SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X )QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission File No. 0-16386
CANNON EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0650141
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
1457 Robinson
P.O. Box 364
Springdale, Arkansas 72765
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 751-9209
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 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
Number of shares of $.01 par value common stock outstanding at April 30,
1996: 3,147,652
<PAGE>
INDEX
CANNON EXPRESS, INC. and SUBSIDIARIES
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements (Unaudited)
Consolidated Balance Sheets
as of March 31, 1996 and June 30, 1995 .......... 1
Consolidated Statements of Income and Retained Earnings
for the Three Months and Nine Months Ended March 31, 1996
and 1995 ........................ 3
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1996 and 1995 .... 4
Notes to Consolidated Financial Statements ........ 5
ITEM 2-Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 6
PART II -- OTHER INFORMATION
ITEM 1-Legal Proceedings ................. *
ITEM 2-Changes in Securities ............... *
ITEM 3-Defaults Upon Senior Securities .......... *
ITEM 4-Submission of Matters to a Vote of Security-Holders 10
ITEM 5-Other Information ................. 10
ITEM 6-Exhibits and Reports on Form 8-K .......... 10
*No information submitted under this caption.<PAGE>
PART 1.
ITEM 1. Financial Statements (Unaudited)
Cannon Express, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31 June 30
1996 1995
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $14,434,590 $12,324,394
Marketable securities 4,102,046 3,493,187
Receivables, net of allowance for
doubtful accounts
(March 31, 1996-$163,675;
June 30, 1995-$141,175):
Trade 12,409,492 9,084,562
Other 3,319 661,917
Prepaid expenses and supplies 2,894,626 1,680,448
Total current assets 33,844,073 27,244,508
Property and equipment:
Land, buildings and improvements 1,143,453 1,143,453
Revenue equipment 72,090,890 59,093,534
Service, office and other equipment 2,220,175 2,129,664
75,454,518 62,366,651
Less allowances for depreciation 16,906,065 14,478,734
58,548,453 47,887,917
Other assets:
Receivable from stockholders 23,406 23,406
Restricted cash 816,397 813,671
Other 1,028,168 1,293,757
Total other assets 1,867,971 2,130,834
$94,260,497 $77,263,259
Note: The balance sheet at June 30, 1995 has been derived from the audited
consolidated balance sheet at that date but it does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.<PAGE>
Cannon Express, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
March 31 June 30
1996 1995
(Unaudited) (Note)
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 570,268 $ 459,319
Accrued expenses:
Insurance reserves 1,875,861 1,337,331
Other 2,788,018 1,485,615
Federal and state income taxes payable 816,782 435,930
Deferred income taxes 211,400 29,000
Current portion of long-term debt 12,761,677 8,727,272
Total current liabilities 19,024,006 12,474,467
Long-term debt, less current portion 44,241,724 35,353,262
Deferred income taxes 3,384,800 3,833,000
Other liabilities 554,670 279,255
Stockholders' equity:
Class A common stock: $.01 par value;
authorized 10,000,000 shares;
issued 2,219,477 shares 22,195 22,195
Class B common stock: $.01 par value;
authorized 10,000,000 shares;
issued 2,224,477 shares 22,245 22,245
Additional paid-in capital 3,542,356 3,542,356
Retained earnings 22,635,979 21,181,034
Unrealized appreciation on marketable
securities, net of income taxes 1,204,297 927,220
27,427,072 25,695,050
Less treasury stock, at cost
(116,250 shares) 371,775 371,775
27,055,297 25,323,275
$94,260,497 $77,263,259
Note: The balance sheet at June 30, 1995 has been derived from the audited
consolidated balance sheet at that date but it does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.<PAGE>
Cannon Express, Inc. and Subsidiaries
Consolidated Statements of Income and Retained Earnings
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
(Unaudited) (Unaudited)
Operating revenue $21,946,007 $20,401,630 $65,778,832 $58,498,399
Operating expenses and costs:
Salaries, wages and
fringe benefits 7,771,191 6,388,170 22,882,729 17,887,514
Operating supplies
and expense 6,743,710 5,760,578 19,008,449 16,151,310
Insurance, taxes
and licenses 2,636,549 1,940,414 7,549,558 5,383,174
Depreciation and
amortization 2,788,303 2,063,273 7,687,586 5,469,577
Rents and purchased
transportation 943,541 1,165,770 2,994,091 3,213,745
Other 441,365 335,775 1,166,991 943,830
21,324,659 17,653,980 61,289,404 49,049,150
Operating income 621,348 2,747,650 4,489,428 9,449,249
Gain on securities sales 151,570 - 226,213 -
Other income 173,206 109,880 406,067 131,038
324,776 109,880 632,280 131,038
Interest expense 943,004 624,982 2,755,763 1,565,951
Income before income taxes 3,120 2,232,548 2,365,945 8,014,336
Federal and state income taxes
Current (230,000) 705,000 871,000 2,770,000
Deferred 231,000 183,000 40,000 315,000
1,000 888,000 911,000 3,085,000
Net income 2,120 1,344,548 1,454,945 4,929,336
Retained earnings at
beginning of period 22,633,859 18,749,680 21,181,034 15,164,892
Retained earnings at
end of period $22,635,979 $20,094,228 $22,635,979 $20,094,228
Earnings per share:
Net income per
share (Note B) $0.00 $0.41 $0.45 $1.51
Average shares and share
equivalents outstanding 3,234,519 3,274,743 3,244,752 3,269,705
Note: Average shares outstanding and earnings per share for current and
prior period balances reflect the effects of the Recapitalization Plan
which was approved by shareholders at a special meeting held April 10,
1996.
