SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-24908
TRANSPORT CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1386925
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1769 YANKEE DOODLE ROAD
EAGAN, MINNESOTA 55121
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (612) 686-2500
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 ____
As of November 6, 1996, the Company had outstanding 6,496,039 shares of Common
Stock, $.01 par value.
This Form 10-Q consists of 14 pages.
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
<S> <C>
Condensed Balance Sheets as of
September 30, 1996 and December 31, 1995 ............................ Page 3
Condensed Statements of Earnings for the
three and nine months ended September 30, 1996 and 1995 ............. Page 4
Condensed Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995 ....................... Page 5
Notes to Condensed Financial Statements ............................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................... Page 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ...................................... Page 11
Exhibit 11 Statement re: Computation of Net Earnings per Weighted
Common and Common Equivalent Share ...................... Page 13
Exhibit 27 Financial Data Schedule ................................... Page 14
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- -------------
ASSETS: (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,912,880 $ 165,173
Trade receivables, net of allowances 13,544,755 13,040,508
Other receivables 1,391,767 3,322,095
Operating supplies 827,745 963,490
Deferred income taxes 2,138,000 2,538,000
Prepaid expenses and tires 2,367,352 1,891,670
------------- -------------
Total current assets 24,182,499 21,920,936
Revenue equipment, at cost 93,957,395 81,203,390
Less: accumulated depreciation (22,331,805) (16,161,324)
------------- -------------
Net revenue equipment 71,625,590 65,042,066
Property, other equipment, and improvements:
Land, buildings, and improvements 10,791,408 8,832,102
Furniture and other equipment 5,054,787 4,634,034
Less: accumulated depreciation (4,549,173) (4,051,995)
------------- -------------
Net property, other equipment, and
improvements 11,297,022 9,414,141
Other assets, net 3,378,904 3,080,043
------------- -------------
TOTAL ASSETS $ 110,484,015 $ 99,457,186
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank $ 0 $ 2,230,000
Current maturities of long-term debt 14,814,261 9,314,272
Accounts payable 2,398,767 2,997,255
Checks issued in excess of cash balances 172,461 1,152,928
Due to independent contractors 2,188,452 980,075
Accrued expenses 11,507,461 11,544,928
------------- -------------
Total current liabilities 31,081,402 28,219,458
Long term debt, less current maturities 25,638,420 24,436,325
Deferred income taxes 12,414,000 10,494,000
Stockholders' equity:
Common stock 64,960 64,206
Additional paid-in capital 23,851,516 23,370,469
Retained earnings 17,433,717 12,872,728
------------- -------------
Total stockholders' equity 41,350,193 36,307,403
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 110,484,015 $ 99,457,186
============= =============
* Based upon audited financial statements.
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- -----------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
AMOUNT AMOUNT AMOUNT AMOUNT
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 42,463,861 $ 36,730,124 $ 122,483,298 $ 106,052,866
OPERATING EXPENSES:
Salaries, wages, and benefits 11,385,083 10,205,966 33,865,713 30,479,745
Fuel, maintenance, and
other expenses 5,389,061 5,198,157 17,015,046 15,168,551
Purchased transportation 12,430,839 9,750,108 34,612,529 27,186,856
Revenue equipment leases 1,652,643 1,790,920 5,202,958 5,338,203
Depreciation and amortization 3,562,571 2,616,080 10,300,688 7,236,097
Insurance, claims, and damage 1,313,134 1,425,251 4,077,545 4,726,506
Taxes and licenses 600,623 643,150 2,176,753 2,145,690
Communication 502,551 521,893 1,464,592 1,448,916
Other general and
administrative expenses 1,384,467 1,370,098 3,960,953 4,049,540
Loss (gain) on disposition of equipment (89,588) (557,925) (101,456) (1,477,363)
------------- ------------- ------------- -------------
Total operating expenses 38,131,384 32,963,698 112,575,321 96,302,741
------------- ------------- ------------- -------------
OPERATING INCOME 4,332,477 3,766,426 9,907,977 9,750,125
Interest expense 713,694 537,952 2,084,498 1,568,807
Interest income (35,288) (33,257) (41,510) (175,825)
------------- ------------- ------------- -------------
Interest expense, net 678,406 504,695 2,042,988 1,392,982
EARNINGS BEFORE INCOME TAXES 3,654,071 3,261,731 7,864,989 8,357,143
Provision for income taxes 1,535,000 1,402,000 3,304,000 3,594,000
------------- ------------- ------------- -------------
