<PAGE>
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, 1999
( )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 of (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, 1999:
3,205,276<PAGE>
INDEX
CANNON EXPRESS, INC. and SUBSIDIARIES
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements (Unaudited)
Consolidated Balance Sheets
as of March 31, 1999 and June 30, 1998..................................1
Consolidated Statements of Income and Retained Earnings
for the Three Months and Nine Months Ended March 31, 1999 and 1998......3
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1999 and 1998.......................4
Notes to Consolidated Financial Statements................................5
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................6
ITEM 3 - Quantitative and Qualitative Disclosure about Market Risk........11
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.............*
ITEM 5 -- Other Information...............................................*
ITEM 6 -- Exhibits and Reports on Form 8-K................................11
*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
1999 1998
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $6,695,388 $3,817,505
Receivables, net of allowance for doubtful accounts
(March 31, 1999-$182,901; June 30, 1998-$158,656):
Trade 8,928,171 9,582,372
Other 1,978,794 1,473,937
Prepaid expenses and supplies 2,002,816 1,325,024
Deferred income taxes 1,439,000 1,875,000
Total current assets 21,044,169 18,073,838
Property and equipment:
Land, buildings and improvements 1,210,138 1,210,138
Revenue equipment 86,624,015 92,546,207
Service, office and other equipment 2,884,476 2,743,709
90,718,629 96,500,054
Less allowances for depreciation 37,920,830 37,193,306
52,797,799 59,306,748
Other assets:
Receivable from stockholders 23,406 23,406
Restricted cash 2,380,924 2,386,832
Marketable securities 653,137 584,322
Other 513,121 511,332
Total other assets 3,570,588 3,505,892
$77,412,556 $80,886,478
Note: The balance sheet at June 30, 1998 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
1999 1998
(Unaudited) (Note)
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $1,557,998 $1,609,825
Accrued expenses:
Insurance reserves 3,075,643 3,144,259
Other 2,228,112 1,758,047
Federal and state income taxes payable 2,354,051 2,208,632
Current portion of long-term debt 17,734,733 18,794,463
Total current liabilities 26,950,537 27,515,226
Long-term debt, less current portion 28,883,968 29,768,122
Deferred income taxes 3,594,000 4,752,000
Other liabilities 38,878 100,862
Stockholders' equity:
Common stock: $.01 par value; authorized
10,000,000 shares; issued 3,265,401 shares
at March 31, 1999 and 3,252,986 shares at
June 30, 1998 32,654 32,530
Additional paid-in capital 3,747,575 3,720,988
Retained earnings 14,495,133 15,197,014
Unrealized depreciation on marketable
securities, net of income taxes (129,925) -
18,145,437 18,950,532
Less treasury stock, at cost (60,125 shares) 200,264 200,264
17,945,173 18,750,268
$77,412,556 $80,886,478
Note: The balance sheet at June 30, 1998 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
1999 1998 1999 1998
(Unaudited) (Unaudited)
Operating revenue $22,700,681 $26,023,161 $71,454,700 $84,965,076
Operating expenses and costs:
Salaries, wages and
fringe benefits 9,187,979 8,511,473 27,333,871 27,475,206
Operating supplies
and expense 7,419,101 7,358,440 22,651,372 24,244,443
Taxes and licenses 1,378,592 1,522,670 4,145,408 4,424,910
Insurance & claims 1,002,206 991,838 3,269,265 4,003,733
Depreciation and
amortization 1,958,973 3,235,306 7,893,806 9,772,308
Rents and purchased
transportation 1,472,285 2,550,637 3,451,381 8,091,047
Other 653,779 546,396 1,775,336 1,510,513
23,072,915 24,716,760 70,520,439 79,522,160
Operating income (loss) (372,234) 1,306,401 934,261 5,442,916
Other income (expense)
Interest expense (743,133) (766,899) (2,304,409) (2,531,678)
Other income 101,434 104,865 229,267 281,602
(641,699) (662,034) (2,075,142) (2,250,076)
Income(loss) before
income taxes (1,013,933) 644,367 (1,140,881) 3,192,840
Federal and state
income taxes
Current (1,059,000) (180,000) 283,000 469,000
Deferred 669,000 428,000 (722,000) 476,000
(390,000) 248,000 (439,000) 945,000
Net income (loss) (623,933) 396,367 (701,881) 2,247,840
Retained earnings at
beginning of period 15,119,066 15,233,900 15,197,014 13,382,427
Retained earnings at
