SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES __X__ NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of shares held by non-affiliates of the Registrant as
of March 24, 1997 (based on the closing sale price of the Common Stock on that
date) was $67,594,944.
As of March 24, 1997, the Company had outstanding 6,617,108 shares of Common
Stock, $.01 par value.
Documents Incorporated by Reference: Part III, Items 10, 11, and 12 incorporate
by reference portions of Transport Corporation of America, Inc.'s Proxy
Statement for the 1997 Annual Meeting of Shareholders.
This Form 10-K report consists of 45 pages (including exhibits: the index to
exhibits is set forth on page 19).
PART I
ITEM 1. BUSINESS
OVERVIEW
Transport Corporation of America, Inc. (the "Company" or
"Transport America") provides a wide range of truckload carriage and logistics
services in various lengths of haul in the United States and parts of Canada.
The Company has designed its business to provide high quality, customized
logistics services that allow it to be a preferred partner or core carrier to
major shippers. The Company serves as an integral part of the distribution
system of many of its major customers, including Ford Motor Company, General
Mills, Hon Company, 3M Company, and Sears, Roebuck & Co. The Company's customers
require time-definite pick-up and delivery to support just-in-time inventory
management; specialized equipment, such as temperature controlled trailers,
special trailer design to support decking, multi-stop loading and unloading and
electronic data interchange services to automate the exchange of order and load
data. To support these complex customer requirements and deliver logistics
services cost effectively, Transport America has developed a sophisticated
information management system which it believes makes it a technological leader
in the industry.
The Company's operating strategy is to provide high quality,
customized logistics services that allow it to be a preferred partner or core
carrier to major shippers. The Company carries out this strategy by assigning to
each customer an experienced marketing representative to tailor its logistics
services; providing a wide range of transportation services, including
line-haul, multi-stop capability, regional and local operations, van trailers
with and without refrigeration or temperature control, time-definite pick-up and
delivery, satellite monitored transit; and information technology services. As
part of its mission to serve the logistics needs of its mostly Fortune 500
customers, and in an effort to address the needs of its drivers, Transport
America has implemented a regional operations strategy. With an advanced
information system, modern fleet of equipment, experienced management team and a
strong customer base, Transport America is positioned to achieve sustained
profitability and growth in the future.
STRATEGY
The key elements of Transport America's business and operating
strategy are:
* CUSTOMER FOCUS AND SERVICE. Transport America believes its
success depends on becoming an integral part of a customer's distribution system
by building a transportation network to meet its customers' needs, rather than
merely seeking new customers who are able to use an existing transportation
network. As a consequence, the Company focuses on providing high quality,
tailored logistics service through "partnership" arrangements with shippers. The
Company employs experienced marketing representatives who have the ability to
understand a shipper's requirements and analyze and deliver services to meet
those requirements. The marketing representatives then match requirements with
existing transportation services or customize new services or equipment. The
Company's top 25 customers, mostly Fortune 500 companies, represented
approximately 80% of its total revenue in 1996. The Company believes its
principal opportunity for revenue growth will come from expanded service to
existing customers including many Fortune 500 companies who are not now one of
the Company's top 25 accounts.
* PRODUCTIVITY. A key element of the Company's strategy is to be
a cost-effective supplier of transportation services. The Company measures its
productivity by monitoring key indicators of equipment usage, the amount of
revenues a tractor earns during a week, the operating revenues per non-driver
employee and the percentage of empty miles. Transport America has improved its
productivity since 1991 and anticipates achieving further improvements in the
future. For example, revenue per tractor per week has increased from $2,457 in
1991 to $2,736 in 1996.
* HUMAN RESOURCES. Transport America seeks to provide a work
environment which is challenging, rewarding, and respectful for driver and
non-driver employees as well as independent contractors. This work environment
is important to Transport America because most employees and independent
contractors routinely interact with customers and ultimately are responsible for
customer satisfaction. The Company involves employees and independent
contractors in customer satisfaction through process improvement teams and "town
meetings" which include customers, drivers, management, operations personnel,
and other employees in discussions intended to better understand customer needs
and how to meet them. The Company believes its compensation and benefits package
for employee drivers and independent contractors ranks among the highest in the
truckload industry.
* TECHNOLOGY. The Company has developed a fully integrated,
client/server computer information system. This system, developed at a cost of
over $2 million during the past four years, integrates operations with the
principal back-office functions of safety and risk management, maintenance,
driver and independent contractor settlement, fuel, billing, and accounting. The
system also includes satellite-based communications with the fleet. This system
provides information directly to and from the Company, its customers, and
drivers to assist in managing a complex information environment. The Company
believes that utilizing advanced technology is the best way to manage a complex,
customer driven logistics process in a cost effective manner.
* REGIONAL OPERATIONS. The Company utilizes a regional operations
strategy to better meet the logistics requirements of its customers and provide
employee drivers and independent contractors with a more amenable work
environment. To date, the Company has established ten strategically located
service centers which allow for local recruitment of employee drivers and
independent contractors, support regional pick-up and delivery operations,
provide a well coordinated and secure relay point for line-haul operations and
provide support for routine maintenance and driver services. The Company
believes its regional operations also allow it to more effectively market its
services.
* SAFETY AND RISK MANAGEMENT. A key component of the Company's
operating strategy is accident prevention. Transport America seeks to hire only
experienced, safe employee drivers and independent contractors or new students
who are trained directly in safe driving and work skills. The Company also
sponsors on-going training programs and periodically tests drivers' skills and
compliance with various regulations. Accidents and work related injuries are
monitored by the Company through its integrated computer information system and
addressed by safety engineers who redesign service delivery processes and work
with customers and drivers to improve safety.
CUSTOMER FOCUS AND SERVICES
The Company has designed its business to be a core carrier or
preferred partner to major shippers by providing high quality, tailored
logistics service. The Company serves as an integral part of the distribution
system of many of its major customers, including Ford Motor Company, General
Mills, DuPont, The Hon Company, and Sears, Roebuck & Co. Some of the Company's
other major customers are Federal Express, 3M Company, PPG Industries, Clorox
Company, and S.C. Johnson & Sons. The principal categories of freight hauled by
the Company are department store merchandise, grocery, industrial, consumer, and
paper products.
The Company's largest 25, 10 and 5 customers accounted for approximately 80%,
64%, and 43%, respectively, of 1996 operating revenues. During 1996, Sears,
Roebuck & Co. accounted for approximately 16% of the Company's operating
revenues.
MARKETING. The Company's marketing personnel seek to strengthen Transport
America's position with existing customers and establish it with prospective
customers by taking advantage of the trend among shippers toward private fleet
conversions, outsourcing of transportation requirements, and utilization of core
carriers. At December 31, 1996, the Company employed a marketing force of eleven
persons located throughout its primary business areas. Senior management is also
actively involved in marketing, logistics planning, and customer relations,
especially with large national customers.
CUSTOMER SUPPORT TEAMS. Customer service teams are comprised of customer
service, order management, load planning, and dispatch personnel. The teams are
assigned customers by geographic region. Each customer has an assigned customer
support team to help meet that customer's needs. The Company's customer support
teams use technology to enhance service by providing customers with real-time
information concerning location and estimated delivery time for shipments in
transit. The Company holds "town meetings," which include support team members,
customers, and drivers in an effort to better understand and effectively respond
to customer needs.
SERVICE CENTERS. The Company utilizes strategically located service centers to
provide an added level of customer service and support. These facilities are
located in close proximity to major customer locations, thereby enabling the
Company to provide a large amount of equipment, local cartage service, and local
customer service representatives to work directly with customers on a day-to-day
basis. The Company believes these service centers provide a competitive
advantage by allowing it to work more directly and frequently with customers and
provide equipment more rapidly.
TIME-DEFINITE SERVICE. In each of its markets, the Company seeks to provide
100% on-time pickup and delivery, expedited time-in-transit, logistical planning
to coordinate and deliver freight within time-definite parameters, and advanced
information capabilities that provide value to customers. Time-definite
transportation requires pick-ups and deliveries to be performed within narrowly
defined time frames. Time definite services are particularly important to the
Company's customers who operate just-in-time manufacturing, distribution, and
retail inventory systems.
HUMAN RESOURCES
Transport America's human resources are an important element of
its customer focused business strategy. Employee drivers, independent
contractors, and non-driver employees regularly interact with customers and are
ultimately responsible for customer satisfaction.
In order for the Company to grow and continue to be positioned as
a quality carrier of choice for existing and new customers, changes to the
driver's work environment are necessary. The Company continues to emphasize
competitive pay packages, quality at-home time, and "driver friendly" freight as
principal means to attract and retain its driver workforce.
INDEPENDENT CONTRACTORS. The Company believes that a fleet of both employee
drivers and independent contractors is essential if the Company is to continue
its growth. In 1992, the Company decided to aggressively expand its independent
contractor fleet, which has increased from 14% of its total fleet at December
31, 1991 to 36% at December 31, 1996. The decision to focus fleet expansion on
independent contractors was based on such factors as reduced capital
requirements, since independent contractors provide their own tractors; the
lower turnover rate that the Company has experienced with independent
contractors; the strong emphasis on safety by independent contractors; and the
Company's success in attracting qualified independent contractors.
The Company enters into operating agreements with its independent
contractors, pursuant to which its independent contractors agree to furnish a
tractor and driver to transport, load and unload goods on behalf of the Company.
These agreements typically have terms for less than one year and provide for the
payment to independent contractors of fixed compensation for total loaded and
empty miles. Independent contractors must pay all of their operating expenses
and must meet DOT regulatory requirements, as well as safety and other standards
established by the Company. The Company awards safety bonuses to its independent
contractors if they exceed certain safety criteria.
REGIONAL FLEETS. Regional fleet drivers pick-up and deliver customers' freight
within a geographic region, enabling the Company to get the drivers home a
minimum of three nights per week, with a target of five or six nights per week.
In addition to allowing the employee drivers predictable time at home, a
regional fleet also provides customers with the same driver who becomes familiar
with the customer and the customer's freight requirements. The Company's
line-haul operation is also improved by a regional operation. Employee drivers
and independent contractors, who are willing to be away from home for extended
periods of time in order to earn higher compensation, can benefit by reduced
delays, limited load handling, and fewer deadhead miles, thereby increasing
miles and earnings per week.
The Company utilizes nine service centers as a base of operations
for the regional fleets. These facilities enable the Company to recruit drivers
from surrounding areas and offer them time at home. The service centers also
allow for frequent in person contact with the regional drivers, similar to that
found in smaller truckload carriers, allow the Company to maintain its
equipment, provide a trailer parking location for relaying regional freight, and
provide bulk fueling.
DRIVER WORK ENVIRONMENT. The Company believes that the type of freight it
typically handles is a significant factor in retention of employee drivers and
independent contractors. Consequently, the Company focuses much of its marketing
efforts on customers with freight that is "driver-friendly" in that it requires
minimal loading or unloading by drivers and customer employees.
The Company utilizes late-model, reliable equipment including
standard features such as double sleeper bunks, extra large cabins, air-ride
suspensions, and anti-lock brakes. The Company also provides satellite
communications technology which enables drivers to receive load related
information, directions, pay information, and family emergency information. The
Company's service centers are strategically located to provide services for the
driver, such as showers, laundry facilities, break-rooms, fuel, tractor and
trailer maintenance, and in-person assistance from service center personnel.
COMPENSATION AND BENEFITS. The Company's compensation and benefits package has
been structured to compensate drivers on the basis of miles driven, with base
compensation increases commensurate with length of service. Employee driver
benefits include paid holiday and vacation days, health insurance, and a Company
funded 401(k) retirement plan. Performance bonuses are paid based upon safety,
customer service and fuel consumption. The Company believes its compensation and
benefits package for employee drivers and independent contractors ranks among
the highest in the truckload industry.
RECRUITING AND TRAINING. The Company's employee drivers are hired and
independent contractors are approved in accordance with specific Company
guidelines relating to safety records, prior work history, personal evaluation,
accident and driving record verification, drug and alcohol screening, and a
physical exam. The Company's initial orientation and training seminar includes a
review of all Company policies and operating requirements, written and road
driving tests, defensive driving and safety skills, DOT compliance requirements,
and the employee driver's and independent contractor's role in providing safe
and efficient value-added service to customers.
In addition to the initial training seminar, on-going training on
subjects such as safety, compliance, equipment operation, customer expectations,
and Company policies is conducted at the Company's service centers and
periodically at outside training facilities under contract with the Company. The
Company also conducts driver meetings, publishes a newsletter, and conducts
specific professional development training, including training to become an
over-the-road driver instructor.
DRIVER AND INDEPENDENT CONTRACTOR SUPERVISION. The Company assigns each
employee driver and independent contractor to a specific fleet manager. The role
of the fleet manager is to be the primary support resource for the employee
driver or independent contractor. The fleet manager also communicates the work
assignments using satellite technology, schedules time off, arranges required
safety inspections, reviews performance, provides day-to-day training, and is
accountable for the retention and productivity of the assigned employee drivers
and independent contractors.
NON-DRIVER EMPLOYEES. Mechanics, service center personnel, corporate staff, and
marketing employees are as important to the success of the Company in meeting or
exceeding customer expectations as are employee drivers and independent
contractors. Employee task groups are used to analyze specific problems,
recommend a course of corrective action, and assist in the implementation of
required changes.