See notes to consolidated financial statements.<PAGE>
Cannon Express, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
March 31
1996 1995
(Unaudited)
Operating activities
Net income $ 1,454,945 $ 4,929,336
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,687,586 5,469,577
Provision for losses on
accounts receivable 22,500 17,163
Provision for deferred income taxes 40,000 315,000
Loss on disposal of assets 15,436 30,170
Gain on sale of marketable securities (226,213) _
Changes in operating assets and liabilities:
Accounts receivable (2,688,831) (1,736,840)
Prepaid expenses and supplies (1,214,178) (908,286)
Accounts payable, accrued expenses,
taxes payable, and other liabilities 2,173,779 2,825,661
Other assets (14,160) 538,053
Net cash provided by operating activities 7,250,864 11,479,834
Investing activities
Purchases of property and equipment (15,542,770) (16,989,379)
Purchases of marketable securities (307,635) -
Proceeds from maturities of restricted
investments - 100,000
Purchases of restricted investments (2,726) (10,848)
Sales of marketable securities 375,520 -
Proceeds from the sale of equipment 6,556,908 3,927,112
Net cash used in investing activities (8,920,703) (12,973,115)
Financing activities
Proceeds from long-term borrowing 15,907,421 9,920,035
Principal payments on long-term debt and
capital lease obligations (12,127,386) (7,660,316)
Net cash provided by financing activities 3,780,035 2,259,719
Increase in cash and cash equivalents 2,110,196 766,438
Cash and cash equivalents at beginning
of period 12,324,394 8,398,287
Cash and cash equivalents at end
of period $14,434,590 $ 9,164,725
See notes to consolidated financial statements.<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
Note A - 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 three month and nine month periods ended March
31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1996. For further information, refer
to the Company's consolidated financial statements and notes thereto
included in its Form 10 - K for the fiscal year ended June 30, 1995.
Note B - Net Income Per Share
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
(Unaudited) (Unaudited)
Average number of common
shares outstanding 3,147,652 3,142,652 3,147,652 3,142,652
Net effect of dilutive stock
warrants and options 86,867 132,091 97,100 127,053
Average shares and share
equivalents outstanding 3,234,519 3,274,743 3,244,752 3,269,705
Net income for the period $ 2,120 $1,344,548 $1,454,945 $4,929,336
Per share $.00 $.41 $.45 $1.51
Note: Average shares outstanding and earnings per share for current and
prior period balances reflect the effects of the Recapitalization Plan
which was approved by shareholders at a special meeting held April 10,
1996.<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations --Third Quarter
Operating revenue for the third quarter of fiscal 1996 (ended March 31,
1996) increased to $21,946,007 from $20,401,630 representing an increase
of $1,544,377 or 7.6% over the comparable period in fiscal 1995. The
Company's fleet expanded by 28.3% from 678 trucks at March 31, 1995 to 870
trucks at March 31, 1996. The increase in operating revenue over the
same period of fiscal 1995 is primarily attributable to the increased
number of shipments to existing customers transported by the Company's
larger fleet of trucks and trailers. Operations of the Company
continued to be affected in the third quarter of fiscal 1996 by excess
capacity in the truckload industry, which led to downward pressure on
rate per-mile caused by increased competition for freight. Therefore, the
increase in operating costs related to the fleet expansion was not offset
by increased revenue. Although the number of shipments increased by 27.8%
the Company's capacity continued to exceed the demand for services forcing
per-mile revenue lower as the Company focused on moving available freight,
in many cases servicing less profitable lanes, and in other cases,
reducing its rates to customers to meet competition. In addition, the
Company experienced a shortage of qualified drivers which impaired its
ability to produce revenue. The Company is increasing its sales efforts
and is undertaking steps which it believes will increase the demand for
its services.
