UNITED STATES
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, 1997
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 11, 1997, the Company had outstanding 6,590,634 shares of Common
Stock, $.01 par value.
----------------------------------------
This Form 10-Q consists of 13 pages.
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996.................... Page 3
Consolidated Statements of Earnings for the
three and nine months ended September 30, 1997 and 1996..... Page 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996............... Page 5
Notes to Consolidated 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 5. Other Information............................................. Page 10
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 12
Exhibit 27 Financial Data Schedule........................... Page 13
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- ---------------
(unaudited) *
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 38,686 $ 6,340,991
Trade receivables, net of allowance for doubtful accounts 17,518,777 12,617,377
Other receivables 3,858,935 656,753
Operating supplies 800,792 810,180
Deferred income taxes 2,572,000 2,113,000
Prepaid expenses and tires 2,536,701 2,102,271
--------------- ---------------
Total current assets 27,325,891 24,640,572
Revenue equipment, at cost 117,281,102 94,691,320
Less: accumulated depreciation (30,364,526) (25,121,215)
--------------- ---------------
Net revenue equipment 86,916,576 69,570,105
Property, other equipment, and improvements:
Land, buildings, and improvements 16,883,407 11,042,479
Furniture and other equipment 6,556,842 5,183,786
Less: accumulated depreciation (5,937,598) (4,879,203)
--------------- ---------------
Net property, other equipment, and improvements 17,502,651 11,347,062
Other assets, net 2,383,102 3,113,171
--------------- ---------------
TOTAL ASSETS $ 134,128,220 $ 108,670,910
=============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank $ 560,000 $ 0
Current maturities of long-term debt 16,205,414 15,258,593
Accounts payable 3,098,870 2,607,861
Checks issued in excess of cash balances 1,236,498 350,950
Due to independent contractors 1,967,203 1,385,364
Accrued expenses 13,053,392 10,837,326
--------------- ---------------
Total current liabilities 36,121,377 30,440,094
Long term debt, less current maturities 33,775,389 21,837,713
Deferred income taxes 16,328,000 13,310,000
Stockholders' equity:
Common stock 65,871 64,960
Additional paid-in capital 23,219,491 23,851,516
Retained earnings 24,618,092 19,166,627
--------------- ---------------
Total stockholders' equity 47,903,454 43,083,103
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 134,128,220 $ 108,670,910
=============== ===============
</TABLE>
* Based upon audited financial statements
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
AMOUNT AMOUNT AMOUNT AMOUNT
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 47,099,930 $ 42,463,861 $ 136,943,734 $ 122,483,298
OPERATING EXPENSES:
Salaries, wages, and benefits 13,489,148 11,385,083 38,676,810 33,865,713
Fuel, maintenance, and other expense 6,047,361 5,389,061 18,258,783 17,015,046
Purchased transportation 13,717,691 12,430,839 40,933,947 34,612,529
Revenue equipment leases 1,231,371 1,652,643 3,777,456 5,202,958
Depreciation and amortization 3,880,422 3,562,571 11,434,644 10,300,688
Insurance, claims, and damage 1,489,227 1,313,134 4,631,045 4,077,545
Taxes and licenses 778,048 600,623 2,433,012 2,176,753
Communication 553,950 502,551 1,619,492 1,464,592
Other general and administrative expenses 1,362,825 1,384,467 4,501,107 3,960,953
Loss on disposition of equipment (240,261) (89,588) (598,974) (101,456)
-------------- -------------- -------------- --------------
TOTAL OPERATING EXPENSES 42,309,782 38,131,384 125,667,322 112,575,321
-------------- -------------- -------------- --------------
OPERATING INCOME 4,790,148 4,332,477 11,276,412 9,907,977
Interest expense 807,845 713,694 2,227,445 2,084,498
Interest income (195) (35,288) (58,498) (41,510)
-------------- -------------- -------------- --------------
INTEREST EXPENSE, NET 807,650 678,406 2,168,947 2,042,988
EARNINGS BEFORE INCOME TAXES 3,982,498 3,654,071 9,107,465 7,864,989
Provision for income taxes 1,593,000 1,535,000 3,656,000 3,304,000
-------------- -------------- -------------- --------------
NET EARNINGS $ 2,389,498 $ 2,119,071 $ 5,451,465 $ 4,560,989
============== ============== ============== ==============
Net earnings per weighted common and
common equivalent share $ 0.36 $ 0.32 $ 0.81 $ 0.68
============== ============== ============== ==============
Weighted average number of common and
common equivalent shares outstanding 6,728,489 6,704,568 6,730,917 6,712,739
============== ============== ============== ==============
</TABLE>
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------- -------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 5,451,465 $ 4,560,989
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 11,434,644 10,300,688