NET EARNINGS $ 2,119,071 $ 1,859,731 $ 4,560,989 $ 4,763,143
============= ============= ============= =============
Net earnings per weighted common and
common equivalent share - primary $ 0.32 $ 0.28 $ 0.68 $ 0.71
============= ============= ============= =============
Weighted average number of common and
common equivalent shares outstanding 6,704,568 6,725,316 6,712,739 6,707,507
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 4,560,989 $ 4,763,143
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 10,300,688 7,236,097
Gain on disposition of equipment (101,456) (1,477,363)
Deferred income taxes 2,320,000 1,915,000
Changes in operating assets
and liabilities:
Trade receivables (504,247) (2,662,817)
Other receivables 1,930,328 (1,351,747)
Operating supplies 135,745 (440,127)
Prepaid expenses and tires (475,682) (451,070)
Accounts payable (598,488) (12,443)
Due to independent contractors 1,208,377 761,215
Accrued expenses (37,467) 967,567
------------ ------------
Net cash provided by operating
activities 18,738,787 9,247,455
------------ ------------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (19,514,858) (27,468,419)
Payments for purchases of property, other
equipment, and leasehold improvements (2,897,984) (1,310,631)
Increase in other assets 55,958 155,326
Proceeds from disposition of equipment 3,392,386 6,613,325
------------ ------------
Net cash used in investing
activities (18,964,498) (22,010,399)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 481,801 900
Proceeds from issuance of long-term debt 15,591,819 9,807,640
Principal payments on long-term debt (8,889,735) (5,420,280)
Proceeds from issuance of
notes payable to bank 21,888,000 4,825,000
Principal payments on notes payable to bank (24,118,000) (4,675,000)
Net checks issued in excess of cash balances (980,467) 1,006,893
------------ ------------
Net cash provided by financing
activities 3,973,418 5,545,153
------------ ------------
INCREASE (DECREASE) IN CASH 3,747,707 (7,217,791)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 165,173 7,372,042
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,912,880 $ 154,251
============ ============
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 2,072,040 1,327,155
Income taxes, net 599,115 2,083,017
</TABLE>
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Condensed Financial Statements
1. Interim Condensed Financial Statements (unaudited)
The unaudited interim condensed financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary to a fair statement of the interim periods. They have been
prepared in accordance with the instructions to Form 10-Q, Article 10
of Regulation S-X and, accordingly, do not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
These statements should be read in conjunction with the
financial statements and footnotes included in the Company's most
recent annual financial statements on Form 10-K for the year ended
December 31, 1995. The policies described in that report are used in
preparing quarterly reports.
The Company's business is seasonal. Operating results for the
nine month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1996.
2. Commitments
As of September 30, 1996 the Company had commitments for the
purchase of approximately $4.1 million of revenue equipment, net of
proceeds from the disposition of used equipment.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended September 30, 1996 and 1995
Operating revenues increased 15.6% to $42.5 million for the
quarter ended September 30, 1996 from $36.7 million for the quarter
ended September 30, 1995. Freight volume increases from existing
customers continued as the primary source of revenue growth. Revenues
per mile, excluding fuel surcharges, increased to $1.28 per mile in the
third quarter of 1996 from $1.26 per mile for the same period of 1995.
Equipment utilization, as measured by average revenue per tractor per
week, rose 5.7% to $2,826 during the third quarter of 1996, from $2,674
in the third quarter of 1995.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) declined to 8.6% in the third quarter of 1996
from 8.9% for the same period of 1995 principally as a result of
significantly lower gains on the disposition of equipment in the third
quarter of 1996, when compared to the same period of 1995. Efficiency,
as measured by average annualized revenues per non-driver employee,
improved 12.1% to $540,700 for the third quarter of 1996, compared to
$482,500 for the same period of 1995. Salaries, wages and benefits as a
percentage of operating revenues were 26.8% in the third quarter of
1996, compared to 27.8% for the same period of 1995. Miles driven by
independent contractors increased 25.7% in the third quarter of 1996,
compared to the same period of 1995, a reflection of the increase in
the average number of independent contractors in 1996 over 1995.