Salaries, wages, and fringe benefits, made up primarily of drivers' wages,
increased as a percentage of revenue to 35.4% in the third quarter of
fiscal 1996 from 31.3% in the third quarter of fiscal 1995. Company
drivers were awarded approximately $466,000 in bonuses for the three-month
period ended March 31, 1996 as compared with $470,000 awarded during the
three-month period ended March 31, 1995. Higher per-mile costs in fiscal
1995 were substantially passed through to the Company's customers in the
form of rate increases. However, during fiscal 1996 the Company
experienced reduced revenue per-mile with no reduction in its per-mile
expense. The Company expects that competition for drivers will continue
and that future pay increases may be necessary to attract and retain
qualified drivers.
Operating supplies and expenses, as a percentage of revenue, increased to
30.7% in the third quarter of fiscal 1996 from 28.2% in the comparable
period of fiscal 1995, due primarily to higher fuel costs and the
increased number of trucks and trailers. Insurance, taxes, and licenses
increased to 12.0% of revenue in fiscal 1996 from 9.5% in fiscal 1995 due
to the timing of new equipment additions during fiscal 1996. Depreciation
and amortization increased to 12.7% of revenue in fiscal 1996 from 10.1%
in the same period of fiscal 1995. This increase is attributable to the
expansion of the Company's fleet during fiscal 1996. Rents and purchased
transportation decreased to 4.3% of revenue in fiscal 1996 from 5.7% in
fiscal 1995 due to a proportionate decrease in revenue from intermodal
activities.
Although operating revenue for the third quarter of 1996 grew by 7.6% over
the comparable period of 1995, operating expenses increased by $3,670,679 <PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Cont'd.
or 20.8%. Accordingly, the Company's operating ratio increased to 97.2% in
the third fiscal quarter of 1996 from 86.5% in the same period of fiscal
1995.
Interest expense increased to 4.3% of revenue in the third quarter of
fiscal 1996 from 3.1% recorded in the third quarter of fiscal 1995, due to
new loans and capital leases incurred as a result of the expansion of the
Company's fleet.
Net income for the third quarter of fiscal 1996 ended March 31, 1996 was
$2,120 ($.00 per share) compared to $1,344,548 ($.41 per share) during the
comparable period of fiscal 1995, a decrease of $1,342,428 or 99.8% for
the period.
Results of Operations --Nine Month Period
Operating revenue for the first nine months of fiscal 1996 ended March 31,
1996 increased to $65,778,832 from $58,498,399 in the comparable period of
fiscal 1995 representing an increase of 12.5%. As in the three-month
period, the increase in operating revenue over the same period of fiscal
1995 is primarily attributable to the increased number of shipments
transported by the Company's larger fleet of trucks and trailers.
Salaries, wages, and fringe benefits increased to 34.8% of revenues in the
nine-month period of fiscal 1996 up from the 30.6% reported in the nine-
month period of fiscal 1995. Higher driver wages were only partially
offset by rate increases to the Company's customers, as such, increased
competition for freight within the industry resulted in a continuing
decrease in per-mile operating revenue for the first nine months of fiscal
1996. Operating supplies and expenses increased to 28.9% of revenue in
fiscal 1996 from 27.6% in fiscal 1995. Insurance, taxes and licenses
increased to 11.5% of revenue during fiscal 1996 from 9.2% in fiscal 1995
due to increased costs associated with the Company's larger fleet of
revenue equipment. Depreciation and amortization, as a percentage of
revenue, increased to 11.7% in fiscal 1996 from 9.3% in the same period of
fiscal 1995 due principally to the addition of new equipment.
Rents and purchased transportation decreased to 4.6% in the first nine
months of fiscal 1996 from 5.5% during the comparable period of fiscal
1995 due primarily to a proportionate decrease in revenue from intermodal
activities. Other expenses increased slightly to 1.8% of revenue in
fiscal 1996 from 1.6% during the same fiscal period in 1995.
As in the three month period, operating expenses increased relative to the
additional fixed costs associated with adding new equipment. Competition
for freight led to decreased margins. Additionally, a shortage of
qualified drivers led to idle equipment. Operating income declined to
$4,489,428 in the nine months ended March 31, 1996 from $9,449,249 during
the comparable period of fiscal 1995, a decrease of 52.5%.
Interest expense increased to 4.2% of revenue in the nine-month period of
fiscal 1996 from 2.7% recorded in the nine-month period of fiscal 1995 <PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Contd.
representing an increase of 76.0%. As in the three-month period, the
increase in interest expense over the same period of fiscal 1995 is due to
new loans and capital leases incurred as a result of the expansion of the
Company's fleet.