Gain on disposition of equipment (598,974) (101,456)
Deferred income taxes 2,559,000 2,320,000
Changes in operating assets and liabilities:
Trade receivables (4,901,400) (504,247)
Other receivables (3,202,182) 1,930,328
Operating supplies 9,388 135,745
Prepaid expenses and tires (434,430) (475,682)
Accounts payable 491,009 (598,488)
Due to independent contractors 581,839 1,208,377
Accrued expenses 2,216,066 (37,467)
------------- -------------
Net cash provided by operating activities 13,606,425 18,738,787
------------- -------------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (32,031,120) (19,514,858)
Payments for purchases of property, other equipment,
and leasehold improvements (7,262,077) (2,897,984)
Increase in other assets (2,980) 55,958
Proceeds from disposition of equipment 5,688,515 3,392,386
------------- -------------
Net cash used in investing activities (33,607,662) (18,964,498)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 326,074 481,801
Payments for repurchase and retirement of common stock (957,187) 0
Proceeds from issuance of long-term debt 25,308,243 15,591,819
Principal payments on long-term debt (12,423,746) (8,889,735)
Proceeds from issuance of notes payable to bank 26,960,000 21,888,000
Principal payments on notes payable to bank (26,400,000) (24,118,000)
Net checks issued in excess of cash balances 885,548 (980,467)
------------- -------------
Net cash provided by financing activities 13,698,932 3,973,418
------------- -------------
INCREASE (DECREASE) IN CASH (6,302,305) 3,747,707
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,340,991 165,173
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,686 $ 3,912,880
============= =============
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 2,171,430 $ 2,072,040
Income taxes, net 1,296,229 599,115
</TABLE>
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Consolidated Financial Statements
1. Interim Consolidated Financial Statements (unaudited)
The unaudited interim consolidated 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, 1996. 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, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997.
2. Commitments
As of September 30, 1997 the Company had commitments for the
purchase of approximately $18.5 million of revenue equipment, net of
proceeds from the planned future disposition of used equipment. The
Company has arranged to finance these revenue equipment purchases.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended September 30, 1997 and 1996
Consolidated operating revenues, increased 10.9% to $47.1
million for the quarter ended September 30, 1997 from $42.5. million
for the quarter ended September 30, 1996. Transport International
Express, Inc. (T.I.E.), the Company's airport-to-airport expedited
less-than-truckload service which started operations in the third
quarter 1997, generated revenues of $817,000. Greater freight volumes
from existing truckline customers, continued as the primary source of
revenue growth. Revenues per mile, at $1.29 per mile, were unchanged
from the same period a year ago. As measured by average revenue per
tractor per week, equipment utilization, improved 2.0% to $2,882 during
the third quarter of 1997, from $2,826 in the third quarter of 1996.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) was 8.5% in the third quarter of 1997, compared
to 8.6% for the same period of 1996. Efficiency, as measured by average
annualized revenues per non-driver employee, improved slightly to
$545,100 for the third quarter of 1997, compared to $540,700 for the
same period of 1996. Salaries, wages, and benefits as a percentage of
operating revenues increased to 28.6% in the third quarter of 1997,
compared to 26.8% for the same period of 1996, due primarily to an
increase in the driver pay scale during 1997 and incremental T.I.E.
expense. At September 30, 1997 there were 442 independent contractors,
compared to 438 a year prior. Miles driven by independent contractors
as a percentage of total miles driven declined in the third quarter of
1997 when compared to the third quarter of 1996. As a result, purchased
transportation declined slightly as a percentage of operating revenues
to 29.1% in the third quarter of 1997 from 29.3% for the same period of
1996. Fuel, maintenance, and other expenses was 12.8% of operating
revenues in the third quarter of 1997, compared to 12.7% in the third
quarter of 1996, reflecting the higher proportion of miles driven by
company drivers, offset by lower fuel prices in 1997. Revenue equipment
leases decreased as a percentage of operating revenues to 2.6% in the
third quarter of 1997 from 3.9% for the same period of 1996, as a
result of the expanded use of debt financed equipment in place of
leased equipment. Depreciation and amortization for the third quarter
of 1997 was 8.2% of operating revenues, compared to 8.4% for the same
period of 1996. Insurance, claims, and damage for the third quarter of
1997 was 3.2% of operating revenues, compared to 3.1% for the same
period of 1996.
