22,911,452 35,212,951
Income taxes 2,177,689 4,724,764 8,033,425 12,486,327
Net income $ 4,087,244 $ 8,624,628 $ 14,878,027 $ 22,726,624
Basic earnings per share $0.37 $0.70 $1.29 $1.85
Diluted earnings per share $0.37 $0.67 $1.28 $1.77
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, 2000
Notes Cumulative
Common Stock Paid-In Retained Receivable Other Compre-
Shares Amount Capital Earnings From Officers hensive Loss Totals
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 2000 12,301,601 $123,016 $66,222,158 $170,952,739 $ $(2,087,703) $235,210,210
Net income 14,878,027 14,878,027
Exercise of employee
stock options 118,500 1,185 850,534 (851,719)
Repurchase of
Common Stock (1,270,100) (12,701) (6,837,239) (20,073,656) (26,923,596)
Foreign currency trans-
lation adjustment 201,651 201,651
Balance at
September 30, 2000 11,150,001 $111,500 $60,235,453 $165,757,110 $(851,719) $(1,886,052) $223,366,292
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
M.S. Carriers, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 2000
2000 1999
<S> <C> <C>
Operating activities
Net income $14,878,027 $22,726,624
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 53,685,035 45,334,754
Gain on disposals of revenue
equipment (880,053) (1,107,426)
Provision for deferred income taxes 3,858,512 6,243,164
Changes in operating assets and
liabilities:
Accounts receivable (20,323,232) (16,101,742)
Current and other assets (7,374,561) (2,073,103)
Trade accounts payable (1,558,725) (8,177,590)
Other current liabilities 327,197 6,048,903
Net cash provided by operating
activities 42,612,200 52,893,584
Investing activities
Investment in joint venture (5,000,000)
Purchases of property and
equipment (69,365,785) (94,589,499)
Proceeds from disposals of property
and equipment 62,426,199 28,531,671
Notes receivable from officer (851,719)
Net cash used in investing
activities (12,791,305) (66,057,828)
Financing activities
Net change in revolving line of credit
and proceeds from long-term debt 20,132,546 30,446,454
Proceeds from exercise of stock options 851,719 747,558
Principal payments on long-term debt
obligations (23,852,469) (19,143,087)
Repurchase of stock (26,923,596)
Net cash provided by (used in)
financing activities (29,791,800) 12,050,925
Increase (decrease) in cash and cash
equivalents 29,095 (1,113,319)
Cash and cash equivalents at
beginning of period 242,606 1,465,303
Cash and cash equivalents at end
of period $ 271,701 $ 351,984
Supplemental cash flow disclosure:
Property and equipment acquired
under capitalized lease obligations $43,777,659 $19,276,820
See accompanying notes.
</TABLE>
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M.S. Carriers, Inc.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
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, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. 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, 1999.
<TABLE>
<CAPTION>
2. Net Income Per Common Share
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Numerator:
Net income available to
common shareholders $ 4,087,244 $8,624,628 $14,878,027 $22,726,624
Denominator:
Weighted-average shares
for basic earnings per
share 11,148,713 12,296,949 11,519,188 12,287,837
Dilutive employee stock
options 8,739 551,430 72,464 569,980
Adjusted weighted-
average shares for
diluted earnings per
share 11,157,452 12,848,379 11,591,652 12,857,817
Basic earnings per
share $0.37 $0.70 $1.29 $1.85
Diluted earnings per
share $0.37 $0.67 $1.28 $1.77
</TABLE>
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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.
In July 2000, the Company contributed its logistics operations to
Transplace.com as further described in Note 4. Summarized segment information
is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Trucking $172,034 $147,523 $488,241 $419,238
Logistics 1,578 17,270 36,952 48,929
Intersegment
eliminations and
other income 2,501 (4,358) (4,908) (11,321)
$176,113 $160,435 $520,285 $456,846
Operating Income:
Trucking $ 10,841 $ 15,048 $33,692 $40,024
Logistics (95) 501 1,035 1,517
$ 10,746 $ 15,549 $34,727 $41,541
</TABLE>
4. Investment in Transplace.com
In April 2000, the Company entered into an Operating Agreement with five other
trucking companies to form Transplace.com, an internet-based global
transportation venture that would create a marketplace for shippers and
carriers. Pursuant to the agreement, each of the six companies is committed
to contribute their respective existing logistics operations and cash of up to
$5 million to fund working capital. In July 2000, the Company contributed its
logistics operations and $5 million to Transplace.com. The Company's
investment in Transplace.com is classified as other assets on its balance
sheet. The Company's logistics operations generated approximately $35.4
million of operating revenues and $1.1 million of operating income for the
six-month period ended June 30, 2000. During the three-months period ended
September 30, 2000, the Company reported $1.6 million of operating revenues
and an $0.1 million operating loss from its logistics operations. These
amounts are related to logistics services that were in process at the time of
the Company's transfer of its logistics operations to Transplace.com.