end of period $14,495,133 $15,630,267 $14,495,133 $15,630,267
Basic earnings (loss)
per share ($0.19) $0.13 ($0.22) $0.71
Average shares outstanding 3,200,586 3,176,097 3,195,436 3,163,413
Diluted earnings (loss)
per share ($0.19) $0.12 ($0.22) $0.69
Diluted shares outstanding 3,211,923 3,257,935 3,225,345 3,250,023
See notes to consolidated financial statements. <PAGE>
Cannon Express, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
March 31
1999 1998
(Unaudited)
Operating activities
Net income (loss) $(701,881) $2,247,840
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,280,521 9,688,790
Provision for losses on accounts receivable 45,000 30,000
Provision (credit) for deferred income taxes (722,000) 476,000
Loss (gain) on disposals of assets (2,386,713) 83,517
Changes in operating assets and liabilities:
Accounts receivable 104,344 (619,424)
Prepaid expenses and supplies (580,433) (466,063)
Accounts payable, accrued expenses,
taxes payable, and other liabilities 576,377 408,785
Other assets - (11,400)
Net cash provided by operating activities 6,615,215 11,838,045
Investing activities
Purchases of property and equipment (7,152,787) (1,781,832)
Investment in outside driver training facility (280,000) -
Net decrease (increase) in restricted cash 5,908 (26,759)
Proceeds from sales of marketable securities - 50,000
Proceeds from equipment sales 5,606,720 8,650
Net cash used in investing activities (1,820,159) (1,749,941)
Financing activities
Proceeds from long-term borrowing 12,506,871 -
Principal payments on long-term debt and
capital lease obligations (14,450,755) (10,420,604)
Proceeds from exercise of stock options 26,711 102,684
Net cash used in financing activities (1,917,173) (10,317,920)
Increase (decrease) in cash and cash equivalents 2,877,883 (229,816)
Cash and cash equivalents at beginning of period 3,817,505 3,995,626
Cash and cash equivalents at end of period $ 6,695,388 $ 3,765,810
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, 1999 are not
necessarily indicative of the results that may be expected for the year
ended June 30, 1999. 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, 1998.
Note B - Net Income (Loss) Per Share
Three Months Ended Nine Months Ended
March 31 March 31
1999 1998 1999 1998
(Unaudited) (Unaudited)
Average shares outstanding 3,200,586 3,176,097 3,195,436 3,163,413
Net effect of dilutive
stock options 11,337 81,838 29,909 86,610
Diluted shares outstanding 3,211,923 3,257,935 3,225,345 3,250,023
Net income(loss) for the period ($623,933) $396,367 ($701,881) $2,247,840
Earnings (loss) per share ($0.19) $0.13 ($0.22) $0.71
Diluted earnings (loss) per share ($0.19) $0.12 ($0.22) $0.69
<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 1999 (ended March 31, 1999)
was $22,700,681 compared to $26,023,161 for the third quarter of fiscal 1998,
a decrease of $3,322,480 or 12.8% for the period. This decrease was primarily
due to a reduction in the amount of business the Company received from its
major customer (Wal-Mart). In March of 1998 the Company made a decision not
to continue some of the freight movements at the rates then being offered.
Management of the Company believes that its longer-term interests will be
best served by diversifying its customer base. During the third quarter of
fiscal 1999, Wal-Mart revenue was $6,743,148 or 29.7% of total revenue
compared to $10,776,167, or 41.4% of total revenue during the same period of
fiscal 1998, representing a decrease of $4,033,019 for the period. The
Company's average rate per mile decreased from $1.26 in the third quarter of
fiscal 1998 to $1.22 in the comparable period of 1999. The Company has hired
3 salespersons to replace the lost business, however, to date the shortfall
in revenue has not been totally replaced. The Company also saw a decrease in
its logistics and intermodal revenue from $2,611,959 for the third quarter of
fiscal 1998 to $1,375,792 for the same period of fiscal 1999. This decrease
was due to the Company's need to retain freight for its own trucks and not
offering the same amount of excess freight to other companies' trucks as in
the prior year. The Company believes that its sales efforts will be rewarded
in the future through higher rates and with equipment utilization returning
to historical levels. At March 31, 1999, the Company's fleet consisted of
828 trucks and 2,342 trailers, while on March 31, 1998, the Company's fleet
consisted of 904 trucks and 2,113 trailers.