In the third quarter of 1997, gain on the disposition of
equipment was $240,000, compared to a gain of $90,000 in the same
period of 1996, due to the larger number of dispositions in 1997, when
compared to 1996.
<PAGE>
The effective tax rate for the third quarter of 1997 was
40.0%, compared to the 42.0% effective tax rate for the third quarter
of 1996. The lower effective rate in 1997 was primarily due to a
continued decline in Company per diem payments, which are not fully
deductible for income tax purposes, when compared to the third quarter
of 1996. 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 $2.4 million, or 5.1% of operating revenues for the
quarter ended September 30, 1997 from $2.1 million, or 5.0% of
operating revenues for the quarter ended September 30, 1996.
Nine Months Ended September 30, 1997 and 1996
Consolidated operating revenues increased 11.8% to $136.9
million for the nine months ended September 30, 1997 from $122.5
million for the first nine months of 1996. Increases in freight volumes
from existing customers continued as the primary source of revenue
growth. Revenues per mile improved to $1.30 per mile in the first nine
months of 1997 from $1.28 per mile for the same period of 1996 as a
result of moderate rate increases in 1997 and fewer empty miles as a
percentage of total miles in 1997, compared to 1996. Equipment
utilization, as measured by average revenues per tractor per week,
improved 6.0% to $2,873 during the first nine months of 1997 from
$2,711 for the same period of 1996.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) rose to 6.6% in the first nine months of 1997
from 6.4% for the same period of 1996. Efficiency, as measured by
average annualized revenues per non-driver employee, increased 3.5% to
$541,800 for the first nine months of 1997 from $523,400 for the same
period of 1996. Salaries, wages, and benefits as a percentage of
operating revenues increased to 28.2% in the first nine months of 1997,
compared to 27.7% for the same period of 1996, due primarily to an
increase in the driver pay scale during 1997. Independent contractor
miles increased 13.8% in the first nine months of 1997, compared to the
same period of 1996, as a result of the increase in the average number
of contractors during the first nine months of 1997, compared to the
same period of 1996. Correspondingly, purchased transportation
increased as a percentage of operating revenues to 29.9% in the first
nine months of 1997 from 28.3% for the same period of 1996. Fuel,
maintenance, and other expenses decreased as a percentage of operating
revenues to 13.3% in the first nine months of 1997 from 13.9% for the
same period of 1996, reflecting the increase of independent contractor
miles as a percent of total miles and somewhat lower fuel prices in
1997, compared to 1996. Revenue equipment leases decreased as a
percentage of operating revenues to 2.8% in the first nine months of
1997 from 4.2% for the same period of 1996, primarily as a result of an
increase in independent contractors and the expanded use of debt
financed equipment.
<PAGE>
In the first nine months of 1997, gain on the disposition of
equipment was $599,000, compared to a gain of $101,000 in the first
nine months of 1996, due to the larger number of equipment dispositions
in 1997, when compared to 1996.
The effective tax rate for the first nine months of 1997 was
40.1%, compared to the 42.0% effective tax rate for the first nine
months of 1996. The lower effective rate in 1997 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 1996. 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 $5.5 million, or 4.0% of operating revenues, for the nine
months ended September 30, 1997 from $4.6 million, or 3.7% of operating
revenues, for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $13.6 million in
the first nine months of 1997. The working capital deficit as of
September 30, 1997 was $8.8 million, compared to the $5.8 million
deficit which existed as of December 31, 1996. Other receivables at
September 30, 1997 include $3.2 million for the sale of certain revenue
equipment which was completed in September, 1997. The working capital
deficit at September 30, 1997 includes $15.3 million of current
maturities of long-term debt associated with the purchase of revenue
equipment which is typically satisfied by the sale proceeds of such
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. The increase in trade receivables
reflects business growth as well as a trend toward slower customer
payments. 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 1997 consumed
net cash of $33.6 million, primarily for the purchase of new revenue
equipment including 215 tractors and 242 trailers, less proceeds from
the disposition of used equipment, including 57 tractors and 175
trailers, plus the purchase, upgrade, and completion of facilities
located in Dallas, Texas; Columbus, Ohio; and Kansas City, Missouri.