5. Comprehensive Income
Comprehensive income for the Company consists of net income and foreign
currency translation adjustments. Total comprehensive income was $4,288,895
and $8,674,434 for the quarters ending September 30, 2000 and 1999,
respectively, and was $15,079,678 and $22,642,575 for the nine-month periods
ending September 30, 2000 and 1999, 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
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 34.1% 29.5% 32.9% 30.0%
Operations and maintenance 20.3% 15.7% 18.3% 15.6%
Taxes and licenses 2.1% 2.0% 2.1% 2.2%
Insurance and claims 3.3% 3.6% 3.1% 3.5%
Communications and utilities 1.4 1.3% 1.3% 1.3%
Depreciation and amortization 9.6% 9.8% 10.3% 9.9%
Gain on disposals of
revenue equipment (0.2%) - (0.2%) (0.2%)
Rent and purchased 22.4% 27.6% 24.7% 27.7%
transportation
Other 0.9% 0.8% 0.8% 0.9%
Total operating expenses 93.9% 90.3% 93.3% 90.9%
Operating income 6.1% 9.7% 6.7% 9.1%
Interest expense 2.7% 1.9% 2.6% 2.0%
Other income (0.1%) (0.5%) (0.3%) (0.6%)
Income before income taxes 3.5% 8.3% 4.4% 7.7%
Income taxes 1.2% 2.9% 1.5% 2.7%
Net income 2.3% 5.4% 2.9% 5.0%
</TABLE>
Results of Operations
Operating revenues for the first nine months of 2000 increased $63.5 million,
or 13.9%, to $520.3 million compared with $456.8 million for the same period
in the prior year. For the quarter ended September 30, 2000, operating
revenues increased $15.7 million, or 9.8%, to $176.1 million compared
with $160.4 million for the same quarter of 2000. The Company's increases in
revenues were due primarily to increased capacity and increased trucking
revenues. The Company's fleet increased to 5,131 tractors at September 30,
2000 from 4,286 at September 30, 1999, an increase of 845 tractors.
The Company's revenues per loaded mile were $1.41 for the nine-month and
three-month periods ended September 30, 2000 compared to $1.36 for the same
periods of 1999. These increases were due primarily to rate increases
implemented by the Company during the second quarter of 2000 which lessened
the impact of the driver pay increases implemented by the Company in March
2000. From time to time, the industry has experienced shortages of drivers.
If such a shortage were to occur over a prolonged period and increases in
driver pay were to occur to attract and retain
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drivers, the Company's results from operations would be negatively impacted to
the extent that corresponding rate increases are not obtained.
The sources of the Company's operating revenues were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Trucking Revenues:
Domestic Irregular Route $106,336 $ 91,672 $301,759 $264,443
International Irregular Route(1) 37,580 34,218 107,981 96,361
Dedicated Route 28,118 21,633 78,501 58,434
Total Trucking Revenues 172,034 147,523 488,241 419,238
Logistics Revenues(2) 1,578 17,270 36,952 48,929
Intersegment eliminations and
other income 2,501 (4,358) (4,908) (11,321)
Total Operating Revenues $176,113 $160,435 $520,285 $456,846
</TABLE>
(1) International Irregular Route Trucking Revenues include loads originating
or terminating at Laredo, TX, Brownsville, TX, El Paso, TX, Nogales, AZ, San
Diego, CA, and Calexico, CA.
(2) In July 2000, the Company contributed its logistics operations to
Transplace.com. Logistics revenues reported for the three-month period ended
September 30, 2000 reflect logistics services in process at the time of the
Company's transfer of its logistics operations to Transplace.com.
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
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Trucking Segment 93.8% 89.8% 93.1% 90.5%
Logistics Segment 106.9% 97.1% 97.2% 96.9%
Total Company 93.9% 90.3% 93.3% 90.9%
</TABLE>
Salaries, wages and benefits increased to 32.9% and 34.1% of operating revenues
for the nine-month and three-month periods ending September 30, 2000, from
30.0% and 29.5% for the same periods in 1999. These increases were due
primarily to (i) significant driver pay increase implemented in March 2000;
(ii) lower logistics revenues as a result of the Company's contribution of its
logistics operations to Transplace.com; and (iii) owner-operator tractors
representing a lower percentage of
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the average number of tractors in service during the first three quarters of
2000. Amounts paid to owner-operators are recorded as purchased
transportation. The Company had 1,387 owner-operators at September 30, 2000
compared to 1,294 at September 30, 1999.
Operations and maintenance expenses increased to 18.3% and 20.3% of operating
revenues for the nine-month and three-month periods ending September 30, 2000
from 15.6% and 15.7% for the same periods in 1999. These increases were due
primarily to higher fuel costs and lower logistics revenues during 2000.
Increases in fuel costs, to the extent not offset by rate increases or fuel
surcharges, could have an adverse effect on the operations and profitability of
the Company.