Accordingly, purchased transportation increased as a percentage of
operating revenues to 29.3% in the third quarter of 1996 from 26.5% for
the same period of 1995. There were 438 independent contractors at
September 30, 1996, compared to 400 a year prior. The decline of fuel,
maintenance and other expenses as a percentage of operating revenues to
12.7% in the third quarter of 1996, when compared to 14.2% in the third
quarter of 1995, reflects the increase of independent contractor miles
as a percent of total miles, partially offset by significantly higher
fuel prices during the third quarter of 1996, when compared to the same
period of 1995. Revenue equipment leases decreased as a percentage of
operating revenues to 3.9% in the third quarter of 1996 from 4.9% for
the same period of 1995, as a result of the expanded use of
debt-financed equipment in place of leased equipment. Correspondingly,
depreciation and amortization for the third quarter of 1996 increased
to 8.4% of operating revenues from 7.1% for the same period of 1995,
due to the replacement during 1995 of leased equipment with
debt-financed equipment and new revenue equipment purchases. Insurance,
claims and damage decreased as a percentage of operating revenues to
3.1% in the third quarter of 1996 from 3.9% for the same period of 1995
as a result of favorable accident experience and insurance premium
costs in the third quarter of 1996, when compared to the same period of
1995.
In the third quarter of 1996, gain on the disposition of
equipment was $89,000, compared to a gain of $558,000 in the third
quarter of 1995, a reflection of the favorable market which existed in
1995 for the sale of used equipment, and the large number of
dispositions in the same period of 1995.
The effective tax rate for the third quarter of 1996 was
42.0%, compared to the 43.0% effective tax rate for the third quarter
of 1995. The lower effective rate in 1996 was due to a decline in
Company per diem payments, which are not fully deductible for income
tax purposes, when compared to the third quarter of 1995. The Company
pays certain of its drivers a per diem allowance while on the road to
cover meals and other expenses.
As a consequence of the items discussed above, net earnings
increased to $2.1 million, or 5.0% of operating revenues for the
quarter ended September 30, 1996 from $1.9 million, or 5.1% of
operating revenues for the quarter ended September 30, 1995.
Nine Months Ended September 30, 1996 and 1995
Operating revenues increased 15.5% to $122.5 million for the
nine months ended September 30, 1996 from $106.1 million for the first
nine months of 1995. Increases in freight volumes from existing
customers continued as the primary source of revenue growth. Revenues
per mile were unchanged from year ago. Equipment utilization, as
measured by average revenues per tractor per week, was $2,711 during
the first nine months of 1996 compared to $2,719 for the same period of
1995.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) declined to 6.4% in the first nine months of
1996 from 7.9% for the same period of 1995, primarily a reflection of
significantly lower gains on the disposition of equipment in 1996, when
compared to 1995. Efficiency, as measured by average annualized
revenues per non-driver employee, increased 11.0% to $523,400 for the
first nine months of 1996 from $471,700 for the same period of 1995.
Independent contractor miles increased 27.3% in the first nine months
of 1996, compared to the same period of 1995, as a result of the
increase in the average number of contractors during the first nine
months of 1996 compared to the same period of 1995. Correspondingly,
purchased transportation increased as a percentage of operating
revenues to 28.3% in the first nine months of 1996 from 25.6% for the
same period of 1995. Fuel, maintenance and other expenses decreased as
a percentage of operating revenues to 13.9% as a result of the increase
in independent contractor miles as a percentage of total miles when
compared to 1995, partially offset by higher fuel costs in 1996 when
compared to 1995. Revenue equipment leases decreased as a percentage of
operating revenues to 4.2% in the first nine months of 1996 from 5.0%
for the same period of 1995, primarily as a result of an increase in
independent contractors and the expanded use of debt-financed
equipment. For the first nine months of 1996, depreciation and
amortization increased to 8.4% of operating revenues from 6.8% for the
same period of 1995 due to the replacement during 1995 of leased
equipment with debt-financed equipment and new revenue equipment
purchases. Insurance, claims and damage decreased as a percentage of
operating revenues to 3.3% in the first nine months of 1996 from 4.5%
for the same period of 1995, as a result of improved accident and claim
experience in 1996 when compared to 1995, and lower insurance premium
costs in 1996.
In the first nine months of 1996, gain on the disposition of
equipment was $101,000, compared to a gain of $1,477,000 in the first
nine months of 1995, due to the large number of equipment dispositions
and the favorable market for used equipment in the first nine months of
1995.
The effective tax rate for the first nine months of 1996 was 42.0%,
compared to the 43.0% effective tax rate for the first nine months of
1995. The lower effective rate in 1996 is due to a decline in Company
per diem payments, which are not fully deductible for income tax
purposes, when compared to the first nine months of 1995. The Company
pays certain of its drivers a per diem allowance while on the road to
cover meals and other expenses.