As of December 31, 1996, the Company employed 841 employee
drivers, 77 mechanics, 239 persons in operations, marketing and administration
and had agreements with 445 independent contractors. The Company's employees are
not represented by any collective bargaining units, and the Company considers
relations with its employees and independent contractors to be good.
TECHNOLOGY
The Company has developed a fully integrated, client/server
computer information system. This system, developed at a cost of over $2 million
during the past four years, integrates operations with the principal back-office
functions of safety, maintenance, driver and independent contractor settlement,
fuel, billing and accounting. The system also includes satellite-based
communications with the fleet. This system provides information directly to and
from the Company, its customers, and drivers to assist in managing a complex
information environment. The Company believes that utilizing advanced technology
is the best way to manage a complex, customer driven logistics process in a cost
effective manner.
OPERATIONS AND COMMUNICATIONS. The Company utilizes information systems and
satellite-based communications to process orders, dispatch loads, and monitor
loads in transit. Load planners match customer orders daily with driver
availability. Once the most appropriate decision respecting a load is made,
based on computer monitored load factors, the load information is sent directly
to the driver through the satellite network. The satellite system simplifies
locating of equipment and permits timely and efficient communication of critical
operating data such as shipment orders, loading instructions, routing, fuel,
taxes paid and mileage operated, payroll, safety, traffic, and maintenance
information.
ELECTRONIC DATA INTERCHANGE ("EDI"). The Company's system enables full
electronic data interchange of load tendering, shipment status, freight billing,
and payment. This system provides significant operating advantages to the
Company and its customers, including real-time information flow, reduction or
elimination of paperwork, error-free transcription, and reductions in clerical
personnel. EDI allows the Company to exchange data with its customers in a
variety of formats, depending on the individual customer's capabilities, which
significantly enhances quality control, customer service, and efficiency. A
majority of the Company's revenues are currently processed through EDI.
REVENUE EQUIPMENT
The Company operates a modern fleet of tractors and trailers.
Tractors are typically replaced every 36 to 54 months, based on factors such as
age and condition, current interest rates, the market for used equipment, and
improvements in technology and fuel efficiency. The average age of the
Company-operated tractors at December 31, 1996 was approximately 28 months.
The Company has available a variety of trailers to meet customer
requirements. At December 31, 1996, these included 2,980 dry vans, most of which
are logistic capable, many of which are equipped with heaters, and 256
refrigerated vans. The trailer-to-tractor ratio of 2.6 allows the Company to
provide its high-volume customers with extra trailers to accommodate loading and
unloading at their convenience. Depending on market conditions, the Company
generally replaces trailers after four to six years of service.
The following table shows the model years of the Company's
tractors and trailers as of December 31, 1996.
MODEL YEAR TRACTORS TRAILERS
---------- -----------
1997.......................... 93 200
1996.......................... 150 1,000
1995.......................... 225 775
1994.......................... 234 698
1993.......................... 72 442
1992.......................... -- 50
1991.......................... -- 20
1990 and Prior................ 1 51
---------- -----------
Total Company................. 775 3,236
Total independent contractor.. 445 --
---------- -----------
Total available....... 1,220 3,236
========== ===========
COMPETITION
The truckload transportation business is extremely competitive
and fragmented. The Company competes primarily with other truckload carriers,
particularly those in the high service end of the truckload market. The Company
also competes with alternative forms of transportation, such as rail,
intermodal, and air freight, particularly in the longer haul segments of its
business. Competition in the truckload industry has created pressure on the
industry's pricing structure. Generally, competition for the freight transported
by the Company is based more on service, equipment availability, trailer type,
and efficiency than freight rates. There are a number of competitors that have
substantially greater financial resources, operate more equipment, and transport
more freight than the Company.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C>
James B. Aronson ................. 57 Chief Executive Officer, President, and Director
Robert J. Meyers ..................43 Executive Vice President, Chief Financial Officer, and
Chief Information Officer
</TABLE>
Executive officers of the Company are appointed by the Board of
Directors and serve at the Board's discretion. There are no family relationships
among the executive officers.
JAMES B. ARONSON has been Chief Executive Officer and a director of the
Company since August 1984, and served as President from August 1984 to June 1994
and since June of 1996. Prior to joining the Company, he served in several
management positions with Overland Express, Inc. from June 1969 to May 1984,
most recently as President and Chief Operating Officer.
ROBERT J. MEYERS has been Executive Vice President since November 1994, Chief
Financial Officer of the Company since January 1993 and Chief Information
Officer since January 1992. Prior to joining the Company, Mr. Meyers was founder
and President of MicroMation, Inc., a Minneapolis/Saint Paul software
development firm from February 1982 to January 1992. During this same period, he
founded and served as a certified public accountant with Meyers and Meyers, LTD.
Prior to that time, he served in several senior accounting, finance and
information systems positions with Haskins and Sells, Dayton-Hudson Corporation
and Tennant Company.
ITEM 2. PROPERTIES
The following chart provides information concerning the Company's
service centers and other facilities:
<TABLE>
<CAPTION>
OWNED OR SQUARE
SERVICE CENTERS AND OTHER FACILITIES LEASED ACREAGE FOOTAGE
--------------------------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C>
Clarksville, Indiana Owned 14.7 18,126
Eagan, Minnesota Owned 17.4 46,500
Hudson, Wisconsin Owned 6.8 4,896
Janesville, Wisconsin Owned 13.6 36,700
North Jackson, Ohio Owned 8.1 11,230
North Liberty, Iowa Owned 13.0 15,150
Atlanta, Georgia Leased * *
Garland, Texas Leased 4.7 3,550
Bishopville, South Carolina Leased 3.5 1,500
Kansas City, Missouri Leased 5.0 13,773
Perrysburg, Ohio Leased 2.9 1,800
</TABLE>
- -----
* This facility is shared with another company.
The Company's current rental payments for its leased service
centers range from $900 to $6,000 per month. The terms of the Company's leases
are month-to-month and do not include automatic renewal options. However, the
Company does not anticipate any difficulties renewing or continuing these
leases.
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its
business, primarily involving claims for workers' compensation or for personal
injury and property damage incurred in the transportation of freight. The
Company maintains insurance which covers liability amounts in excess of retained
liabilities from personal injury and property damage claims. There is currently
one automobile liability claim against the Company which, in the aggregate,
seeks an amount in excess of the Company's $1 million liability coverage in
place at the time of the occurrence. The Company has evaluated its exposure to
this claim and believes that in the event of settlement in excess of the
liability coverage, any such settlement would not have a material adverse effect
on its financial condition or results of operation. The Company currently
carries a total of $5,000,000 liability insurance coverage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
PRICE RANGE OF COMMON STOCK. The Company's Common Stock is traded in the
Nasdaq National Market under the symbol TCAM. The following table sets forth the
high and low closing prices for the Company's common stock, as reported by
Nasdaq, for the periods indicated:
Period High Low
1995
1st Quarter $ 12 1/2 $ 9 1/2
2nd Quarter 14 1/4 10 1/8
3rd Quarter 14 1/8 10 1/2
4th Quarter 13 1/8 10 7/8
1996
1st Quarter 14 1/8 8 7/8
2nd Quarter 13 1/4 12
3rd Quarter 12 5/8 10 3/4
4th Quarter 12 1/2 9 1/2
SHAREHOLDERS. As of March 24, 1997, the Company had 105 shareholders of
record, including Depository Trust Company which held of record 4,812,960
shares.
DIVIDENDS. The Company has never paid any dividends on its Common Stock and
does not intend to pay cash dividends for the foreseeable future. Any future
decision as to the payment of dividends will be at the discretion of the
Company's Board of Directors and will depend upon the Company's results of
operations, financial position, cash requirements, certain corporate law
restrictions, restrictions under loan agreements and such other factors as the
Board of Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share and operating data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues $ 164,666 $ 144,254 $ 127,425 $ 104,497 $ 93,631
Operating expenses:
Salaries, wages and benefits 45,515 41,479 37,107 33,401 32,727
Fuel, maintenance and other
expenses 23,238 20,688 20,433 19,912 19,748
Purchased transportation 46,761 37,258 29,754 18,680 12,488
Revenue equipment leases 6,490 7,090 8,423 9,050 8,770
Depreciation and amortization 13,966 10,273 6,535 5,118 4,474
Insurance, claims and damage 5,325 6,230 6,010 5,497 3,753
Taxes and licenses 2,952 2,873 3,064 2,681 2,481
Communications 1,974 1,978 1,881 1,594 1,117
Other general and administrative
expenses 5,324 5,389 5,096 4,243 3,935
Gain on sale of equipment (275) (1,755) (642) (1,233) (556)
--------- --------- --------- --------- ---------
Total operating expenses 151,270 131,503 117,661 98,943 88,937
Operating income 13,396 12,751 9,764 5,554 4,694
Interest expense, net 2,734 2,038 2,031 1,530 1,258
--------- --------- --------- --------- ---------
Earnings before income taxes 10,662 10,713 7,733 4,024 3,436
Provision for income taxes 4,368 4,607 3,524 1,678 1,740
--------- --------- --------- --------- ---------
Net earnings $ 6,294 $ 6,106 $ 4,209 $ 2,346 $ 1,696
========= ========= ========= ========= =========
Net earnings per weighted common
and common equivalent share $ .94 $ .91 $ .78 $ .47 $ .36
========= ========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding 6,718 6,709 5,382 5,028 4,718
========= ========= ========= ========= =========
OPERATING DATA:
Pre-tax margin (1) 6.5% 7.4% 6.1% 3.9% 3.7%
Tractors (at end of period):
Company 775 779 677 666 633
Independent contractor 445 401 303 216 155
--------- --------- --------- --------- ---------
Total 1,220 1,180 980 882 788
Trailers (at end of period) 3,236 2,913 2,378 2,074 1,844
Average revenues per tractor
per week $ 2,736 $ 2,739 $ 2,718 $ 2,568 $ 2,517
Average revenues per mile (2) $ 1.293 $ 1.275 $ 1.284 $ 1.239 $ 1.240
Average empty mile percentage 11.2% 11.4% 9.9% 11.2% 11.3%
Average length of haul, miles 644 674 661 667 667
Average annual revenues
per non-driver employee $ 526,700 $ 477,300 $ 456,100 $ 403,000 $ 392,700
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets $ 108,671 $ 99,457 $ 76,757 $ 49,963 $ 33,384
Long term debt, less current
maturities (3) $ 21,838 $ 24,436 $ 17,456 $ 19,207 $ 7,714
Stockholders' equity $ 43,083 $ 36,307 $ 30,189 $ 11,181 $ 8,834
</TABLE>
(1) The Company has in the past acquired a significant amount of its revenue
equipment under operating leases rather than through debt financing or
capitalized leases. As a result, the Company believes that its pre-tax margin
(earnings before income taxes as a percentage of operating revenues) is a more
appropriate measure of its operating efficiency than its operating ratio
(operating expenses, excluding net interest expense, as a percentage of
operating revenues).
(2) Net of fuel surcharges.
(3) Long-term debt excludes $13,196,000 for the total of obligations under
revenue equipment operating leases for regular lease payments plus the residual
cost of acquiring the leased equipment at the end of the lease term. The
combined total of long-term indebtedness (excluding current maturities), lease
obligations, and residual acquisition costs at December 31, 1996 was
$35,033,000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Transport America began substantial operations in 1984 when Mr.
Aronson joined the Company as President and Chief Executive Officer. From 1984
to 1996, the Company increased revenues from $2.4 million to $164.7 million.
The Company has financed the acquisition of some of its revenue
equipment through operating leases. Under generally accepted accounting
principles, the interest component of an operating lease is classified as rent
expense and not as interest expense. Because of the Company's use of operating
leases, the operating ratio of Transport America is higher than it would be if
it utilized only debt financing. The Company believes that the most meaningful
comparative measure of its operating efficiency is its pre-tax margin (earnings
before income taxes as a percentage of operating revenues).
Potential liability associated with accident, cargo loss,
workers' compensation and equipment damage in the truckload industry is large
and difficult to predict. The Company reserves in its financial statements the
estimated value of all known claims, damage and losses. These estimates are
determined by Company management with the assistance of claims administrators at
the insurance carrier or by third party claims administrators. The Company's own
claims administrators estimate the cost of damage to the Company-owned
equipment. Estimates are based on case facts and past experience and are
adjusted monthly as necessary. Estimates are subject to change due to discovery
of new facts or injuries, actual settlements or jury awards which may vary from
initial estimates.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of
expense items to operating revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
------------ ------------ ------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Salaries, wages and benefits................................ 27.7 28.8 29.1
Fuel, maintenance and other expenses........................ 14.1 14.4 16.0
Purchased transportation.................................... 28.4 25.8 23.4
Revenue equipment leases.................................... 4.0 4.9 6.6
Depreciation and amortization............................... 8.5 7.1 5.1
Insurance, claims and damage................................ 3.2 4.3 4.7
Taxes and licenses.......................................... 1.8 2.0 2.4
Communications.............................................. 1.2 1.4 1.5
Other general and administrative expenses................... 3.2 3.7 4.0
Gain on sale of equipment................................... (0.2) (1.2) (.5)
Interest expense............................................ 1.6 1.4 1.6
------- ------- -------
Earnings before income taxes.................................... 6.5 7.4 6.1
Provision for income taxes...................................... 2.7 3.2 2.8
------- ------- -------
Net earnings................................................... 3.8% 4.2% 3.3%
======== ======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Operating revenues increased 14.1% to $164.7 million for the year
ended December 31, 1996 from $144.3 million for the year ended December 31,
1995. Increases in freight volumes from existing customers continued as the
primary source of revenue growth. Revenues per mile, excluding fuel surcharges
were $1.28 per mile for both 1996 and 1995, a reflection of continued soft
demand and industry overcapacity which limited opportunities for rate increases.