Insurance and claims decreased to 3.1% and 3.3% of operating revenues for the
nine-month and three-month periods ended September 30, 2000 from 3.5% and 3.6%
for the same periods ended September 30, 1999. These decreases were due
primarily to improved accident claims experience during 2000.
Depreciation and amortization was 10.3% of operating revenues for the first
nine months of 2000 compared to 9.9% for the same period in 1999 and 9.6% of
operating revenues for the quarter ended September 30, 2000, compared to 9.8%
for the same quarter of 1999. The increase for the nine-month period was
attributable primarily to the expansion of the Company's fleet with additional
Company-owned tractors and leased owner-operators during 2000. The decrease
for the three-month period was due primarily to the change from a three-year to
a four-year trade cycle with respect to Company owned tractors.
Rent and purchased transportation decreased to 24.7% of operating revenues in
the first nine months of 2000 compared to 27.7% for the same period of 1999
primarily as a result of the decreased percentage of owner-operator tractors to
total tractors and the contribution of the Company's logistics operations to
Transplace.com in July 2000. Rent and purchased transportation decreased to
22.4% of operating revenues for the quarter ended September 30, 2000, from
27.6% for the same quarter in 1999, for the same reasons.
Interest expense was $13,268,125 and $4,687,587 for the nine-month and three-
month periods ended September 30, 2000 compared to $8,895,696 and $3,058,774
for the same periods in 1999. These increases in interest expense were due
primarily from average debt outstanding being significantly higher during 2000
as compared to 1999.
Other income was $1,452,531 and $206,222 for the nine-month and three-month
periods ended September 30, 2000 compared to $2,567,844 and $859,522 for the
same periods in 1999. These decreases in other income were attributable
primarily to reduced earnings reported by 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, 2000, the Company had
expenditures, net of equipment sales, of $6.9 million for purchases of property
and equipment. The Company funded these purchases of property and equipment
through cash provided by operating activities. Net cash provided by operating
activities was $42.6 million.
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In October 2000, the Company restructured its credit facility with Bank of
America to provide for a $55 million reducing revolving term loan and a $30
million revolving line of credit. At November 1, 2000 there was $71.5 million
outstanding under this credit facility. Management expects to retire the
reducing revolving term loan through cash provided by operating activities or
secured borrowings and expects to maintain the revolving line 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 credit facilities 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.
In December 1999, the Company's Board of Directors authorized the repurchase of
up to 1 million shares of the Company's common stock. In June 2000, the
Company's Board of Directors authorized the repurchase of up to an additional 2
million shares of the Company's common stock. The Company purchased 1,270,100
shares of its common stock for approximately $26.9 million during the first
nine months of 2000.
Recently Issued Accounting Standards
During 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No.
133). This statement requires companies to record derivative instruments on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of a derivative would be accounted
for depending on the use of a derivative and whether it qualifies for hedge
accounting. In June 1999, the FASB issued Statement No. 137, which delayed the
effective date of SFAS No 133 to the Company's fiscal year 2001. Because of
the Company's minimal historical use of derivatives, management anticipates
that the adoption of SFAS No. 133 will not have a significant effect on
earnings or on the financial position of the Company.
Year 2000 Issues
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date change. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products and services, its internal systems, or the products
and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the Year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed properly.
Transplace.com
In April 2000, the Company entered into an Operating Agreement with five other
trucking companies to form Transplace.com, an internet-based global
transportation venture that would create a marketplace for shippers and
carriers. Pursuant to the agreement, each of the six companies committed to
contribute their respective existing logistics operations and cash of up to $5
million to
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fund working capital. In July 2000, the Company contributed its logistics
operations and $5 million to Transplace.com. The Company's logistics
operations generated approximately $35.4 million of operating revenues and $1.1
million of operating income for the six-month period ended June 30, 2000.
During the three months ended September 30, 2000, the Company reported $1.6
million of operating revenues and an $0.1 million operating loss from its
logistics operations. These amounts are related to logistics services that
were in process at the time of the Company's transfer of its logistics
operations to Transplace.com.
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; the
cost of fuel; 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, 2000, the fair value of
the Company's total long-term debt is approximately $281.7 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 $267,000 at September 30, 2000.
At September 30, 2000, the Company had $231.9 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, 2000 rates for the
next twelve months, the increase in interest expense would be approximately
$1,072,000. 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,
2000.
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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:
Exhibit 10.10 Ninth Amended and Restated Loan Agreement with Bank of
America, N.A.
Exhibit 27 Financial Data Schedule
(b) The Company filed a report on Form 8-K on July 19, 2000 relating to the
contribution of its logistics business to Transplace.com in exchange for a
fourteen percent (14%) interest in Transplace.com.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
M.S. Carriers, Inc.
(Registrant)
Date: November 14, 2000
M.J. Barrow
Senior Vice President and
Chief Financial Officer
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