The Company's effective tax rate remained steady at 38.5% of pre-tax net
income in the nine-month period of fiscal 1996 as well as in the
comparable period of fiscal 1995.
Net income for the first nine months of fiscal 1996 ended March 31, 1996
was $1,454,945 ($.45 per share) compared to $4,929,336 ($1.51 per share)
during the comparable period of fiscal 1995, a decline of $3,474,391 or
70.5% for the nine-month period.
Fuel Cost and Availability
The Company, and the motor carrier industry as a whole, is dependent upon
the availability and cost of diesel fuel. Although diesel fuel costs
remained relatively stable during the first two quarters of fiscal 1996,
the price of fuel rose significantly during the latter part of the quarter
ended March 31, 1996. Average price per gallon increased 6.7% during the
third quarter of fiscal 1996 over the comparable period in fiscal 1995.
Historically, most increases have been passed through to the Company's
customers, either in the form of fuel surcharges, or if deemed permanent
in nature, through increased rates. However, in the current rate
environment, fuel surcharges met customer resistance. Through April 1996
fuel costs continued to increase with the industry's average cost at April
30, 1996 up 16.5% over April 30, 1995. In April 1996, the Company has
been able to implement a fuel surcharge for most of its customers.
Implementation of fuel surcharges is intended to offset some of the
effects of fuel price increases. However, further cost increases or
shortages of fuel could affect the Company's future profitability.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been cash flows generated
from operations and proceeds from borrowings. The Company typically
extends credit to its customers, billing freight charges after delivery.
Accordingly, the ability of the Company to generate cash to
satisfactorily meet its ongoing cash needs is substantially dependent upon
timely payment by its customers. The Company has not experienced
significant uncollectible accounts receivable.
Operating activities provided cash flows of $7.3 million for the first
nine months of fiscal 1996 compared to $11.5 million for the same period
of fiscal 1995. Cash flows from operations in the first three quarters of
fiscal 1996 were the result of $1.5 million in net income, $7.7 million in
depreciation and $1.9 million net use of other working capital assets and
liabilities. Investing activities used net cash of $8.9 million during
the first nine months of fiscal 1996 compared to $13.0 million net cash
used in the same period of fiscal 1995. Purchases of new equipment and
marketable securities totaling $15.8 million were offset by $6.9 million<PAGE>
in proceeds from equipment and security sales for 1996. Financing
activities provided net cash of $3.8 million during the third quarter of
fiscal 1996 compared to $2.3 million cash provided in the third quarter of
1995. During fiscal 1996, proceeds from long-term borrowings of $15.9
million were offset by repayment on long-term debt and capital leases of
$12.1 million.
The Company's working capital at March 31, 1996 was $14.8 million compared
to $14.8 million at June 30, 1995. The Company will use approximately
$11.3 million in working capital to fund the recapitalization proposal
detailed below. Historically, working capital needs have been met from
cash generated from operations. Management believes that the Company's
working capital is sufficient for its short-term needs. However, to the
extent additional capital is necessary for the Company's operations,
management believes it would be available through additional borrowings or
equity offerings.
The Company added 50 new trucks to its fleet in the quarter ended March
31, 1996 and was unable to hire enough qualified drivers during that
period for those trucks. The Company will take delivery of 40 additional
trucks during the fourth quarter of its fiscal year ending June 30, 1996.
The Company believes that it will be able to staff these additional trucks
with qualified drivers, although it expects the competition for qualified
drivers to continue. The Company expects that it will not add additional
trucks to its fleet in the fiscal year ending June 30, 1997, although it
may replace older trucks with new ones during that period.
Stock Recapitalization
On January 29, 1996 the Company announced that its Board of Directors had
approved a recapitalization plan which would take private its Class B
Common Stock and reclassify its two existing classes of common stock into
a new, single class of publicly traded common stock. The Company's
existing Class A Common Stock and Class B Common Stock are currently
traded on the NASDAQ National Market System under the symbols CANXA and
CANXB.
The recapitalization plan would effect a 1-for-500,000 reverse split of
the Company's non-voting Class B Common Stock and convert each whole share
of Class B Common Stock outstanding after the reverse stock split into
493,150 shares of voting Class A Common Stock. All shareholders who own
fewer than 500,000 shares of Class B Common Stock on January 26, 1996 will
be paid a cash price of $9.00 per share. The Company is funding these
payments with existing working capital.