Equipment utilization, as measured by average revenues per tractor per week was
$2,736 during 1996, compared to $2,739 during 1995.
The pre-tax margin (earnings before income taxes as a percentage
of operating revenues) declined to 6.5% for 1996 from 7.4% for 1995. Excluding
gain on sale of equipment, pre-tax margin was 6.3% and 6.2% for 1996 and 1995,
respectively. As measured by average annual revenues per non-driver employee,
efficiency improved 10.3% to $526,700 for 1996 from $477,300 for 1995. Salaries,
wages and benefits decreased as a percentage of operating revenues to 27.7% for
1996 from 28.8% for 1995. Independent contractor miles increased 24% due to an
increase in the number of contractors to 445 at December 31, 1996 from 401 at
December 31, 1995. Correspondingly, purchased transportation increased as a
percentage of operating revenues to 28.4% for 1996 from 25.8% in 1995. Fuel,
maintenance and other expense decreased as a percentage of operating revenues to
14.1% for 1996 from 14.4% for 1995 as a result of the increase in independent
contractor miles as a percentage of total miles, and partially offset by higher
fuel costs in 1996 when compared to 1995. Average miles per gallon for
Company-owned tractors rose to 6.4 for 1996 from 6.3 for 1995 due to use of more
fuel efficient engines. Revenue equipment leases decreased as a percentage of
operating revenues to 4.0% for 1996 from 4.9% for 1995 principally as a result
of an increase in independent contractors and the expanded use of debt-financed
equipment. Depreciation and amortization increased to 8.5% for 1996 from 7.1%
for 1995 due to purchases of new revenue equipment and replacement of leased
equipment with debt-financed equipment. Improved accident and claims experience
in 1996 as well as favorable premium rates for policies renewed in 1996 resulted
in a decline of insurance, claims and damage expense as a percentage of
operating revenues to 3.2% in 1996 from 4.3% in 1995. Net interest expense
increased as a percentage of operating revenues to 1.6% for 1996 from 1.4% for
1995 primarily as a result of increased debt-financed equipment purchases in
1996, when compared to 1995.
Gain on the disposition of equipment was $0.3 million in 1996,
compared to a gain of $1.8 million in 1995, as a result of the fewer number of
equipment dispositions in 1996 when compared to 1995.
The provision for income taxes declined as a percentage of
operating revenues to 2.7% for 1996 from 3.2% for 1995. The effective tax rate
for 1996 was 41.0%, compared to the tax rate for 1995 of 43.0%. The lower
effective rate in 1996 was due primarily to a continued decline in Company per
diem payments, which are not fully deductible for income tax purposes, when
compared to 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 $6.3 million, or 3.8% of operating revenues, for the year ended
December 31, 1996 from $6.1 million, or 4.2% of operating revenues, for the year
ended December 31, 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Operating revenues increased 13.2% to $144.3 million for the year
ended December 31, 1995 from $127.4 million for the year ended December 31,
1994. Increases in freight volumes from existing customers continued as the
primary source of revenue growth. Revenues per mile were unchanged at $1.28 per
mile for both 1995 and 1994, a reflection of soft demand and industry
overcapacity which contributed to higher empty miles as a percentage of total
miles driven and which limited opportunities for rate increases. Equipment
utilization, as measured by average revenues per tractor per week, increased
from $2,718 during 1994 to $2,739 during 1995.
The pre-tax margin (earnings before income taxes as a percentage
of operating revenues) improved to 7.4% for 1995 from 6.1% for 1994. As measured
by average annual revenues per non-driver employee, efficiency improved 4.6% to
$477,300 for 1995 from $456,100 for 1994. Salaries, wages and benefits decreased
as a percentage of operating revenues to 28.8% for 1995 from 29.1% for 1994.
Independent contractor miles increased 25% due to an increase in the number of
contractors to 401 at December 31, 1995 from 303 at December 31, 1994.
Correspondingly, purchased transportation increased as a percentage of operating
revenues to 25.8% for 1995 from 23.4% in 1994. Fuel, maintenance and other
expense decreased as a percentage of operating revenues to 14.4% for 1995 from
16.0% for 1994 as a result of the increase in independent contractor miles as a
percentage of total miles. Average miles per gallon for Company-owned tractors
rose to 6.29 for 1995 from 6.05 for 1994 due to use of more fuel efficient
engines. Revenue equipment leases decreased as a percentage of operating
revenues to 4.9% for 1995 from 6.6% for 1994 principally as a result of an
increase in independent contractors and the expanded use of debt-financed
equipment. Depreciation and amortization increased to 7.1% for 1995 from 5.1%
for 1994 due to purchases of new revenue equipment and replacement of leased
equipment with debt-financed equipment. As result of improved accident and
claims experience in 1995, partially offset by additional premium expense for
expanded insurance coverage added in late 1994, insurance, claims and damage
expense declined as a percentage of operating revenues to 4.3% in 1995 from 4.7%
in 1994. Net interest expense decreased as a percentage of operating revenues to
1.4% for 1995 from 1.6% for 1994 primarily as a result of the use of proceeds
from the Company's public stock offering in late 1994 to complete revenue
equipment purchases in 1995 which otherwise would have been debt-financed.
Gain on the disposition of equipment was $1.8 million in 1995,
compared to a gain of $0.6 million in 1994, as a result of favorable used
equipment market conditions in 1995 and the greater number of equipment
dispositions in 1995 than in 1994.
The provision for income taxes increased as a percentage of
operating revenues increased to 3.2% for 1995 from 2.8% for 1994. The effective
tax rate for 1995 was 43.0% while the tax rate for 1994 was 45.6%. The lower
effective rate in 1995 was due to a decline in Company per diem payments, which
are not fully deductible for income tax purposes, when compared to 1994.
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 $6.1 million, or 4.2% of operating revenues, for the year ended
December 31, 1995 from $4.2 million, or 3.3% of operating revenues, for the year
ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $25.6 million,
$13.5 million, and $14.7 million for the years ended 1996, 1995, and 1994,
respectively. The working capital deficit was $5.8 million at December 31, 1996,
compared to the $6.3 million deficit at December 31, 1995. 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 its reserves and liquidity are adequate for
expected future claim payments.
Investing activities consumed $20.2 million in 1996, primarily
for the purchase of new revenue equipment including 100 tractors and 420
trailers, less proceeds from the disposition of 105 used tractors and 97 used
trailers. These expenditures were financed through a combination of cash
provided by operating activities, long-term debt financing, and proceeds from
equipment dispositions. As of December 31, 1996 the Company had purchase
commitments totaling $12.1 million for the purchase of revenue equipment.
Financing has been arranged for $5.6 million of the revenue equipment purchase
commitment. The balance of the revenue equipment purchase commitment is expected
to be financed by cash flows from operating activities and proceeds from the
disposition of used equipment.
Net cash provided by financing activities in 1996 was $0.8
million. The primary source of financing was the issuance of $15.6 million of
long-term debt associated with the purchase of revenue equipment. Payments under
the Company's term loan agreements were $12.2 million. The Company also received
$0.5 million of proceeds from the exercise of options and warrants for the
purchase of common stock.
The Company maintains an $10 million working capital line of
credit secured primarily by its accounts receivable. This facility is used to
support letter of credit requirements associated with the Company's self-insured
retention insurance program and to meet short-term operating cash requirements.
As of December 31, 1996, there was no outstanding debt under this line of credit
and $2.8 million of outstanding letters of credit which reduced the amount
available under the line of credit. Management believes that its relationship
with the current lender is satisfactory and anticipates that the Company's
credit facility will be renewed prior to the May, 1997 expiration date.
SEASONALITY
As is typical in the truckload industry, the Company's operations
fluctuate seasonally according to customer shipping patterns which tend to peak
in the summer and fall, then increase again after the holiday and winter
seasons. Operating expenses also tend to be higher during the cold weather
months, primarily due to poorer fuel economy and increased maintenance costs.
INFLATION
Many of the Company's operating expenses are sensitive to the
effects of inflation, which could result in higher operating costs. The effects
of inflation on the Company's business have not been significant during the last
three years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements described in Item 14(a)1 of this report
are incorporated herein. See "Quarterly Financial Data" appearing on page F-19
of the audited financial statements which are incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning the Company's executive officers,
reference is made to the information set forth under the caption "Executive
Officers of the Registrant" located in Item 1 on page 8 of this Form 10-K. For
information concerning the Company's directors and compliance by the Company's
directors, executive officers and significant shareholders with the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended,
reference is made to the information set forth under the captions "Election of
Directors" and "Beneficial Ownership of Common Stock," respectively, in the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
May 13, 1997 to be filed pursuant to Regulation 14A, which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption
"Executive Compensation and Other Information" in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on May 13, 1997 to be filed
pursuant to Regulation 14A, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to the information set forth under the caption
"Beneficial Ownership of Common Stock" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 13, 1997 to be filed pursuant
to Regulation 14A, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this Form 10-K
1. Financial Statements
Form 10-K
Page Reference
--------------
Index to Financial Statements ........... F-1
Independent Auditors' Report ............ F-2
Balance Sheets .......................... F-3
Statements of Earnings .................. F-5
Statements of Stockholders' Equity ...... F-6
Statements of Cash Flows ................ F-7
Notes to Financial Statements ........... F-8
2. Financial Statement Schedules
Included in Part IV of this report:
Independent Auditors' Report on
Schedule VIII ...................... S-1
Schedule VIII - Valuation and
Qualifying Accounts ................ S-2
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Page
<S> <C>
3.1 Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File No.
33-84140) as declared effective by the
Commission on November 3, 1994 (the "1994
S-1")).
3.2 Bylaws (incorporated by reference to Exhibit
3.2 to the 1994 S-1).
10.1 Employment Agreement with Robert Johnson
(incorporated by reference to Exhibit 10.1 to
the 1994 S-1).
10.2 1986 Stock Option Plan, as amended.
10.3 401(k) Retirement Plan (incorporated by
reference to Exhibit 10.3 to the 1994 S-1).
10.4 Revolving Credit Agreement dated as of
December 9, 1992, as amended on March 15, 1993
and April 29, 1994, between National City Bank
of Minneapolis and the Company, along with the
Promissory Notes and Security Agreement
(incorporated by reference to Exhibit 10.4 to
the 1994 S-1).
10.5 Form of warrants granted to officers,
directors and consultants (incorporated by
reference to Exhibit 10.5 to the 1994 S-1).
10.11 Form of Vehicle Lease and Independent
Contractor Agreement.
10.12 Employee Stock Purchase Plan (incorporated by
reference to Form S-8 which was filed on
January 31, 1996 (File No. 333-934)).
10.13 1995 Stock Plan, as amended.
11.1 Statement re: Computation of Per Common Share
Earnings ...................................... 44
23.1 Independent Auditors' Consent.................. 45
27 Financial Data Schedule........................
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1996.
(c) Exhibits
Reference is made to Item 14(a)3.
(d) Schedules
Reference is made to Item 14(a)2.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
("Registrant")
Dated: March 28, 1997 By /s/James B. Aronson
James B. Aronson
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature and Title Date
------------------- ----
/s/ James B. Aronson March 28, 1997
James B. Aronson
Chief Executive Officer
and Director
(Principal Executive Officer)
/s/Robert J. Meyers March 28, 1997
Robert J. Meyers
Chief Financial Officer and
Chief Information Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Dennis M. Mathisen March 28, 1997
Dennis M. Mathisen, Chairman
of the Board
/s/ Anton J. Christianson March 28, 1997
Anton J. Christianson, Director
/s/ Michael J. Paxton March 28, 1997
Michael J. Paxton, Director
/s/ Kenneth J. Roering March 28, 1997
Kenneth J. Roering, Director
Minneapolis, Minnesota
February 7, 1997
Independent Auditors' Report
The Board of Directors and Stockholders
Transport Corporation of America, Inc.