Salaries, wages, and fringe benefits, made up primarily of drivers' wages,
increased as a percentage of revenue to 40.5% in the third quarter of fiscal
1999 from 32.7% in the third quarter of fiscal 1998. This increase was due to
the lower per mile revenue and decreased revenue from intermodal and
logistics operations. Company drivers were awarded approximately $208,000 in
bonuses for the three-month period ended March 31, 1999 as compared with
$212,000 awarded during the three-month period ended March 31, 1998.
Operating supplies and expenses, as a percentage of revenue, increased to
32.7% in the third quarter of fiscal 1999 from 28.3% in the comparable period
of fiscal 1998. This increase was mainly attributable to increased frequency
and cost of repairs to older trucks which compounded the revenue lost from
hauling loads while those trucks were being repaired. Taxes and licenses
increased to 6.1% of revenue in fiscal 1999 from 5.9% in fiscal 1998.
Insurance and claims were 4.4% of revenue in fiscal 1999, increasing from
3.8% in fiscal 1998, primarily due to an increased incidence of weather-
related accidents in the third quarter of fiscal 1999. Depreciation and
amortization decreased to 8.6% of revenue in fiscal 1999 from 12.4% in
fiscal 1998 due to a gain on sale of equipment of $1,345,706 which was
realized in the third quarter of fiscal 1999 as compared to a gain of $17,377
in the third quarter of fiscal 1998. Rents and purchased transportation
decreased to 6.5% of revenue in fiscal 1999 from 9.8% in fiscal 1998 due to
decreased logistics operations. Other expenses were 2.9% of revenue in the
third quarter of fiscal 1999 and 2.1% in the comparable period of 1998.<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
Operating revenue for the third quarter of 1999 decreased by 12.8% over the
comparable period of 1998, while operating expenses decreased by $1,643,845
or 6.7%. Accordingly, the Company's operating ratio increased to 101.6% in
the third fiscal quarter of 1999 from 95.0% in the same period of fiscal
1998.
Interest expense increased to 3.3% of revenue in the third quarter of
fiscal 1999 from 2.9% recorded in the third quarter of fiscal 1998.
The Company's effective income tax rate was 38.5% of pre-tax net income in
the third quarter of fiscal 1999 and in the third quarter of fiscal 1998.
Net loss for the third quarter of fiscal 1999 ended March 31, 1999 was
($623,933) ($.19 loss per diluted share) compared to net income of $396,367
($.12 earnings per diluted share) during the comparable period of fiscal
1998, a decrease of $1,020,300 or 257.4% for the period.
Results of Operations - Nine Month Period
Operating revenue for the first nine months of fiscal 1999 ended March 31,
1999 was $71,454,700 compared to $84,965,076 for the comparable period of
fiscal 1998, representing a decrease of $13,510,376 or 15.9%. As in the
three-month period, the decrease in operating revenue over the same period
of fiscal 1998 is primarily attributable to fewer shipments from the
Company's major customer (Wal-Mart). For the nine months period ended March
31, 1999, Wal-Mart revenue totaled $21,878,362, or 30.6% of the Company's
revenue, compared to $41,581,693, or 48.9% in the nine months period ended
March 31, 1998. The Company, for the nine month period has been able to
replace approximately 31% of its previous Wal-Mart business with freight
from other customers. The Company's average rate per mile increased from
$1.20 in the third quarter of fiscal 1998 to $1.24 in the comparable period
of 1999. Logistics and intermodal revenue decreased by $5,860,354 for the
nine-month period of fiscal 1999 over the comparable period of fiscal 1998.
As in the three-month period, this decrease was due to the Company's need
to retain freight for its own trucks and not offering the same amount of
excess freight to other companies' trucks as in the prior year. Operating
income decreased to 934,261 in the nine months ended March 31, 1999 from
$5,442,916 during the comparable period of fiscal 1998.