As a consequence of the items discussed above, net earnings
declined to $4.6 million, or 3.7% of operating revenues, for the nine
months ended September 30, 1996 from $4.8 million, or 4.5% of operating
revenues, for the nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $18.7 million in
the first nine months of 1996. The working capital deficit as of
September 30, 1996 was $6.9 million, compared to the $6.3 million
deficit which existed as of December 31, 1995. The working capital
deficit at September 30, 1996 includes $14.8 million of current
maturities of long-term debt associated with the purchase of revenue
equipment. Historically, the Company has operated effectively with
current liabilities in excess of current assets through a combination
of operating profits, collections on accounts receivable, and other
cash management strategies. Management expects to continue to do so
while meeting its obligations. Accrued liabilities include normal
provisions for accident and workers' compensation claims associated
with the Company's self-insured retention insurance program, less claim
payments actually made. The Company believes that reserves are adequate
for expected future claim payments.
Investing activities in the first nine months of 1996 consumed
net cash of $19.0 million, primarily for the purchase of new revenue
equipment including 99 tractors and 420 trailers, less proceeds from
the disposition of used equipment, including 104 tractors and 47
trailers, and completion of a new $1.4 million facility located in
Janesville, Wisconsin. These expenditures were financed through a
combination of cash generated by operations, long-term debt financing
and proceeds from equipment dispositions. As of September 30, 1996 the
Company had commitments for the purchase of approximately $4.1 million
of revenue equipment, net of proceeds from the disposition of used
equipment. The Company has arranged to finance the revenue equipment
purchases.
Net cash used by financing activities was $4.0 million in the
first nine months of 1996. Payments under the Company's term loan
agreements were $8.9 million. The primary source of financing was the
issuance of $15.6 million of long-term debt associated with the
purchase of revenue equipment.
The Company maintains a $10 million working capital line of
credit, secured primarily by its accounts receivable with a bank. This
facility, which expires in May 1997, is used to meet short-term
operating cash requirements as well as letter of credit requirements
associated with the Company's self-insured retention arrangements. As
of September 30, 1996, there was no outstanding debt under this line of
credit. There was $2.8 million of outstanding letters of credit which
reduced the amount available under the line of credit as of September
30, 1996.
The Company expects to continue to fund its liquidity needs
and anticipated capital expenditures with cash flows from operations,
long-term debt financing and operating leases, equipment dispositions,
and the line of credit.
PART II OTHER INFORMATION
Item6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description Page
11 Statement re: Computation of Net Earnings per Weighted
Common and Common Equivalent Share...................... 13
27 Financial Data Schedule................................. 14
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
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.
TRANSPORT CORPORATION OF AMERICA, INC.
Date: November 7, 1996 /s/ James B. Aronson
---------------------- -----------------------------------------------
James B. Aronson
Chief Executive Officer
/s/ Robert J. Meyers
-----------------------------------------------
Robert J. Meyers
Executive Vice President, Chief Financial
Officer and Chief Information Officer (Principal
Financial and Accounting Officer)
EXHIBIT 11
TRANSPORT CORPORATION OF AMERICA, INC.
Computation of Net Earnings per Weighted Common
and Common Equivalent Share
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1996 1995
------------ --------------
<S> <C> <C>
Weighted average number of common
shares outstanding 6,428,176 6,363,524
Dilutive effect of outstanding stock
options and warrants 276,392 361,792
Weighted average number of common and
common equivalent shares outstanding 6,704,568 6,725,316
---------- ----------
Net earnings $2,119,071 $1,859,731
---------- ----------
Net earnings per weighted common and
common equivalent share $ 0.32 $ 0.28
---------- ----------
Nine months ended September 30,
-------------------------------
1996 1995
------------ -------------
Weighted average number of common
shares outstanding 6,423,617 6,341,037
Dilutive effect of outstanding stock
options and warrants 289,122 366,470
Weighted average number of common and
common equivalent shares outstanding 6,712,739 6,707,507
---------- ----------
Net earnings $4,560,989 $4,763,143
---------- ----------
Net earnings per weighted common and
common equivalent share $ 0.68 $ 0.71
---------- ----------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,912,880
<SECURITIES> 0
<RECEIVABLES> 13,544,755
<ALLOWANCES> 0
<INVENTORY> 827,745
<CURRENT-ASSETS> 24,182,499
<PP&E> 109,803,590
<DEPRECIATION> 26,880,978
<TOTAL-ASSETS> 110,484,015
<CURRENT-LIABILITIES> 31,081,402
<BONDS> 25,638,420
0
0
<COMMON> 64,960
<OTHER-SE> 41,285,233
<TOTAL-LIABILITY-AND-EQUITY> 110,484,015
<SALES> 0
<TOTAL-REVENUES> 122,483,298
<CGS> 0
<TOTAL-COSTS> 112,575,321
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,084,498
<INCOME-PRETAX> 7,864,989
<INCOME-TAX> 3,304,000
<INCOME-CONTINUING> 4,560,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,560,989
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