Over the past year the Board of Directors had been exploring alternatives
to increase shareholder value, and ultimately determined to eliminate the
dual class structure and to return to a single, publicly-traded class of
common stock. On January 26, 1996 a special committee of the Board of
Directors concluded that the recapitalization plan was in the best
interests of both the Company and the shareholders. The special committee
considered various factors before recommending that the Board approve the
recapitalization plan, including the opinion of its financial advisor,
Llama Company, that the $9.00 per share of Class B Common Stock price is
fair to the shareholders of Class B Common Stock.<PAGE>
PART II OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
On April 10, 1996, a Special Meeting of Stockholders was held in
Springdale, Arkansas. The only matter submitted to a vote of the
stockholders was a proposal to amend Article Fourth of the Company's
Certificate of Incorporation, (Stock Recapitalization Proposal). The
proposal was approved as presented.
ITEM 5. Other Information
The Company announced on April 24, 1996 that Dean G. and Rose Marie
Cannon, majority stockholders of the Company, have entered into a stock
purchase agreement with Alice L. Walton, who is Chairman and General
Partner of Llama Company, an Arkansas investment banking firm, whereby Ms.
Walton will purchase, for an undisclosed price, approximately 9% of the
total outstanding shares of common stock of the Company. As part of this
transaction, it is expected that Ms. Walton will be nominated to serve as
a member of the Company's Board of Directors.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The exhibits, as listed in the Exhibit Index, are submitted as a separate
section of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1996.
INDEX TO EXHIBITS.
Exhibit
Number Description
3(i) Certificate of Incorporation, which has been
restated to reflect the Certificate of Incorporation, effective August 26,
1986, as amended by a Certificate of Amendment to Certificate of
Incorporation, effective November 17, 1986, as further amended by a
Certificate of Amendment to Certificate of Incorporation, effective
January 19, 1993, and as further amended by a Certificate of Amendment to
Certificate of Incorporation, effective April 10, 1996.<PAGE>
3(ii) Bylaws of the Company. (1)
27 Financial Data Schedules.
<F1>
(1) Incorporated by reference from the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1988.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANNON EXPRESS, INC.
(Registrant)
Date: May 14, 1996 Dean G. Cannon
President, Chairman of the Board,
Chief Executive Officer and Chief
Accounting Officer
Date: May 14, 1996 Rose Marie Cannon
Secretary, Treasurer and Director<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 14434590
<SECURITIES> 4102046
<RECEIVABLES> 12576486
<ALLOWANCES> 163675
<INVENTORY> 0
<CURRENT-ASSETS> 33844073
<PP&E> 75454518
<DEPRECIATION> 16906065
<TOTAL-ASSETS> 94260497
<CURRENT-LIABILITIES> 19024006
<BONDS> 0
0
0
<COMMON> 44440
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 94260497
<SALES> 65778832
<TOTAL-REVENUES> 65778832
<CGS> 0
<TOTAL-COSTS> 61289404
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2755763
<INCOME-PRETAX> 2365945
<INCOME-TAX> 911000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1454945
<EPS-PRIMARY> 0
<EPS-DILUTED> .45
</TABLE>
EXHIBIT 3(i)
Note: The Certificate of Incorporation of Cannon Express, Inc. is restated
in electronic format herein pursuant to Rule 102(c) of Regulation S-T. The
Certificate of Incorporation, however, has not been filed in restated form
with the Delaware Secretary of State.
CERTIFICATE OF INCORPORATION
OF
CANNON EXPRESS, INC.
FIRST: The name of the Company is Cannon Express, Inc.
SECOND: The address of the registered office of the Company in the
State of Delaware is 229 South State Street in the City of Dover, County of
Kent. The name of the registered agent of the Company at such address is
the United States Corporation Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock of which the
Company shall have authority to issue is Ten Million (10,000,000) shares of
Common Stock having a par value of $0.01 per share.
FIFTH: The business and affairs of the Company shall be managed by
the Board of Directors consisting of not less than two (2) nor more than
ten (10) persons. The exact number of directors within the limitations
specified in the preceding sentence shall be fixed from time to time by the
Board of Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors.
The Board of Directors shall be natural persons of full age. The
initial term of office of each director shall expire at the Annual Meeting
of Stockholders in 1987. At each annual election commencing at the Annual
Meeting of Stockholders of 1987, the successors to the directors shall be
elected to hold office for a term of one year. Each director shall hold
office until the next annual meeting of stockholders and until his
successor shall be elected and qualified or until his death, or until he
shall resign.
Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from the death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by a majority vote of
the directors then in office, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
During his term of office any director may be removed from his office
as a director for cause or otherwise by the vote of 66 2/3% of the
stockholders.
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the bylaws.