Under date of February 7, 1997, we reported on the balance sheets of Transport
Corporation of America, Inc. as of December 31, 1996 and 1995, and the related
statements of earnings, stockholders' equity, and cash flows for each of the
years on the three-year period ended December 31, 1996, as contained in the 1996
annual report to stockholders. These financial statements, and our report
thereon, are incorporated by reference in the annual report on Form 10-K for the
year 1996. In connection with our audits of the aforementioned financial
statements, we also have audited the related financial statement schedule as
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1997
SCHEDULE VIII
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
Valuation and Qualifying Accounts
Column A Column B Column C Column D Column F
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
-------------------------------
Additions
Balance at charged to Charge to Balance
beginning cost and other at end
Description of year expense accounts Deductions of year
----------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts
(deducted from accounts receivable) $ 304,000 60,000 51,000 (1) 313,000
=========== ============ ============= ============== ==============
Year ended December 31, 1995
Allowance for doubtful accounts
(deducted from accounts receivable) $ 238,000 60,000 (6,000) 304,000
=========== ============ ============= ============== ==============
Year ended December 31, 1994
Allowance for doubtful accounts
(deducted from accounts receivable) $ 219,000 48,000 29,000 238,000
=========== ============ ============= ============== ==============
(1) Accounts deemed to be uncollectible $60,000
Recoveries of amount previously deemed to
be uncollectible (9,000)
-------
$51,000
-------
</TABLE>
TRANSPORT CORPORATION
OF AMERICA, INC.
Financial Statements as of
December 31, 1996 and 1995
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report.............................................F-2
Balance Sheets...........................................................F-3
Statements of Earnings...................................................F-5
Statements of Stockholders' Equity.......................................F-6
Statements of Cash Flows.................................................F-7
Notes to Financial Statements............................................F-8
Independent Auditors' Report
The Board of Directors and Stockholders
Transport Corporation of America, Inc.
We have audited the balance sheets of Transport Corporation of America, Inc. as
of December 31, 1996 and 1995, and the related statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Transport Corporation of
America, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
Balance Sheets
December 31
---------------------------
Assets 1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $6,340,991 $ 165,173
Trade receivables, less allowance for doubtful accounts
of $ 313,000 in 1996 and $304,000 in 1995 (note 2) 12,617,377 13,040,508
Other receivables 656,753 3,322,095
Operating supplies 810,180 963,490
Deferred income tax benefit (notes 1 and 7) 2,113,000 2,538,000
Prepaid expenses and tires 2,102,271 1,891,670
------------ -----------
Total current assets 24,640,572 21,920,936
Revenue equipment, net of accumulated depreciation
of $25,121,000 in 1996 and $16,161,000 in 1995
(note 4) 69,570,105 65,042,066
Property and other equipment (note 4):
Land, buildings, and improvements 11,042,479 8,832,102
Other equipment 5,183,786 4,634,034
Less accumulated depreciation (4,879,203) (4,051,995)
------------ -----------
Net property and other equipment 11,347,062 9,414,141
Other assets, net 3,113,171 3,080,043
------------ -----------
Total assets $108,670,910 $99,457,186
============ ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
December 31
-------------------------
Liabilities and Stockholders' Equity 1996 1995
---------- ----------
<S> <C> <C>
Current liabilities:
Note payable to bank (note 2) $ 0 $ 2,230,000
Current maturities of long-term debt (note 4) 15,258,593 9,314,272
Accounts payable 2,607,861 2,997,255
Checks issued in excess of cash balances 350,950 1,152,928
Due to independent contractors 1,385,364 980,075
Accrued expenses (note 3) 10,837,326 11,544,928
---------- ----------
Total current liabilities 30,440,094 28,219,458
Long term debt, less current maturities (note 4) 21,837,713 24,436,325
Deferred income taxes (note 7) 13,310,000 10,494,000
Commitments (notes 6 and 9)
Stockholders' equity (note 5):
Common stock, $.01 par value; 15,000,000 shares authorized;
6,496,039 and 6,420,619 shares issued and outstanding
as of December 31, 1996 and 1995, respectively 64,960 64,206
Additional paid-in capital 23,851,516 23,370,469
Retained earnings 19,166,627 12,872,728
---------- ----------
Total stockholders' equity 43,083,103 36,307,403
---------- ----------
Total liabilities and stockholders' equity $108,670,910 $99,457,186
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
Statements of Earnings
Years ended December 31
---------------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Operating revenues $ 164,666,098 $ 144,254,491 $ 127,424,807
Operating expenses:
Salaries, wages and benefits 45,515,262 41,479,035 37,106,582
Fuel, maintenance and other expenses 23,237,783 20,687,547 20,433,026
Purchased transportation 46,760,672 37,257,678 29,754,189
Revenue equipment leases 6,489,621 7,090,426 8,422,542
Depreciation and amortization 13,966,419 10,273,111 6,535,035
Insurance, claims and damage 5,325,862 6,230,243 6,010,338
Taxes and licenses 2,952,332 2,873,096 3,063,980
Communications 1,974,625 1,977,816 1,880,395
Other general and administrative expenses 5,323,586 5,388,994 5,096,162
Gain on sale of equipment (275,582) (1,754,810) (642,058)
------------- ------------- -------------
Total operating expenses 151,270,580 131,503,136 117,660,191
------------- ------------- -------------
Operating income 13,395,518 12,751,355 9,764,616
Interest expense (2,823,839) (2,232,702) (2,134,318)
Interest income 90,220 194,454 103,094
------------- ------------- -------------
Interest expense, net (2,733,619) (2,038,248) (2,031,224)
------------- ------------- -------------
Earnings before income taxes 10,661,899 10,713,107 7,733,392
Provision for income taxes (note 7) 4,368,000 4,607,000 3,524,000
------------- ------------- -------------
Net earnings (note 5) $ 6,293,899 $ 6,106,107 $ 4,209,392
============= ============= =============
Net earnings per weighted common and
common equivalent share $ 0.94 $ 0.91 $ 0.78
------------- ------------- -------------
Weighted average number of common and
common equivalent shares outstanding 6,718,351 6,709,222 5,382,302
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
Statements of Stockholders' Equity
Years ended December 31, 1996, 1995, and 1994
Common Additional Total
------------------------- paid-in Retained stockholders'
Shares Amount capital earnings equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,631,244 $ 46,312 $ 8,577,083 $ 2,557,229 $11,180,624
Issuance of common stock 1,450,113 14,501 14,420,282 0 14,434,783
Exercise of common stock
options and warrants 248,250 2,483 361,987 0 364,470
Net earnings 0 0 0 4,209,392 4,209,392
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 6,329,607 63,296 23,359,352 6,766,621 30,189,269
Exercise of common stock
options and warrants 91,012 910 11,117 0 12,027
Net earnings 0 0 0 6,106,107 6,106,107
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 6,420,619 64,206 23,370,469 12,872,728 36,307,403
Exercise of common stock
options and warrants 75,420 754 481,047 0 481,801
Net earnings 0 0 0 6,293,899 6,293,899
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 6,496,039 $ 64,960 $23,851,516 $19,166,627 $43,083,103
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
TRANSPORT CORPORATION OF AMERICA, INC.
Statements of Cash Flows
Years ended December 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 6,293,899 $ 6,106,107 $ 4,209,392
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 13,966,419 10,273,111 6,535,035
Gain on sale of equipment (275,582) (1,754,810) (642,058)
Deferred income taxes 3,241,000 2,850,000 1,706,000
Changes in operating assets and liabilities:
Trade receivables 423,131 (1,907,653) (2,193,026)
Other receivables 2,665,342 (2,604,193) (237,999)
Operating supplies 153,310 (400,011) 9,211
Prepaid expenses and tires (210,601) (215,925) (358,287)
Accounts payable (389,394) 128,889 472,800
Due to independent contractors 405,289 308,950 244,448
Accrued expenses (707,602) 699,618 4,965,679
------------ ------------ ------------
Net cash provided by operating activities 25,565,211 13,484,083 14,711,195
------------ ------------ ------------
Investing activities:
Payments for purchases of revenue equipment (21,132,518) (41,216,303) (22,600,304)
Payments for purchases of property and other equipment (3,303,334) (1,937,911) (5,036,995)
(Increase) decrease in other assets 82,812 221,500 109,176
Proceeds from sales of equipment 4,168,115 9,806,998 4,708,249
------------ ------------ ------------
Net cash used in investing activities (20,184,925) (33,125,716) (22,819,874)
------------ ------------ ------------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 481,801 12,027 14,799,253
Proceeds from issuance of long-term debt 15,591,819 17,897,080 15,428,955
Principal payments on long-term debt (12,246,110) (7,470,911) (17,211,073)
Proceeds from issuance of notes payable to bank 21,888,000 11,720,000 0
Principal payments on notes payable to bank (24,118,000) (9,490,000) 0
Proceeds from issuance of notes payable, revolving equipment line 0 0 1,130,760
Principal payments on notes payable, revolving equipment line 0 0 (1,444,150)
Change in net checks issued in excess of cash balances (801,978) (233,432) 125,885
------------ ------------ ------------
Net cash provided by financing activities 795,532 12,434,764 12,829,630
------------ ------------ ------------
Increase (decrease) in cash 6,175,818 (7,206,869) 4,720,951
Cash and cash equivalents, beginning of year 165,173 7,372,042 2,651,091
------------ ------------ ------------
Cash and cash equivalents, end of year $ 6,340,991 $ 165,173 $ 7,372,042
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,806,400 $ 2,115,034 $ 2,096,637
Income taxes, net 1,136,516 2,354,588 760,426
</TABLE>
See accompanying notes to financial statements.
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Financial Statements
Years ended December 31, 1996, 1995, and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF
BUSINESS
NATURE OF BUSINESS
Transport Corporation of America, Inc. (the Company) is a
truckload motor carrier which is engaged in the
transportation of a variety of general commodities for
customers primarily in the midwestern and eastern half of
the United States and portions of Canada, pursuant to
nationwide operation authority. Customer freight is
transported by Company equipment and by independent
contractors. Payments to Company drivers and independent
contractors are primarily based upon miles driven.
REVENUE RECOGNITION
Operating revenues are recognized when the freight to be
transported has been loaded. Amounts payable to
independent contractors for purchased transportation, to
Company drivers for wages and any other direct expenses
are accrued when the related revenue is recognized. If the
Company had used the method whereby revenues and related
direct costs are recognized when the shipment is
completed, there would not have been a material effect on
the Company's financial position, results of operations,
or liquidity on either an annual or quarterly basis.
REVENUE EQUIPMENT, PROPERTY, AND OTHER EQUIPMENT
Revenue equipment, property, and other equipment are recorded at
cost. Depreciation, including amortization of capitalized
leases, is computed using the straight-line basis over the
estimated useful lives of the assets or the lease periods,
whichever is shorter. The estimated useful lives and
salvage values are as follows:
Years Salvage value
Tractors 5 25%
Trailers 5 40-50%
Buildings 30 0
Other equipment, including
computers and furniture 3-7 0
TIRES
The cost of tires, less a per tire salvage value, purchased
with new revenue equipment is amortized over 30 and 48
months for tractors and trailers, respectively. The
current portion of such cost is included in prepaid
expenses and the long-term portion is recorded as other
assets. Replacement tires and tire recapping costs are
expensed when placed into service.
IMPAIRMENT OF LONG-LIVED ASSETS
The company adopted the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of, on January 1, 1996. This
Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less
costs to sell. Adoption of this Statement had no impact on
the Company's financial position or results of operations.
OPERATING SUPPLIES
Operating supplies representing repair parts, fuel, and
replacement tires for revenue equipment are recorded at
cost.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ESTIMATED LIABILITY FOR INSURANCE CLAIMS
The Company has automobile liability, workers' compensation
and health insurance coverage under both deductible and
retrospective rating policies. The Company estimates and
accrues a liability for its share of ultimate settlements
using all available information, including the services of
a third party insurance risk claims administrator, to
establish reserve levels for each occurrence based on the
facts and circumstances of the occurrence coupled with the
Company's history of such claims. The Company accrues for
workers' compensation and automobile liability claims when
reported, typically the same day as the occurrence. The
recorded expense depends upon actual loss experience and
changes in estimates of settlement amounts for open claims
which have not been fully resolved. The Company provides
for adverse loss development in the period when new
information so dictates. However, final settlement of
these claims could differ materially from the amounts the
Company has accrued at year-end. The Company accrues for
health insurance claims reported, as well as for claims
incurred but not reported based upon the Company's past
experience.
There is currently one automobile liability claim against the
Company which, in the aggregate, seeks an amount in excess
of the Company's $1 million liability coverage in place at
the time of the occurrence. The Company has evaluated its
exposure to this claim and believes that in the event of
settlement in excess of the liability coverage, any such
settlement would not have a material adverse effect on its
financial condition or results of operation.
STOCK-BASED EMPLOYEE COMPENSATION
The Company follows the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, in accounting
for its stock-based employee compensation plans. The
disclosure requirements of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation, are found in footnote number 5 to these
financial statements.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences
between the amounts presented on the financial statements
for the existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that
includes the enactment date.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Net earnings per common and common equivalent share have been
computed by dividing net earnings by the weighted average
number of common and common equivalent shares outstanding
during the year. All common share options and warrants
granted by the Company during the 12-month period
preceding the initial filing date of the public offering,
which was completed in the fourth quarter of 1994, have
been included in the calculation of the weighted average
common and common equivalent shares outstanding as if they
were outstanding for all periods. Such options are
presented using the treasury stock and if-converted
methods with an offering price of $11 per share through
the quarter ended September 30, 1994. Common equivalent
shares included in the computation represent shares
issuable upon the assumed exercise of stock options and
warrants. Subsequent to September 30, 1994 all options and
warrants are included under the treasury stock method
using the average market price of the Company's stock
during the period.