These expenditures were financed through a combination of cash
generated by operations, long-term debt financing and proceeds from
equipment dispositions.
<PAGE>
As of September 30, 1997 the Company had commitments for the purchase
of approximately $18.5 million of revenue equipment, net of proceeds
from the planned future disposition of used equipment. The Company has
arranged to finance these revenue equipment purchases.
Net cash provided by financing activities was $13.7 million in
the first nine months of 1997. Payments under the Company's term loan
agreements were $12.4 million. The primary source of financing was the
issuance of $25.3 million of long-term debt associated with the
purchase of revenue equipment.
The Company maintains a $15 million credit facility with a
bank, consisting of a $10 million line of credit, secured primarily by
its accounts receivable, and an additional $5 million line of credit
secured by revenue equipment not otherwise pledged. The credit facility
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, 1997, there
was $0.6 million outstanding debt under this line of credit and there
was $2.8 million of outstanding letters of credit which reduced the
amount available under the line of credit.
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.
Item 5. Other Information:
Operations of Transport International Express, Inc., a wholly-owned
subsidiary, commenced in the third quarter of 1997. The subsidiary
offers airport-to-airport, expedited less-than-truckload service. The
foregoing Management's Discussion and Analysis for the third quarter of
1997 reflects certain financial information about the operation of this
subsidiary.
During the third quarter of 1997, James B. Aronson, the Company's
Chairman and Chief Executive Officer, was diagnosed with recurrent
rectal cancer. Mr. Aronson's condition has been diagnosed as treatable
and he is presently undergoing therapy. While there are currently no
medical limitations on his activities, there can be no assurance that
his cancer can be successfully treated or that the cancer or the
treatment regimen will not in the future limit his activities. The
Board of Directors is confident that Robert J. Meyers, President and
Chief Operating Officer, and other members of the management team are
fully capable of successfully managing the Company's growth strategy.
<PAGE>
Item 6. 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........... 12
27 Financial Data Schedule.................................... 13
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
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 11, 1997 /s/ James B. Aronson
-------------------- -----------------------------------------------
James B. Aronson
Chief Executive Officer
/s/ Robert J. Meyers
-----------------------------------------------
Robert J. Meyers
President, Chief Operating Officer, and
Chief Financial 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,
--------------------------------
1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average number of common
shares outstanding 6,578,579 6,428,176
Dilutive effect of outstanding stock
options and warrants 149,910 276,392
Weighted average number of common and
common equivalent shares outstanding 6,728,489 6,704,568
=======================================================================================
Net earnings $ 2,389,498 $ 2,119,071
=======================================================================================
Net earnings per weighted common and
common equivalent share $ 0.36 $ 0.32
=======================================================================================
Nine months ended September 30,
--------------------------------
1997 1996
- ---------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding 6,561,448 6,423,617
Dilutive effect of outstanding stock
options and warrants 169,469 289,122
Weighted average number of common and
common equivalent shares outstanding 6,730,917 6,712,739
=======================================================================================
Net earnings $ 5,451,465 $ 4,560,989
=======================================================================================
Net earnings per weighted common and
common equivalent share $ 0.81 $ 0.68
=======================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 38,686
<SECURITIES> 0
<RECEIVABLES> 17,518,777
<ALLOWANCES> 0
<INVENTORY> 800,792
<CURRENT-ASSETS> 27,325,891
<PP&E> 140,721,351
<DEPRECIATION> 36,302,124
<TOTAL-ASSETS> 134,128,220
<CURRENT-LIABILITIES> 36,121,377
<BONDS> 33,775,389
0
0
<COMMON> 65,871
<OTHER-SE> 47,837,583
<TOTAL-LIABILITY-AND-EQUITY> 134,128,220
<SALES> 0
<TOTAL-REVENUES> 136,943,734
<CGS> 0
<TOTAL-COSTS> 125,667,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,227,445
<INCOME-PRETAX> 9,107,465
<INCOME-TAX> 3,656,000
<INCOME-CONTINUING> 5,451,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,451,465
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.81
</TABLE>