SEVENTH:
A.1. In addition to any affirmative vote required by law or under
any other provision of this Certificate of Incorporation, and except as
otherwise expressly provided in subparagraph B:
a. any merger or consolidation of the Company or any
subsidiary (as hereinafter defined) with or into (i) any Substantial
Stockholder (as hereinafter defined), or (ii) any other corporation
(whether or not itself a Substantial Stockholder) which, after such merger
or consolidation, would be an Affiliate (as hereinafter defined) of a
Substantial Stockholder, or
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related transactions)
to or with (i) any Substantial Stockholder, or (ii) an Affiliate of a
Substantial Stockholder of any assets of the Company or any subsidiary
having an aggregate fair market value of $4,000,000 or more, or
c. the issuance or transfer of the Company or any Subsidiary
(in one transaction or a series of related transaction) of any securities
of the Company or any Subsidiary to (i) any Substantial Stockholder or (ii)
any other Company (whether or not itself a Substantial Stockholder) which,
after such issuance or transfer, would be an Affiliate of a Substantial
Stockholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value of $4,000,000 or
more, or
d. the adoption of any plan or proposal for the liquidation
or dissolution of the Company proposed by or on behalf of a Substantial
Stockholder or an Affiliate of a Substantial Stockholder, or
e. any reclassification of securities (including any reverse
stock split), recapitalization, reorganization, merger or consolidation of
the Company with any of its Subsidiaries or any similar transaction
(whether or not with or into or otherwise involving a Substantial
Stockholder or an Affiliate of a Substantial Stockholder) which has the
effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of
the Company or any Subsidiary which is directly or indirectly owned by any
Substantial Stockholder or by an Affiliate of a Substantial Stockholder,
shall require the affirmative vote of the holders of at least 66 2/3% of
the voting power of the then outstanding shares of capital stock of the
Company entitled to vote generally in the election of directors, considered
for the purpose of this Article Seventh as one class ("Voting Shares").
Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that some lesser percentage may be specified, by
law or in any agreement with any national securities exchange or otherwise.
2. The term "business combination" as used in this Article
Seventh shall mean any transaction which is referred to in any one or more
clauses (a) through (e) of Section 1 of this subparagraph A.
B. The provisions of subparagraph A of this Article Seventh shall
not be applicable to any particular business combination, and such business
combination shall require only such affirmative vote as is required by law
and any other provision of this Certificate of Incorporation, if all of the
conditions specified in either of the following paragraphs 1 and 2 are met:
1. The business combination shall have been approved by a
majority of the "Continuing Directors" (as hereinafter defined).
2. All of the following conditions shall have been met:
a. The ratio of:
(1) the aggregate amount of the cash and the fair
market value of other consideration to be received per share of holders of
common stock of the Company ("Common Stock") in such business combination,
to
(2) the market price of the Common Stock
immediately prior to the public announcement of the proposal of such
business combination, is at least as great as the ratio of
(i) the highest per share price (including
brokerage commissions, transfer taxes and soliciting dealers' fees) which
such Substantial Stockholder has paid for any shares of Common Stock
acquired by it within the five year period prior to the business
combination.
to
(ii) the market price of the Common Stock
immediately prior to the initial acquisition by such Substantial
Stockholder of any Common Stock;
b. The aggregate amount of cash and fair market value of
other consideration to be received per share by holders of Common Stock in
such business combination:
(1) is not less than the highest per share price
(including brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by Substantial Stockholder in acquiring any of its holdings of
Common Stock, and
(2) is not less than the earnings per share of Common
Stock for the four full consecutive fiscal quarters immediately preceding
the record date for solicitation of votes on such business combination
multiplied by the then price/earnings multiple (if any) of such Substantial
Stockholder as customarily computed and reported in the financial
community;
c. The aggregate amount of the cash and the fair market value
as of the date of the consummation of the business combination of
consideration other than cash to be received per share by holders of shares
of any other class of outstanding capital stock of the Company shall be at
least equal to the highest of the following (it being intended that the
requirements of this paragraph B.2.c. shall be required to be met with
respect to every class of outstanding capital stock of the Company whether
or to the Substantial Stockholder has previously acquired any shares of a
particular class of capital stock):
(1) (if applicable) the highest per share (including any
brokerage commission, transfer taxes and soliciting dealers' fees) paid by
the Substantial Stockholder for any shares of such class of capital stock
acquired by it (1) within the five year period immediately prior to the
first public announcement of the proposal of the business combination (the
"Announcement Date") or (2) in the transaction in which it became a
Substantial Stockholder, whichever is higher;
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of capital stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company;
(3) the fair market value per share of such class of
capital stock (which may be determined by a majority of the Continuing
Directors) on the Announcement Date or on the date on which the Substantial
Stockholder became a Substantial Shareholder (the "Determination Date"),
whichever is higher; and
(4) (if applicable) the price per share equal to the
fair market value per share of such class of capital stock determined
pursuant to paragraph B.2.c. (3) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Substantial Stockholder for
any shares of such class of capital stock acquired by it within the five-
year period immediately prior to the Announcement Date to (2) the fair
market value per share of such class of capital stock on the first day in
such five-year period upon which the Substantial Stockholder acquired any
shares of such class of Voting Shares.