Salaries, wages, and fringe benefits increased to 38.3% of revenues in the
nine-month period of fiscal 1999 from the 32.3% reported in the nine-month
period of fiscal 1998. This increase is primarily due to decreased revenue
from intermodal and logistics operations. Operating supplies and expenses
increased to 31.7% of revenue in fiscal 1999 from 28.5% in fiscal 1998. The
Company experienced an increase in the cost of operating its trucks as
maintenance costs were incurred outside of warranty on its older fleet. The
higher maintenance cost was partially offset by lower average fuel cost of
approximately 14 cents per gallon. Taxes and licenses increased to 5.8% of
revenue during fiscal 1999 from 5.2% in fiscal 1998. Insurance and claims
were 4.6% of revenue in fiscal 1999, decreasing from 4.7% in fiscal 1998.<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
Depreciation and amortization, as a percentage of revenue, decreased to
11.0% of revenue in fiscal 1999 from 11.5% in the same period of fiscal
1998. A gain on sale of equipment of $2,386,713 was included in the nine-
month period of fiscal 1999 as compared to a loss of $83,518 in the same
period of fiscal 1998. Rents and purchased transportation decreased to 4.8%
of revenue in the first nine months of fiscal 1999 from 9.5% during the
comparable period of fiscal 1998. As was the case in the three-month
period, this decrease was caused primarily by the decreased logistics
activities. Other expenses increased to 2.5% in the nine-month period of
fiscal 1999 from 1.8% in the nine-month period of fiscal 1998.
Operating revenue for the nine-month period of 1999 decreased by 15.9% over
the comparable period of 1998, while operating expenses decreased by
$9,001,721 or 11.3%. Accordingly, the Company's operating ratio increased
to 98.7% for the nine-month period in 1999 from 93.6% during the same period
in 1998.
Interest expense increased to 3.2% of revenue in the first nine months of
fiscal 1999 from 3.0% recorded in the first nine months of fiscal 1998.
The Company's effective income tax rate increased to 38.5% of income before
income taxes for the first nine months of fiscal 1999 from 29.6% for the
first nine months of fiscal 1998. During fiscal 1998, income tax
consequences of certain equipment leasing transactions were recorded in the
financial statements in reliance on opinion of tax counsel.
Net loss for the first nine months of fiscal 1999 ended March 31, 1999 was
($701,881) ($.22 loss per diluted share) compared to net income of
$2,247,840 ($.69 earnings per diluted share) during the comparable period of
fiscal 1998, a decrease of $2,949,721 or 131.2% 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. Diesel fuel costs, as mentioned
above, have declined during the first three quarters of fiscal 1999 over the
same period of fiscal 1998. Fuel costs in the quarter ended March 31, 1999
were approximately 10 cents per gallon lower than in the same period of the
prior year. For the nine-month period of fiscal 1999, fuel costs were
approximately 14 cents per gallon lower than in the nine-month period of
fiscal 1998. However, fuel costs, recently, have returned to approximately
the same level as a year ago. Historically, increases in fuel costs 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. There
is no assurance that any future increases in fuel costs may be passed
through to the Company's customers. Future cost increases or shortages of
fuel could affect the Company's future profitability.<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
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 $6.6 million for the first nine
months of fiscal 1999 compared to $11.8 million for the same period of
fiscal 1998. Cash flows from operations in the first three quarters of
fiscal 1999 were the result of $.7 million net loss, $10.3 million in
depreciation offset by $2.4 million from gain on disposal of assets and $.6
million used in other working capital assets and liabilities. Investing
activities used net cash of $1.8 million during the first nine months of
fiscal 1998 compared to $1.7 million net cash used in the same period of
fiscal 1998. Financing activities used net cash of $1.9 million during the
first three quarters of fiscal 1999 compared to $10.3 million in fiscal
1998.
The Company's working capital at March 31, 1999 was a deficit of $5.9
million compared to a deficit of $9.4 million at June 30, 1998. This
deficit is primarily due to final note or lease payments on equipment. This
equipment will be sold or refinanced when these payments become due.
Management believes that it is unlikely that the cost and availability of
financing will be adversely affected by this working capital deficit in the
near future.
Like other truckload carriers, the Company experiences significant driver
turnover. Management anticipates that competition for qualified drivers will
intensify. The Company seeks to attract drivers by advertising job openings,
encouraging referrals from existing employees and providing a training
program for applicants whose experience does not meet the Company's minimum
requirements, however, no assurance can be made that the Company will not
continue to experience a shortage of drivers in the future.
The Company was caught in a cycle of large demand for new trucks and long
lead times for new truck orders. Due to the manufacturer's lead time for new
trucks, the Company was unable to secure any replacement trucks on schedule
and was forced to make expensive non-warranty repairs to its older equipment.
Through March 31, 1999 the Company has taken delivery of 100 new trucks and
has sold 120 trucks, reducing its fleet to 828 at March 31, 1999. The Company
has entered into an agreement to purchase 800 new trucks for its fleet with
deliveries beginning in May of 1999 and continuing through June of 2000.