The effect of full dilution using the year-end price of the
Company's shares is immaterial.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial assets and
liabilities, because of their short-term nature,
approximates fair value. The fair value of the Company's
borrowing, if recalculated based on current interest
rates, would not significantly differ from the recorded
amounts.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company
considers all highly liquid investments with initial
maturities of three months or less to be cash equivalents.
(2) NOTE PAYABLE TO BANK
The Company has a $10,000,000 bank line of credit which
expires in May 1997 and is secured by accounts receivable.
In addition to short-term needs, this credit facility
provides for letters of credit associated with the
Company's insurance program. At December 31, 1996, there
were letters of credit outstanding totaling $2,830,000
under this program.
The following is a summary of data relating to this short-term
financing:
<TABLE>
<CAPTION>
Years ended
December 31
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Outstanding balance at year end $ 0 $2,230,000
Average amount outstanding 360,000 143,000
Maximum amount outstanding 3,920,000 2,470,000
Weighted average interest rate during the year 8.3% 9.6%
</TABLE>
(3) ACCRUED EXPENSES
Accrued expenses are as follows:
December 31
---------------------------
1996 1995
----------- -----------
Salaries and wages $ 2,767,973 $ 2,843,640
Insurance, claims, and damage 5,701,584 6,391,970
Independent contractor escrows 811,778 675,023
Taxes, other than income 452,425 670,628
Current income tax 620,699 24,916
Interest 266,840 249,402
Other 216,027 689,349
----------- -----------
$10,837,326 $11,544,928
=========== ===========
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
---------------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Notes payable to banks and other financial institutions with maturities through
September 2000, secured by certain revenue equipment:
Interest rates ranging from 6.8% to 8.1% $ 31,601,192 $26,317,258
Interest rate floating on a reference rate which was 7.6% at
December 31, 1996 4,063,911 5,184,017
Notes payable for other equipment, paid in full in 1996: 0 390,550
Obligations under capital leases payable with maturities through December 1999:
Interest rates ranging from 4.4% to 12.0%, secured by certain
revenue equipment and other equipment 1,204,989 1,374,546
Mortgage notes payable with maturities through October 2002, secured by real estate:
Interest rates of 9.0% 226,214 484,226
------------- ------------
Total long-term debt 37,096,306 33,750,597
Less current maturities of long-term debt 15,258,593 9,314,272
------------- ------------
Long-term debt, less current maturities $ 21,837,713 $24,436,325
============= ============
</TABLE>
The aggregate annual maturities of long-term debt at December
31, 1996 are as follows:
Year ending
December 31 Amount
1997 $ 15,258,593
1998 8,985,169
1999 9,435,105
2000 3,336,644
2001 45,262
Thereafter 35,533
-------------
$ 37,096,306
=============
(5) STOCKHOLDERS' EQUITY
WARRANTS
At December 31, 1996 and 1995, the Company had outstanding
warrants for the purchase of 184,125 and 187,875 shares of
the Company's common stock, respectively, at prices
ranging from $1.56 to $5.20 per share. All of the warrants
are currently exercisable and have expiration dates
through 1999. During 1996 and 1995, warrants for the
purchase of 3,750 shares and 94,768 shares, respectively,
were exercised in cashless transactions. These
transactions resulted in the issue of 3,253 shares and
67,322 shares in 1996 and 1995, respectively. No
additional warrants were granted during either 1996 or
1995.
<TABLE>
<CAPTION>
Warrant transactions are summarized as follows:
1996 1995
------- -------
<S> <C> <C>
Warrants outstanding at beginning of year: 187,875 282,643
Warrants exercised 3,750 94,768
------- -------
Warrants outstanding at end of year 184,125 187,875
======= =======
Weighted average price of warrants outstanding at end of year $ 1.99 $ 1.98
======= =======
</TABLE>
STOCK OPTION PLANS
The Company has adopted two stock option plans which allow for
the grant of options to officers and other key employees
to purchase common shares at an exercise price not less
than 100% of fair market value on the dates of grant.
Officers and other key employees of the Company who are
responsible for, or contribute to, the management, growth
and/or profitability of the business of the Company, as
well as selected consultants under contract to the Company
and non-employee directors are eligible to be granted
awards. These option plans allow for the grant of 725,000
shares. Options are generally exercisable in cumulative
annual increments over periods from one to four years. At
December 31, 1996 and 1995, the exercise prices of
outstanding options ranged from $1.40 to $13.44 for both
periods.
Option transactions are summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 301,780 307,470 $6.72 $5.86
Granted 37,277 18,000 11.83 12.65
Cancelled (16,740) 0 10.66 0
Exercised (69,880) (23,690) 6.57 .51
-------- -------- --------- -------
Options outstanding at end of year 252,437 301,780 $7.25 $6.72
-------- -------- --------- -------
Options exercisable at end of year 177,590 147,240 $6.13 $5.86
======== ======== ========= =======
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
In 1996, the stockholders approved and the Company
implemented an Employee Stock Purchase Plan ("the Plan").
The purpose of the Plan is to encourage the purchase by
employees of shares of Common Stock in the Company in
order to provide a greater community of interest between
the Company and its employees. There are 100,000 shares of
the Company's Common Stock reserved for issuance under the
Plan, which terminates on December 31, 2000.
The Plan permits employees to purchase shares of Common Stock
of the Company at a price equal to the lesser of 85% of
the market value of the Common Stock at the commencement
or termination dates of each phase. Each year, during the
term of the plan, there are two six-month phases
commencing on January 1 and July 1, respectively, except
for the initial phase of 1996, which commenced on March 1,
1996. Employees who are regularly scheduled to work more
than 20 hours per week and who are less than 5% owners are
eligible to participate in the program via payroll
deductions. Purchases are limited to 10% of a
participant's base pay during the respective phase.
During 1996, employees purchased 2,287 shares at an average
price of $9.98 per share.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION. Accordingly, no
compensation cost has been recognized with respect to the
Company's stock option plans or the Employee Stock
Purchase Plan. Had compensation cost been determined on
the basis of fair value pursuant to the provisions of FAS
No. 123, net earnings and net earnings per share would
have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Net earnings:
As reported $ 6,293,899 $ 6,106,107
============= =============
Pro forma $ 6,233,809 $ 6,081,381
============= =============
Net earnings per weighted common and common equivalent share:
As reported $ 0.94 $ 0.91
============= =============
Pro forma $ 0.93 $ 0.91
============= =============
</TABLE>
The above pro forma amounts may not be representative of the
effects on reported net earnings for future years. The
fair value of each option grant is estimated on the date
of grant using the Black-Scholes options-pricing model
with the following weighted-average assumptions used for
grants in 1996 and 1995:
1996 1995
------- -------
Dividend yield 0.0% 0.0%
Expected volatility 40.0% 45.0%
Risk-free interest rate 6.21% 6.21%
Expected lives 5 years 5 years
======= =======
(6) EMPLOYEE BENEFIT PLANS
The Company has a savings retirement plan ("the Plan") for
eligible employees under Section 401(k) of the Internal
Revenue Code. The Plan allows employees to defer up to 16%
of their compensation on a pretax basis. The Company may,
at its discretion, match a portion of the employee
deferrals. During 1996, 1995, and 1994 the Company
contributed amounts equal to one-fourth of the employee
deferrals, up to 1% of each participant's compensation.
For participants who are employed as truck drivers with
pay based on actual miles driven, the Company may also
elect to contribute 1/2(cent) and 1(cent) per paid
mile driven for drivers with over one and two years of
service, respectively. The Company contributed $323,000 in
1996, $480,000 in 1995, and $455,000 in 1994 to the Plan
on behalf of all employees.
In 1995 the Company terminated its noncontributory Employee
Stock Ownership Plans (ESOP). As a result, all ESOP
participants became fully vested and a lump sum
distribution was completed in December 1995.
(7) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
---------- ---------- ----------
<S> <C> <C> <C>
For the year ended December 31, 1996:
Federal $ 896,000 $2,603,000 $3,499,000
State 239,000 630,000 869,000
---------- ---------- ----------
$1,135,000 $3,233,000 $4,368,000
========== ========== ==========
For the year ended December 31, 1995:
Federal $1,385,000 $2,327,000 $3,712,000
State 380,000 515,000 895,000
---------- ---------- ----------
$1,765,000 $2,842,000 $4,607,000
========== ========== ==========
For the year ended December 31, 1994:
Federal $1,515,000 $1,399,000 $2,914,000
State 303,000 307,000 610,000
---------- ---------- ----------
$1,818,000 $1,706,000 $3,524,000
========== ========== ==========
</TABLE>
The income tax expense differs from the "expected" tax expense
(computed by applying the U.S. federal corporate tax rate
of 34%) as follows for the years ended December 31, 1996,
1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Expected federal tax expense at statutory rates $ 3,625,000 $ 3,643,000 $ 2,629,000
Increases in taxes resulting from:
State income taxes, net of federal benefit 546,000 591,000 403,000
Expenses not deductible for tax purposes 250,000 373,000 486,000
Other (53,000) 0 6,000
----------- ----------- -----------
Actual tax expense $ 4,368,000 $ 4,607,000 $ 3,524,000
=========== =========== ===========
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and
deferred tax liabilities at December 31, 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Vacation accrual $ 226,000 $ 263,000
Allowance for doubtful accounts 121,000 118,000
Insurance, claims, and damage accruals 2,088,000 2,437,000
Alternative minimum tax credit carryforward 2,117,000 1,876,000
----------- -----------
Total deferred tax assets 4,552,000 4,694,000
----------- -----------
Deferred tax liabilities:
Equipment, principally due to differences in depreciation and
leases 15,749,000 12,650,000
----------- -----------
Net deferred tax liability $11,197,000 $ 7,956,000
=========== ===========
</TABLE>
At December 31, 1996, the Company has alternative minimum tax
credit carryforwards of approximately $2,117,000 which are
available to reduce future federal regular income taxes,
if any, over an indefinite period.
The Company has reviewed the need for a valuation allowance
relating to the deferred tax assets and has ascertained that no
allowance is needed.
(8) MAJOR CUSTOMERS
Sales to the Company's five largest customers represented 43%,
39%, and 34% of total revenues for 1996, 1995, and 1994,
respectively. One customer accounted for approximately 16%
of sales in 1996, 13% in 1995, and 11% in 1994.
(9) COMMITMENTS
REVENUE EQUIPMENT LEASES
The Company has entered into operating leases for certain
revenue equipment. The aggregate cost of this leased
equipment at the beginning of the leases was approximately
$26,642,000 at December 31, 1996.
Approximately $5,820,000 of the equipment is under
noncancellable operating leases of 36 to 60 months, with
the equipment reverting to the lessor at the end of lease
term.
Approximately $20,822,000 of the equipment is under TRAC
(terminal rental adjustment clause) operating leases, over
periods generally ranging from 48 to 72 months. Several of
these leases allow the Company to terminate the lease
anytime after a minimum lease term, ranging from 12 to 36
months. In exchange, the Company guarantees the lessor a
predetermined decreasing resale value. The guaranteed
resale value of equipment under TRAC leases, assuming
termination at the end of the noncancellable minimum lease
term, is approximately $10,349,000 through 1997, which
will be reduced by the sales proceeds of the equipment.
However, the Company typically continues the lease through
to the full term of the lease agreement. The full term
guaranteed termination values vary from 20% to 40% of the
original cost for tractors, van trailers, and
temperature-controlled trailers. Typically the lessor
assumes a portion of the residual risk for the condition
of the equipment upon termination of the contract.
Rental expense under these operating leases was approximately
$6,438,000 in 1996, $7,089,000 in 1995, and $8,181,000 in
1994.
Aggregate future minimum lease payments as of December 31, 1996
for the noncancellable portion of revenue equipment under
operating leases are as follows:
Years ending December 31:
1997 $2,742,879
1998 1,016,533
1999 804,826
2000 469,482
----------
$5,033,720
==========
OTHER LEASES
The Company leases two facilities with future minimum lease
payments of $12,500 which expire in 1997. During 1994 and
prior years, the Company also leased office and terminal
facilities. The total facility and computer equipment
operating lease expense was $138,300 in 1996, $151,758 in
1995, and $614,000 in 1994.
CAPITAL ADDITIONS
The Company has committed to purchase approximately $12.1
million of revenue equipment to be delivered during 1997.
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996:
Quarter First Second Third Fourth
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues $38,794,178 $41,225,259 $42,463,861 $42,182,800
Operating income 1,796,632 3,778,868 4,332,477 3,487,541
----------- ----------- ----------- -----------
Net earnings $ 645,179 $ 1,796,739 $ 2,119,071 $ 1,732,910
=========== =========== =========== ===========
Net earnings per
weighted common
and common
equivalent share $ .10 $ .27 $ .32 $ .26
=========== =========== =========== ===========
1995:
Quarter First Second Third Fourth
----------- ----------- ----------- -----------
Operating revenues $34,350,614 $34,972,128 $36,730,124 $38,201,625
Operating income 2,282,580 3,701,119 3,766,426 3,001,230
----------- ----------- ----------- -----------
Net earnings $ 1,046,356 $ 1,857,056 $ 1,859,731 $ 1,342,964
=========== =========== =========== ===========
Net earnings per
weighted common
and common
equivalent share $ .16 $ .28 $ .28 $ .20
=========== =========== =========== ===========
1994:
Quarter First Second Third Fourth
----------- ----------- ----------- -----------
Operating revenues $29,257,391 $32,339,558 $33,222,430 $32,605,428
Operating income 898,369 3,205,844 3,072,721 2,587,682
----------- ----------- ----------- -----------
Net earnings $ 221,471 $ 1,469,920 $ 1,390,360 $ 1,127,641
=========== =========== =========== ===========
Net earnings per
weighted common
and common
equivalent share $ .04 $ .29 $ .27 $ .19
=========== =========== =========== ===========
</TABLE>
(11) SUBSEQUENT EVENT
On January 29, 1997, the company announced a stock repurchase
program for up to 350,000 shares of its common stock.