d. The consideration to be received by holders of the capital
stock of the Company in such business combination shall be in cash or in
the same form and of the same kind as the consideration paid by the
Substantial Stockholder in acquiring the shares of Stock already owned by
it;
e. After such Substantial Stockholder has acquired ownership
of not less than 10% of the then outstanding Voting Shares (a "10%
Interest") and prior to the consummation of such business combination;
(1) the Substantial Stockholder shall have taken steps
to ensure that the Company's Board of Directors included at all times
representation by Continuing Director(s) (as hereinafter defined)
proportionate to the ratio that the Voting Shares which from time to time
are owned by persons other than the Substantial Stockholder ("Public
Holders") bear to all Voting Shares outstanding at such respective times
(with a Continuing Director to occupy any resulting fractional Board
position);
(2) there shall have been no reduction in the rate of
dividends payable on the Common Stock except as may have been approved by a
majority vote of the Continuing Directors;
(3) such Substantial Stockholder shall not have acquired
any newly issued shares of capital stock of the Company, directly or
indirectly, from the Company (except upon conversion of convertible
securities acquired by it prior to obtaining a 10% Interest or as a result
of a pro rata stock dividend or stock split; and
(4) such Substantial Stockholder shall not have acquired
any additional shares of the Company's outstanding Common Stock or
securities convertible into or exchangeable for Common Stock except as part
of the transaction which results in such Substantial Stockholder acquiring
its 10% Interest.
f. Prior to the consummation of such business combination,
such Substantial Stockholder shall not have (i) received the benefit,
directly or indirectly (except proportionately as a stockholder), of any
loss, advances, guarantees, pledges or other financial assistance or tax
credits provided by the Company, or (ii) made any major change in the
Company's business or equity capital structure without the approval of a
majority of the Continuing Directors; and
g. A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to all holders of
Voting Shares for the purpose of soliciting stockholder approval of such
business combination. Such proxy statement shall contain at the front
thereof, in a prominent place, any recommendations as to the advisability
(or inadvisability) of the business combination which the Continuing
Directors, or any of them, may have furnished in writing and, if deemed
advisable by a majority of the Continuing Directors, an opinion of a
reputable investment banking firm as to the fairness (or lack of fairness)
of the terms of such business combination, from the point of view of the
holders of Voting Shares other than the Substantial Stockholder (such
investment banking firm to be selected by a majority of the Continuing
Directors, to be furnished with all information it reasonably requests and
to be paid a reasonable fee for its services upon receipt by the Company of
such opinion.)
C. For the purposes of this Article Seventh:
1. A "person" shall mean any individual, firm, corporation or
other entity.
2. "Substantial Stockholder" shall mean, in respect of any
business combination, any person (other than the Company or any subsidiary)
who or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or as of
the time of the vote on such business combination, or immediately prior to
the consummation of any such transaction,
(a) is the beneficial owner, directly or indirectly, of
not less than 10% of the Voting Shares, or,
(b) is an Affiliate of the Company and at any time
within five years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding Voting Shares, or
(c) is an assignee of or has otherwise succeeded to any
shares of capital stock of the company which were at any time within five
years prior thereto beneficially owned by any Substantial Stockholder, and
such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
3. A person shall be the "beneficial owner" of any Voting
Shares:
(a) which such person or any of its Affiliates and
Associates (as hereinafter defined) beneficially own, directly or
indirectly, or
(b) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants, or options, or otherwise, or (ii) the right to
vote pursuant to any agreement, arrangement or understanding or
(c) which are beneficially owned, directly or
indirectly, by any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares of capital stock of the Company.
4. The outstanding Voting Shares shall include shares deemed
owned through application of section 3 above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise.
5. "Continuing Director" shall mean a person who was a
director prior to October 1, 1986 or who was a member of the Board of
Directors of the Company elected by the Public Holders prior to the date as
of which the Substantial Stockholder acquired 10% of the then outstanding
Voting Shares, or a person designated (before his initial election as a
director) as a Continuing Director by a majority of the then Continuing
Directors.
6. "Other consideration to be received" shall mean Common
Stock of the Company retained by its Public Holders in the event of a
business combination in which the Company is the surviving corporation.
7. "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1982.