The Company will sell approximately 725 of its older trucks, which will
return the Company's fleet to its former size of 900 trucks. The cost of
the new trucks, net of trade-ins, will be approximately $37,691,000. The new
truck specifications include features that afford the driver a higher level
of comfort and appeal than the older models being traded in. Management
believes that these new trucks, when placed in service, will reduce
maintenance costs and time lost for repairs. Additionally, the Company is
planning a new program for owner-operators to help high-quality drivers to
lease/purchase a truck and be paid a percentage of the Company's revenue to
operate it under a contract with the Company to haul freight for its customers.<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
In December 1998, the Company sold 192 of its 48 foot trailers resulting in a
gain of $677,270. The Company plans to convert the majority of its trailer
fleet to 53 foot trailers in the future in order to allow it to compete for
freight from the increasing number of customers who require 53 foot trailers
for some or all of their shipments. The Company currently owns and operates
898 of the 53 foot trailers and 1444 of the 48 foot trailers.
Year 2000 Issues
The Company has completed an assessment of its internal systems with regard
to Year 2000 compliance. All of its computer hardware and internal software
is compliant. The Company will convert its EDI format to ASC X12, version
4010 which is year 2000 compliant. The Company's communication systems which
include telephones, on-board computers for trucks, voice mail, and electronic
mail (E-mail) are certified compliant, with the exception of the on-board
computers which are scheduled by the vendor to be compliant by early 1999.
Although the Company believes that its systems would be Year 2000 compliant,
in April of 1999, the Company determined that it would purchase new computer
software for its business. This decision was made primarily due to the
increased cost and inefficiency of maintaining the Company's own software.
The new software requires that the Company also purchase new computer
hardware. The new system will be certified Year 2000 compliant by the
manufacturer of the computer and the developer of the software. Management
believes that the new system will enable the Company to better manage its
business and to utilize new technologies as they are developed.
The Company has assurances from its utilities providers of an implementation
plan in place. Backup power generators are certified compliant. However,
the Company's business requires that it operate in all regions of the United
States, and the Company may rely indirectly on utility providers over which
it has no control. Infrastructure failures could significantly reduce the
Company's ability to serve its customers.
The Company's trucks are certified compliant for the year 2000 by the
manufacturer. The Company has conducted a survey of other internal
electronic devices which may have embedded technology likely to be affected
by the Year 2000 and believes that no critical devices will fail.
The Company will seek written assurance from its customers and vendors of
their Year 2000 compliance during the early part of 1999 to determine the
extent of any effect on the Company's operations. The Company has not
received written assurances from its significant customers and vendors that
their systems will be timely converted and would not have an adverse effect
on the Company. It is not possible at this time to quantify the amount of
business that might be lost or other costs that could be incurred by the
Company as a result of the Company's customers' and vendors' failure to
remediate their Year 2000 issues.
The Company believes that the most likely worst-case scenario which it may
face would be the inability of one or more of its major customers to
communicate electronically through EDI (Electronic Data Interchange). In
that event, the Company believes that it would be able to continue its
business as it did prior to EDI until those customers' systems return to
normal. <PAGE>
The Company estimates that its cost of becoming Year 2000 compliant will be
less than $50,000, with the majority of the expense accounted for in the
cost of operations through June 30, 1998.
The Company subscribes to a service called Year 2000 Stocks via the internet
at www.year2000stocks.com as one of the ways to stay abreast of the Year 2000
issues.
Forward-Looking Statements
This report contains forward-looking statements that are based on assumptions
made by management from information currently available to management. These
statements address future plans, expectations and events or conditions
concerning various matters such as the results of the Company's sales efforts
as set forth in the discussion of results of operations, capital
expenditures, litigation and capital resources, accounting matters, and Year
2000 readiness. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, actual results
could differ materially from those currently reported.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to cash flow and interest rate risk due to changes in
interest rates with respect to its long-term debt. See Note 2 to the
Consolidated Financial Statements in the Company's Annual Report for fiscal
year ended June 30, 1998 for details on the Company's long-term debt.
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended March 31,
1999. <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 13, 1999 /s/ Dean G. Cannon
President, Chairman of the Board,
Chief Executive Officer and Chief
Accounting Officer
Date: May 13, 1999 /s/ Rose Marie Cannon
Secretary, Treasurer and Director
<PAGE>
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