TRANSPORT CORPORATION OF AMERICA, INC.
1986 EMPLOYEE STOCK OPTION PLAN
1. Purpose. The purpose of the Transport Corporation of America, Inc.
1986 Employee Stock Option Plan is to provide a continuing, long-term incentive
to selected eligible officers and key employees of Transport Corporation of
America, Inc. (the "Corporation") and of any subsidiary corporation of the
Corporation (the "Subsidiary"), as herein defined; to provide a means of
rewarding outstanding performance; and to enable the Corporation to maintain a
competitive position to attract and retain key personnel necessary for continued
growth and profitability.
2. Definitions. The following words and phrases as used herein shall
have the meanings set forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Change in Control" shall mean the time at which any entity, person
or group (other than the Corporation, any subsidiary of the Corporation or any
savings, pension or other benefit plan for the benefit of any employees of the
Corporation or its subsidiaries) which prior to such time beneficially owned
less than twenty percent (20%) of the then outstanding Common Stock acquires
such additional shares of Common Stock in one or more transactions, or a series
of transactions, such that following such transaction or transactions such
entity, person or group beneficially owns, directly or indirectly, twenty
percent (20%), or more, of the outstanding Common Stock.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4 "Committee" shall mean a committee of the Board as may be
designated by the Board, from time to time, for the purpose of administering
this plan as contemplated by Article 4 hereof.
2.5 "Common Stock" shall mean the common stock, par value $.0l per
share, of the Corporation.
2.6 "Corporation" shall mean Transport Corporation of America, Inc., a
Minnesota corporation.
2.7 "Fair Market Value" of any security on any given date shall be
determined by the Committee as follows: (a) if the security is listed for
trading on one or more national securities exchanges (including the NASDAQ
National Market System), the reported last sales price on the principal such
exchange on the date in question, or if such security shall not have been traded
on such principal exchange on such date, the reported last sales price on such
principal exchange on the first day prior thereto on which such security was so
traded; or (b) if the security is not listed for trading on a national
securities exchange (including the NASDAQ National Market System) but is traded
in the over-the-counter market, the mean of the highest, and lowest bid prices
for such security on the date in question, or if there are no such bid prices
for such security on such date, the mean of the highest and lowest bid prices on
the first day prior thereto on which such prices existed; or (c) if neither (a)
nor (b) is applicable, by any means deemed fair and reasonable by the Committee,
which determination shall be final and binding on all parties.
2.8 "ISO" shall mean any stock option granted pursuant to this Plan as
an "incentive stock option" within the meaning of Section 422 the Code
2.9 "Non-Employee Director" shall mean a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act, as amended,
or any successor rule.
2.10 NQO" shall mean any stock option granted pursuant to this Plan
which is not an ISO.
2.11 "Option" shall mean any stock option granted pursuant to this
Plan, whether an ISO or an NQO.
2.12 "Optionee" shall mean any person who is the holder of an Option
granted pursuant to this Plan.
2.13 "Outside Director" shall mean a director who (a) is not a current
employee of the Corporation or any member of an affiliated group which includes
the Corporation; (b) is not a former employee of the Corporation who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year; (c) has not been an officer of the
Corporation; (d) does not receive remuneration from the Corporation, either
directly or indirectly, in any capacity other than as a director, except as
otherwise permitted under Code Section 162(m) and regulations thereunder. For
this purpose, remuneration includes any payment in exchange for goods or
services. This definition shall be further governed by the provisions of Code
Section 162(m) and regulations promulgated thereunder.
2.14 "Plan" shall mean this 1986 Employee Stock Option Plan of the
Corporation.
2.15 "Subsidiary" shall mean any corporation which at the time
qualifies as a subsidiary of the Corporation under Section 425(f) of the Code.
3. Shares Available Under Plan. The number of shares which may be
issued pursuant to options granted under this Plan shall not exceed 500,000
shares of the Common Stock of the Corporation; provided, however, that shares
which become available as a result of canceled, unexercised, lapsed or
terminated options granted under this Plan shall be available for issuance
pursuant to options subsequently granted under this Plan. The shares issued upon
exercise of options granted under this Plan may be authorized and unissued
shares or shares previously acquired or to be acquired by the Corporation.
4. Administration.
4.1 The Plan will be administered by the Board or by a Committee of at
least two directors, all of whom shall be Outside Directors and Non-Employee
Directors. The Committee may be a subcommittee of the Compensation Committee of
the Board.
4.2 The Committee will have plenary authority, subject to provisions of
the Plan, to determine when and to whom Options will be granted, the term of
each Option, the number of shares covered by it, the participation by the
Optionee in other plans, and any other terms or conditions of each Option. The
Committee shall determine with respect to each grant of an Option whether a
participant shall receive an ISO or an NQO. The number of shares, the term and
the other terms and conditions of a particular kind of Option need not be the
same, even as to options granted at the same time. The Committee's
recommendations regarding option grants and terms and conditions thereof will be
conclusive.
4.3 The Committee will have the sole responsibility for construing and
interpreting the Plan, for establishing and amending any rules and regulations
as it deems necessary or desirable for the proper administration of the Plan,
and for resolving all questions arising under the Plan. Any decision or action
taken by the Committee arising out of or about the construction, administration,
interpretation and effect of the Plan and of its rules and regulations will, to
the extent permitted by law, be within its absolute discretion, except as
otherwise specifically provided herein, and will be conclusive and binding on
all Optionees, all successors, and any other person, whether that person is
claiming under or through any Optionee or otherwise.
4.4 The Committee will designate one of its members as chairman. It
will hold its meetings at the times and places as it may determine. A majority
of its members will constitute a quorum, and all determinations of the Committee
will be made by a majority of its members. Any determination reduced to writing
and signed by all members will be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, who need not be a member of the Committee, and may make such rules
and regulations for the conduct of its business as it may deem advisable.
4.5 No member of the Committee will be liable, in the absence of bad
faith, for any act or omission with respect to his services on the Committee.
Service on the Committee will constitute service as a member of the Board, so
that the members of the Committee will be entitled to indemnification and
reimbursement as Board members pursuant to its Bylaws.
4.6 The Committee will regularly inform the Board as to its actions
with respect to all Options granted under the Plan and the terms and conditions
and any such Options In a manner, at any times, and in any form as the Board may
reasonably request.
4.7 Any other provision of the Plan to the contrary notwithstanding,
the Committee is authorized to take such action as it, in its discretion, may
deem necessary or advisable and fair and equitable to Optionees in the event of:
a Change in Control of the Corporation; a tender, exchange or similar offer for
all or any part of the Common Stock made by any entity, person or group (other
than the Corporation, any Subsidiary of the Corporation or any savings, pension
or other benefit plan for the benefit of employees of the Corporation and its
Subsidiaries); a merger of the Corporation into, a consolidation of the
Corporation with, or an acquisition of the Corporation by another corporation;
or a sale or transfer of all or substantially all of the Corporation's assets.
Such action, in the Committee's discretion, may include (but shall not be deemed
limited to): establishing, amending or waiving the forms, terms, conditions or
duration of Options so as to provide for earlier, later, extended or additional
terms for exercise of the whole, or any installment, thereof; alternate forms of
payment; or other modifications. The Committee may take any such actions
pursuant to this Section 4.7 by adopting rules or regulations of general
applicability to all Optionees, or to certain categories of Optionees; by
amending or waiving terms and conditions in stock option agreements; or by
taking action with respect to individual Optionees. The Committee may take any
such actions before or after the public announcement of any such Change in
Control, tender offer, exchange offer, merger, consolidation, acquisition or
sale or transfer of assets.
5. Participants.
5.1 Participation in this Plan shall be limited to key personnel of the
Corporation or of a Subsidiary, who are salaried employees of the Corporation or
of a Subsidiary. Officers will be employees for this purpose, whether or not
they are also members of the Board, but a member of the Board who is not such an
employee will not be eligible to receive an Option.
5.2 Subject to other provisions of this Plan, Options may be granted to
the same participants on more than one occasion.
5.3 The Committee's determination under the Plan including, without
limitation, determination of the persons to receive Options, the form, amount
and type of such Options, and the terms and provisions of Options need not be
uniform and may be made selectively among otherwise eligible participants,
whether or not the participants are similarly situated.
5.4 No person shall receive Options under this Plan which exceed
100,000 shares during any fiscal year of the Corporation.
6. Terms and Conditions.
6.1 Each Option granted under the Plan shall be evidenced by a written
agreement, which shall be subject to the provisions of this Plan and to such
other terms and conditions as the Corporation may deem appropriate.
6.2 Each Option agreement shall specify the period for which the Option
thereunder is granted (which in no event shall exceed ten years from the date of
the grant for options granted pursuant to Section 6.3(a) hereof and five years
from the date of grant for Options granted pursuant to 6.3(b) hereof) and shall
provide that the Option shall expire at the end of such period; provided,
however, the term of each Option shall be subject to the power of the Committee,
among other things, to accelerate or otherwise adjust the terms for exercise of
Options pursuant to Section 4.7 hereof in the event of the occurrence of any of
the events set forth therein.
6.3 The exercise price per share shall be determined by the Committee
at the time any Option is granted and shall be determined as follows:
(a) For employees who do not own stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise price
per share shall not be less than one hundred percent (100%) of Fair
Market Value of the Common Stock of the Corporation on the date the
Option is granted, as determined by the Committee.
(b) For employees who own stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise price
per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value of the Common Stock of the Corporation on the date
the Option is granted, as determined by the Committee.
(c) For all employees, the NQO exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value of
the Common Stock of the Corporation on the date the Option is granted,
as determined by the Committee.
6.4 The aggregate Fair Market Value (determined as of the time the
Option is granted) of the Common Stock with respect to which an ISO under this
Plan or any other plan of the Corporation or its Subsidiaries is exercisable for
the first time by an Optionee during any calendar year shall not exceed
$100,000.
6.5 An Option shall be exercisable at such times, and with respect to
such minimum number of shares, as may be determined by the Corporation at the
time of grant. The Option agreement may require, if so determined by the
Corporation, that no part of the Option may be exercised until the Optionee
shall have remained in the employ of the Corporation or of a Subsidiary for such
period after the date of the Option as the Corporation may specify.
Notwithstanding the foregoing and subject to the discretionary acceleration
rights of the Committee, an Option granted to a director, officer or 10%
shareholder of the Corporation shall not be exercisable for a period of six (6)
months after the date of grant unless the Option has been approved by the Board,
the Committee or the shareholders of the Corporation.
6.6 The Corporation may prescribe the form of legend which shall be
affixed to the stock certificate representing shares to be issued and the shares
shall be subject to the provisions of any repurchase agreement or other
agreement restricting the sale or transfer thereof. Such agreements or
restrictions shall be noted on the certificate representing the shares to be
issued.
7. Exercise of Option.
7.1 Each exercise of an Option granted hereunder, whether in whole or
in part, shall be by written notice thereof, delivered to the Secretary of the
Corporation (or such other person as he may designate). The notice shall state
the number of shares with respect to which the Options are being exercised and
shall be accompanied by payment in full for the number of shares so designated.
Shares shall be registered in the name of the Optionee unless the Optionee
otherwise directs in his or her notice of election.
7.2 Payment shall be made to the Corporation either (i) in cash,
including certified check, bank draft or money order, (ii) at the discretion of
the Corporation, by delivering Corporation Common Stock already owned by the
participant or a combination of Common Stock and cash, or (iii) at the
discretion of the Corporation, by delivering a promissory note, containing such
terms and conditions acceptable to the Corporation, for all or a portion of the
purchase price of the shares so purchased. With respect to (ii), the Fair Market
Value of stock so delivered shall be determined as of the date immediately
preceding the date of exercise.
7.3 Upon notification of the amount due and prior to, or concurrently
with, the delivery to the Optionee of a certificate representing any shares
purchased pursuant to the exercise of an Option, the Optionee shall promptly pay
to the Corporation any amount necessary to satisfy applicable federal, state or
local tax requirements.
8. Assignments. Any Option granted under this Plan shall be exercisable
only by the Optionee to whom granted during his or her lifetime and shall not be
assignable or transferable otherwise than by will or by the laws of descent and
distribution.