8. "Subsidiary" means any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934; as in
effect on January 1, 1984) which is owned, directly or indirectly, by the
Company; provided, however, that for the purposes of the definition of
Substantial Stockholders set forth in section 2 of this subparagraph C, the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Company.
D. A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article Seventh, on the basis of
information known to them, (a) the number of Voting Shares beneficially
owned by any person, (b) whether a person is an Affiliate or Associate of
another, (c) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in section 3 of
subparagraph C, or (d) whether the assets subject to any business
combination have an aggregate fair market value of $4,000,000 or more.
E. Nothing contained in Article Seventh shall be construed to
relieve any Substantial Stockholder from any fiduciary obligation imposed
by law.
EIGHTH: The Company reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
Notwithstanding anything to the contrary contained in this Certificate of
Incorporation or the bylaws of the Corporation (and notwithstanding the
fact that a lesser percentage may be specified by law, this Certificate of
Incorporation or the bylaws of the Corporation), the affirmative vote of
the holders of at least 66 2/3% of the voting power of the then outstanding
Voting Shares shall be required to amend, alter, change or appeal, or to
adopt any provision inconsistent with, Articles Fifth, Seventh, Tenth,
Twelfth and this Article Eighth of this Certificate of Incorporation,
provided that such 66 2/3 vote shall not be required for, any amendment,
alteration, change or repeal recommended to the stockholders by a majority
of the Continuing Directors, as defined in Article Seventh.
NINTH: The holders of a majority of the Common Stock issued,
outstanding, and entitled to vote at the time a determination is made,
present in person, or represented by proxy, shall be requisite and shall
constitute a quorum at all meetings of the stockholders for the transaction
of business.
TENTH: Any action required or permitted to be taken by the
stockholders of the Company must be effected at a duly called annual or
special meeting of stockholders of the Company and may not be effected by
any consent in writing by such stockholders. Special meetings of
stockholders of the Company may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors or by the Chairman of the Board or President, upon not less than
10 nor more than 60 days' written notice.
ELEVENTH: Whenever a compromise or arrangement is proposed between
this Company and its creditors or any class of them and/or between this
Company and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Company or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Company
under the provisions of Section 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Company under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Company, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing two-thirds in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Company, as the case may be, agree to any compromise
or arrangement and to any reorganization of this Company as a consequence
of such compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Company, as the case may be, and also on this Company.
TWELFTH: The bylaws of the Company may be amended or repealed, or
new bylaws may be adopted (a) by the affirmative vote of seventy-five
percent of the voting power of the then outstanding Voting Shares; provided
that the notice of such meeting of stockholders, whether regular or
special, shall specify as one of the purposes thereof the making of such
amendment or repeal; or (b) by the affirmative vote of the majority of the
Board of Directors at any regular or special meeting.
THIRTEENTH: Any person who, by reason of the fact he is or was a
director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
is or was a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, shall be indemnified by the Company;
provided, such person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. Such indemnification shall be
provided against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding; provided, however, that
with respect to an action or suit by or in the right of the Company, such
indemnification shall be only against expenses (including attorneys' fees)
and in such cases no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable, unless, and only to the extent that, the court in which the action
or suit was brought determines, upon application, that despite the
adjudication of liability and in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses
as the court shall deem proper.
To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any
action, suit, or proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection with the action, suit or proceeding.
Any other indemnification hereunder, unless ordered by a court, shall
be made by the Company only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth herein. The determination shall
be made, (i) by the board of directors who were not parties to the action,
suit, or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
stockholders. The termination, of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea or nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and
with respect to any criminal action or proceeding, that had reasonable
cause to believe that his conduct was unlawful.
Expenses (including attorneys' fees), incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance
of the final disposition of the action, suit, or proceeding upon receipt of
an undertaking by or on behalf of the director, officer, employee or agent
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized herein.
The indemnification and advancement of expenses provided hereunder, or
granted pursuant to this Article, shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any applicable statute as amended from time
to time, any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacity and as
to action in another capacity while holding such office.
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Company may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether
or not the Company would have the power to indemnify him against such
liability under the provisions herein.
For purposes of this Article, references to "the Company" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which
imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Company" as referred
to in this Article.
FOURTEENTH: No director shall have any personal liability to the
Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided such breach does not (i) constitute a breach
of such director's duty of loyalty to the Company or its stockholders, (ii)
consist of acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) give rise to liability
under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) involve any transaction from which such director derived an
improper personal benefit.
FIFTEENTH: The incorporator is Robert B. Thomson, whose mailing
address is 2700 City Center Square, 12th & Baltimore, P.O. Box 26010,
Kansas City, Missouri 64196.