9. Severance; Death; Disability. An Option shall terminate, and no
rights thereunder may be exercised, if the person to whom it is granted ceases
to be employed by the Corporation or by a Subsidiary except that:
9.1 If the employment of the Optionee is terminated by any reason other
than his or her death or disability, the Optionee may at any time within not
more than three months after termination of his or her employment, exercise his
or her Option rights but only to the extent they were exercisable by the
Optionee on the date of termination of his or her employment; provided, however,
that if the employment is terminated by deliberate, willful or gross misconduct
as determined by the Committee, all rights under the Option shall terminate and
expire upon such termination.
9.2 If the Optionee dies while in the employ of the Corporation or a
Subsidiary, or within not more than three months after termination of his or her
employment, the Optionee's rights under the Option may be exercised at any time
within three months following such death by his or her personal representative
or by the person or persons to whom such rights under the Option shall pass by
will or by the laws of descent and distribution.
9.3 If the employment of the Optionee is terminated because of
permanent disability, the Optionee, or his or her legal representative, may at
any time within not more than one (1) year after termination of his or her
employments exercise his or her Option rights but only to the extent they were
exercisable by the Optionee on the date of termination of his or her employment.
9.4 Notwithstanding anything contained in Sections 9.1, 9.2 and 9.3 to
the contrary, no Option rights shall be exercisable by anyone after the
expiration of the term of the Option.
9.5 Transfers of employment between the Corporation and a Subsidiary,
or between Subsidiaries, will not constitute termination of employment for
purposes of any Option granted under this Plan. The Committee may specify in the
terms and conditions of an Option whether any authorized leave of absence or
absence for military or government service or for any other reasons will
constitute a termination of employment for purposes of the Option and the Plan.
10. Rights of Participants. Neither the participant nor the personal
representatives, heirs, or legatees of such participant shall be or have any of
the rights or privileges of a shareholder of the Corporation in respect of any
of the shares issuable upon the exercise of an Option granted under this Plan
unless and until certificates representing such shares shall have been issued
and delivered to the participant or to such personal representatives, heirs or
legatees.
11. Securities Registration. If any law or regulation of the Securities
and Exchange Commission or of any other body having jurisdiction shall require
the Corporation or the participant to take any action in connection with the
exercise of an Option, then notwithstanding any contrary provision of an Option
agreement or this Plan, the date for exercise of such Option and the delivery of
the shares purchased thereunder shall be deferred until the completion of the
necessary action. In the event that the Corporation shall deem it necessary, the
Corporation may condition the grant or exercise of an Option granted under this
Plan upon the receipt of a satisfactory certificate that the Optionee is
acquiring the Option or the shares obtained by exercise of the Option for
investment purposes and not with the view or intent to resell or otherwise
distribute such Option or shares. In such event, the stock certificate
evidencing such shares shall bear a legend referring to applicable laws
restricting transfer of such shares. In the event that the Corporation shall
deem it necessary to register under the Securities Act of 1933, as amended, or
any other applicable statute, any Options or any shares with respect to which an
Option shall have been granted or exercised, then the participant shall
cooperate with the Corporation and take such action as is necessary to permit
registration or qualification of such Options or shares.
12. Duration and Amendment.
12.1 There is no express limitation upon the duration of the Plan,
except for the requirement of the Code that all ISOs must be granted within ten
years from the date the Plan is approved by the stockholders.
12.2 The Board may terminate or may amend the Plan at any time,
provided, however, that the Board may not without approval of the stockholders
of the Corporation, (i) increase the maximum number of shares as to which
Options may be granted under the Plan, (ii) permit the granting of Options at
less than 100% of Fair Market Value at time of grant, or (iii) change the class
of employees eligible to receive Options under the Plan.
13. Approval of Shareholders. This Plan expressly is subject to
approval of holders of a majority of the outstanding shares of Common Stock of
the Corporation, and if it is not so approved on or before one year after the
date of adoption of this Plan by the Board, the Plan shall not come into effect,
and any Options granted pursuant to this Plan shall be deemed canceled.
14. Conditions of Employment. The granting of an Option to a
participant under this Plan shall impose no obligation on the Corporation to
continue the employment of any participant and shall not lessen or affect the
right of the Corporation to terminate the employment of the participant.
15. Other Options. Nothing in the Plan will be construed to limit the
authority of the Corporation to exercise its corporate rights and powers,
including, by way illustration and not by way of limitation, the right to grant
options for proper corporate purposes otherwise than under the Plan to any
employee or any other person, firm, corporation, association, or other entity,
or to grant options to, or assume options of, any person for the acquisition by
purchase, lease, merger, consolidation, or otherwise, of all or any part of the
business and assets of any person, firm, corporation, association, or other
entity.
Adopted by the Board of Directors and Shareholders on December 1, 1986.
INDEPENDENT CONTRACTOR AGREEMENT
This INDEPENDENT CONTRACTOR AGREEMENT ("AGREEMENT") is entered into
this ____ day of _________________, 19__ by and between Transport Corporation of
America, Inc. a Minnesota corporation ("CARRIER") and _____________________ of
__________________________________, (the "CONTRACTOR"), each individually, a
"party"; collectively, the "parties."
RECITALS
WHEREAS, the CARRIER, wishes to obtain transportation through an
agreement with CONTRACTOR; and
WHEREAS, the CONTRACTOR is engaged in the business of transporting
freight by motor vehicle for common carriers; and
WHEREAS, the CARRIER and CONTRACTOR desire to enter into this
Agreement to carry out the foregoing;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, the parties agree as follows:
1. TERM AND TERMINATION
The term of this Agreement shall be for an initial period of 190 days,
commencing on the date set forth above, and shall automatically renew for three
(3) successive thirty (30) day periods, unless otherwise terminated (a) by
either party upon three (3) calendar days' written notice prior to the
expiration of the initial or any renewal term, or (b) in accordance with the
provisions of Section 9, but, in any event, CONTRACTOR shall complete the
performance of all services being performed on the date of termination.
2. CONTRACTOR OBLIGATIONS
2.1 General Duties. CONTRACTOR shall provide transportation
services to CARRIER on an as-requested basis. CONTRACTOR and its employees and
representatives shall perform those duties on behalf of or for CARRIER and only
as requested by CARRIER.
2.2 Equipment. CONTRACTOR agrees to use the following
described Equipment, specifically, a TRACTOR, bearing:
UNIT NO. YEAR MAKE SERIAL NO. STATE LICENSE
together with drivers and all other necessary labor to transport, load and
unload on behalf of CARRIER (or on behalf of such other certificated carriers as
CARRIER may designate through authorized "trip lease" or interchange agreements)
such commodities as the CARRIER may from time to time make available to
CONTRACTOR, and CONTRACTOR may accept for hauling.
2.3 Compliance with Standards. CONTRACTOR shall comply and
ensure that all of its employees and representatives assigned to provide
services to CARRIER shall comply, with all CARRIER policies, rules and
regulations, including, but not limited to CARRIER's Standard Operating
Procedures, as they may be in effect from time to time, which Standard Operating
Procedures have been separately provided and which CONTRACTOR acknowledges
receipt from CARRIER as they are currently in effect.
2.4 Regulatory Requirements. CONTRACTOR recognizes that
CARRIER's business of providing motor carrier transportation services to the
public is subject to regulation by the Federal Government acting through the
Department of Transportation, and by various state and local governments.
CONTRACTOR shall have the responsibility to CARRIER of satisfying these
regulatory requirements, subject at all times to verification by CARRIER, by:
a. Maintaining or causing the Equipment to be maintained
in the state of repair required by all applicable
regulations;
b. Operating the Equipment in accord with all applicable
regulations;
c. Hiring to operate the Equipment only those drivers
who are qualified under all applicable regulations
(any such driver shall have at least one year's
experience in substantially similar work, shall be at
least 22 years old and shall have obtained a Safety
Clearance from CARRIER's Safety Department, which
Safety Clearance must be in effect at all times
driver is assigned by CONTRACTOR to drive any
equipment on behalf of CARRIER); and
d. Doing all other things necessary to conduct the
transportation services provided in this Agreement in
accord with all applicable regulations.
2.5 Method and Means of Performance. CONTRACTOR shall
determine the means and methods of the performance of all transportation
services undertaken by CONTRACTOR under the terms of this AGREEMENT. CONTRACTOR
has and shall retain responsibility for:
a. Hiring, setting the wages, hours and working
conditions and adjusting the grievances of,
supervising, training, disciplining and firing all
drivers, driver's helpers and other workers necessary
for the performance of CONTRACTOR's obligations under
the terms of this Agreement, which drivers, driver's
helpers, and other workers are and shall remain the
employees of CONTRACTOR;
b. Selecting, purchasing or leasing, financing and
maintaining the Equipment;
c. Selecting all routes; and
d. Paying all operating expenses, including but not
limited to, all expenses of fuel for Equipment, fines
for parking, moving violations, license plates, base
plates and any unused portions thereof, Federal
highway use taxes or any other levies or assessments
based upon the operation of the vehicle, unless
specifically identified in Exhibit A to this
Agreement.
At all times, CONTRACTOR shall exercise all diligent efforts to conduct his
operations under this Agreement to assure continued customer satisfaction.
2.6 Personnel Screening. CONTRACTOR shall ensure compliance
with statutory background screening requirements of all its personnel who
perform services for CARRIER. CONTRACTOR will provide proof of such compliance
upon execution hereof and thereafter upon request by the CARRIER.
2.7 License. CONTRACTOR warrants that it has and will maintain
all- necessary licenses, permits, certificates and accreditation's in good
standing during the terms of this Agreement to the extent required by the law.
3. CARRIER DUTIES
3.1 Use of Services. CARRIER agrees to make loads available
from time to time for transportation by CONTRACTOR and CARRIER shall exercise
every reasonable effort to make sufficient loads available so that CONTRACTOR
shall be able to keep the Equipment in reasonably regular use under the terms of
this Agreement, although this shall not be construed as an agreement by CARRIER
to furnish any specific number of loads or pounds of freight for transportation
by CONTRACTOR at any particular time or any particular place.
3.2 Fines. Except when a violation results from the act or
omission of CONTRACTOR, CARRIER assumes risks and costs of fines for (i)
overweight and oversized trailers when the trailers are pre-loaded, sealed or
the load is containerized, or when the trailer or loading is otherwise outside
CONTRACTOR's control and (ii) improperly permitted overweight and over dimension
loads; carrier shall reimburse CONTRACTOR for any fines paid by the CONTRACTOR
on account of overweight or over dimension loads handled at the direction of the
CARRIER.
3.3 Government Identification. CARRIER will provide all
identification required by any governmental agencies to be affixed to Equipment,
and CONTRACTOR agrees that such identification shall be removed and returned to
CARRIER upon termination of this Agreement. Such identification shall be
consistent with signage used by CARRIER and must be approved by CARRIER.
4. BILLING AND COMPENSATION
4.1 Compensation. For the full and proper performance of each
trip made by the CONTRACTOR under the terms of this Agreement, the CARRIER
agrees, with such exceptions as agreed to between CARRIER and CONTRACTOR and
specifically provided for on CARRIER's prenumbered trip record issued to
CONTRACTOR or his driver for each trip, to pay CONTRACTOR in accordance with a
schedule issued by CARRIER, attached hereto as Exhibit A and made a part hereof.
CARRIER may revise such schedule from time to time, and the rates set forth in
any such revised schedule shall become effective when the schedule is issued to
CONTRACTOR. In the case of any trip in which CONTRACTOR is paid a percentage of
gross revenue received by CARRIER, CARRIER shall, at the time of settlement with
CONTRACTOR, give CONTRACTOR a copy of the rated freight bill. CARRIER's tariff
may be inspected by CONTRACTOR at CARRIER's office at 1769 Yankee Doodle Road,
Eagan, MN 55121.
This amount shall constitute full payment to CONTRACTOR for use of the Equipment
and for the services of CONTRACTOR's driver, including all payments for pick-up,
delivery, and transportation between points of origin and destination. Any
amounts overpaid by CARRIER for pick-up, delivery, overpayments on previous
loads and similar items shall be deducted from this amount.
4.2 Settlement. CARRIER shall settle with CONTRACTOR on a
weekly basis after the successful completion of his assignment. Submission by
CONTRACTOR by mail or in person of those documents showing full and proper
performance of the terms of this Agreement on each trip is required and CARRIER
shall have the right to suspend making loads available to CONTRACTOR until such
documents are received. The required documents shall include Bills of Lading,
Daily Logs required by the Department of Transportation and those documents
necessary for the CARRIER to obtain payment from the shipper customer. CARRIER
shall settle with CONTRACTOR in all cases within fifteen (15) days after the
submission of the above-described documents by CARRIER. No final settlement
shall be made until CONTRACTOR has returned to CARRIER all required documents
referred to in the preceding sentence, as well as all identification required by
government agencies, as provided in Section 3.3 hereof, and has returned to
CARRIER all CARRIER property in the condition as it was received.
4.3 Deductions. In any case where CONTRACTOR has secured an
advance of any kind from CARRIER, or if there shall be any other amounts due to
CARRIER from the CONTRACTOR or CONTRACTOR's authorized agents or employees, the
CARRIER shall be authorized to deduct the amount of such advance or other
amounts due to the CARRIER from the CONTRACTOR in settling with the CONTRACTOR
under the terms of this Agreement. CONTRACTOR shall be advised as to the method
of computation used to arrive at the amount of each deduction. CONTRACTOR shall
be afforded copies of those documents which are necessary to determine the
validity of the deduction. In addition, the CARRIER shall have a period of
fifteen (15) days after termination of this Agreement to verify the account of
the CONTRACTOR and to make appropriate adjustments before final settlement.
CARRIER shall be under no obligation to make such final settlement unless and
until CONTRACTOR has returned the identification described in Section 3.3 to
CARRIER.
5. NATURE OF ARRANGEMENT
This Agreement shall be interpreted as furnishing to CARRIER the
exclusive possession, control and use of the equipment, as those terms are used
in the Department of Transportation Regulation on Lease and Interchange of
Vehicles. CARRIER assumes complete responsibility for the operation of the
Equipment under the terms of such regulations for the duration of this
Agreement.
6. INSURANCE
6.1 CONTRACTOR Liability. CONTRACTOR shall be responsible and
liable to CARRIER and agrees to pay for shortage of, loss of, or damage to cargo
transported by CONTRACTOR in the event that such shortage, loss or damage is
caused directly or indirectly by the operations of CONTRACTOR or its employees
or agents. CONTRACTOR shall further be responsible and liable to CARRIER for the
first $500 in damage or loss on account of fire, theft, collision or upset to
any equipment of CARRIER used by CONTRACTOR in pursuance of this Agreement. Any
such payments due from CONTRACTOR under this Section 6.1 shall be deducted from
any monies due CONTRACTOR under this Agreement only after a written explanation
and itemization of the deduction has been furnished CONTRACTOR by CARRIER.
6.2 CONTRACTOR Coverage. CARRIER shall in no way be liable for
any damage which may occur to the Equipment of CONTRACTOR. CARRIER shall
maintain at its own expense public liability, property damage, required state
insurance, and cargo insurance coverage as concerns shippers and the general
public; however, CONTRACTOR shall indemnify and be liable to CARRIER for any
loss or damage to third persons or property, including any equipment of CARRIER
which results from negligent operations of CONTRACTOR, its agents or employees.
CONTRACTOR shall, throughout the term of this Agreement, purchase and keep in
force bobtail coverage, and shall furnish CARRIER with a certificate of
insurance satisfactory to CARRIER evidencing such coverage.
7. INDEPENDENT CONTRACTOR RELATIONSHIP
7.1 Independent Contractor. It is understood and agreed that
CONTRACTOR, including its employees, agents and representatives, is an
independent contractor and nothing herein to the contrary is intended nor shall
be construed to create an employer/employee, partners of partnership or joint
venture relationship between CONTRACTOR and the CARRIER, between CONTRACTOR and
any CARRIER employee or between CARRIER and any CONTRACTOR employee, agent or
representative. CONTRACTOR agrees and acknowledges that neither it nor any of
its employees, agents or representatives has any right or authorization, express
or implied to act for the CARRIER or incur, assume or create any obligation,
responsibility or liability on behalf of the CARRIER or make any representations
or warranties concerning the CARRIER or the services in the name of or on behalf
of the CARRIER or bind the CARRIER in any manner whatsoever. In no event shall
either party be liable for the debts or obligations of the other except as
otherwise specifically provided in this Agreement.
7.2 Contractor Responsible For Taxes. CONTRACTOR and each of
its employees and representatives will be solely responsible for and will pay
any income, Social Security, Medicare, unemployment, Workers' Compensation or
Federal highway use assessments or taxes with respect to any amounts paid to
CONTRACTOR hereunder. Payment of any taxes or other amounts shall be directly
made by CONTRACTOR, and CONTRACTOR will file all required forms or documents
with the Internal Revenue Service or any state. CARRIER shall not be responsible
for and will not withhold on behalf of CONTRACTOR or its employees and
representatives any sums for income tax, unemployment insurance, Social Security
or any other withholdings pursuant to any law or requirement of any governmental
body. Neither CONTRACTOR not its employees or representatives shall have any
claim under this Agreement for pension or retirement benefits, social security,
workers compensation, health, disability, professional malpractice, or
unemployment insurance benefits of any kind. CONTRACTOR will indemnify and hold
harmless the CARRIER from any and all loss or liability, including attorneys
fees and costs (at all levels including appeal), arising from its failure to
make such payments, withholdings and benefits, if any.
8. RESTRICTIVE COVENANT
8.1 Restrictive Covenants. During the term of this Agreement
and for a period of one (1) year after its termination by either party for any
reason, with or without cause, CONTRACTOR hereby agrees that it will not,
directly or indirectly, for itself or any person, firm, corporation, partnership
association or other entity divert business from the CARRIER or solicit any
customer of the CARRIER with whom such CONTRACTOR has had any contact whosoever
of any nature or kind as a result of this engagement.
8.2 Remedies. CONTRACTOR further acknowledges that it would be
very difficult or impossible to measure the damages resulting from any breach of
Section 8.1. CONTRACTOR further acknowledges that the restrictions contained
herein are reasonable and are reasonably necessary for the protection of the
CARRIER'S business. A violation by CONTRACTOR or any of its employees or
representatives of such covenant will constitute irreparable damage to the
CARRIER. Therefore, CONTRACTOR hereby agrees that any breach or threatened
breach by it or any of its employees or representatives of any provision of
Section 8.1 shall entitle CARRIER, in addition to any other legal remedies, to
apply to any court of competent jurisdiction to enjoin such breach or threatened
breach. If the restrictions contemplated in Section 8.1 shall for any reason be
held by a court of competent jurisdiction to be excessively broad, such
restrictions shall be construed to be so limited or reduced so as to be
enforceable. CONTRACTOR understands and agrees that each provision and
restriction agreed to by CONTRACTOR in Section 8.1 shall be separable and
divisible from every other provision.
9. TERMINATION
9.1 Immediate Termination. Unless otherwise provided herein,
this Agreement may be terminated immediately by the CARRIER by providing the
notice required by Section 10 hereof, if
a. CONTRACTOR commits a material breach of any term of
this Agreement and CARRIER may hold CONTRACTOR liable
for damages as a result of such breach; or
b. CONTRACTOR fails to notify CARRIER of any
modification or cancellation of licensure,
certification or insurance as required herein, or
takes any action or fails to take any action which
action or failure could result in an adverse
modification or cancellation of that license,
certification or insurance; or the permanent
cessation of CONTRACTOR'S business; or if CONTRACTOR
is adjudicated as bankrupt or insolvent, files a
voluntary petition in bankruptcy or petition or
answer seeking reorganization or other relief under
any insolvency law.
9.2 Continuing Obligations. Anything to the contrary
notwithstanding, this Agreement shall remain in effect after the date of
termination with regard to those covenants contained herein that are expressly
made to the extent beyond the term of this Agreement or which may be necessary
to allow for the resolution of all pending matters as of the date of
termination. Upon termination by either party, the CARRIER shall have no further
obligation to pay the CONTRACTOR any compensation except for compensation to
which CONTRACTOR is entitled for services performed prior to the actual date of
termination.
9.3 Completion of Services. If for any reason, CONTRACTOR
shall fail to complete transportation of commodities in transit, or abandons a
shipment or otherwise subjects CARRIER to liabilities to shippers or
governmental agencies on account of the acts or omissions of CONTRACTOR en
route, CONTRACTOR expressly agrees that CARRIER shall have the right to complete
performance using the same or other equipment, and hold CONTRACTOR liable for
the costs thereof and for any other damages. CONTRACTOR hereby waives any
recourse against CARRIER for such action and agrees to reimburse CARRIER for any
costs and expenses arising out of such completion of such trip, and to pay to
CARRIER any damages for which CARRIER may be liable to shipper arising out of
such breach of contract by CONTRACTOR.
10. NOTICES
All notices or other communications required or permitted hereunder
shall be in writing and shall be delivered in person, or by means of certified
or registered mail, postage paid, return receipt requested, to such party at its
address as set forth below. All such notices shall be deemed given upon delivery
if delivered by hand, on the third business day after mailing if mailed as
aforesaid.
A. If to CONTRACTOR:
B. If to CARRIER: Transport Corporation of America, Inc.
1769 Yankee Doodle Road
Eagan, MN 55121
Attention: Director of Independent
Contractor Services
11. MISCELLANEOUS
11.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
11.2 Assignment. This Agreement may not be assigned by the
CONTRACTOR without the prior written consent of the CARRIER.
11.3 Choice of Law. This Agreement will be interpreted,
construed and enforced in accordance with the laws of the State of Minnesota.
11.4 Effect of Waiver. The failure of any party at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right to enforce the same. The waiver by any party of any
breach of any provision of this Agreement will not be construed to be a waiver
by any such party or any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
11.5 Severability. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement will not
affect any other provision of this Agreement, which will remain in full force
and effect, nor will the invalidity, illegality or unenforceability of a portion
of any provision of this Agreement affect the balance of such provision. In the
event that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
11.6 Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties hereto.
11.7 No Third-Party Beneficiaries. No person shall be deemed
to possess any third-party beneficiary right pursuant to this Agreement. It is
the intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as the day
and year first above written.
CARRIER
TRANSPORT CORPORATION OF AMERICA, INC.
By: _____________________________________
Its: _________________________________
CONTRACTOR
____________________________________
a _____________________ corporation
By: _____________________________________
Printed Name: ____________________________
Title: ___________________________________
EXHIBIT A
COMPENSATION
TRANSPORT CORPORATION OF AMERICA, INC.
1995 STOCK PLAN
SECTION CONTENTS PAGE
1. General Purpose of Plan; Definitions 1
2. Administration 3
3. Stock Subject to Plan 4
4. Eligibility 4
5. Stock Options 5
6. Restricted Stock 9
7. Transfer, Leave of Absence, etc. 11
8. Amendments and Termination 12
9. Unfunded Status of Plan 12
10. General Provisions 13
11. Effective Date of Plan 14
TRANSPORT CORPORATION OF AMERICA, INC.
1995 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the Transport Corporation of America, Inc.
1995 Stock Plan (the "Plan"). The purpose of the Plan is to enable Transport
Corporation of America, Inc. (the "Company") and its Subsidiaries to retain and
attract executives, other key employees, consultants and directors who
contribute to the Company's success by their ability, ingenuity and industry,
and to enable such individuals to participate in the long-term success and
growth of the Company by giving them a proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty, any of
which is directly and materially harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then
the functions of the Committee specified in the Plan shall be
exercised by the Board.
e. "Company" means Transport Corporation of America, Inc., a
corporation organized under the laws of the State of Minnesota
(or any successor corporation).
f. "Disability" means permanent and total disability as
determined by the Committee.
g. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company.
h. "Fair Market Value" means the value of the Stock on a given
date as determined by the Committee in accordance with Section
422 of the Code and any applicable Treasury Department
regulations with respect to "incentive stock options."
i. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
j. "Non-Employee Director" means a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) of the Securities Exchange
Act, as amended, or any successor rule.
k. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, and is intended to be and is
designated as a "Non-Qualified Stock Option."
l. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company on or after age 65.
m. "Outside Director" means a director who (a) is not a current
employee of the Company or any member of an affiliated group
which includes the Company; (b) is not a former employee of
the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the
Company; (d) does not receive remuneration from the Company,
either directly or indirectly, in any capacity other than as a
director, except as otherwise permitted under Code Section
162(m) and regulations thereunder. For this purpose,
remuneration includes any payment in exchange for goods or
services. This definition shall be further governed by the
provisions of Code Section 162(m) and regulations promulgated
thereunder.
n. "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the
Company if each of the corporations (other than the Company)
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain.
o. "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 below.
p. "Retirement" means Normal Retirement or Early Retirement.
q. "Stock" means the Common Stock, $.01 par value per share, of
the Company.
r. "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
s. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one
of the other corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board consisting of at least two directors, all of
whom shall be Outside Directors and Non-Employee Directors and who shall serve
at the pleasure of the Board. The Committee may be a subcommittee of the
Compensation Committee of the Board.
The Committee shall have the power and authority to grant to eligible
employees, consultants and directors pursuant to the terms of the Plan: (i)
Stock Options and (ii) Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers, other key employees, consultants and
directors of the Company and its Subsidiaries to whom Stock
Options and/or Restricted Stock awards may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, or Restricted Stock
awards, or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, any restriction on any Stock
Option or other award and/or the shares of Stock relating
thereto); and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to
an award under this Plan shall be deferred either
automatically or at the election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 350,000. Such shares may consist, in whole
or in part, of authorized and unissued shares.
If any shares that have been optioned cease to be subject to Stock
Options, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Stock Options granted under the Plan, and in the number
of shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees, consultants and members of the Board of
the Company and Subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options or Restricted Stock awards
under the Plan. The optionees and participants under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
Notwithstanding the foregoing, no person shall receive grants of Stock
Options and Restricted Stock awards under this Plan which exceed 100,000 shares
during any fiscal year of the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after March 21, 2005.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option be less than 100% of the Fair Market Value of the Stock on the date
of the grant of the Stock Option. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time, provided, however, that unless the Stock Option has been approved by
the Board, the Committee or the shareholders of the Company, a Stock Option to a
director, officer or a 10% shareholder of the Company or its Subsidiaries shall
not be exercisable for a period of six (6) months after the date of the grant.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise or vesting provisions, for a
period specified by the Board, but not to exceed sixty (60) days nor be less
than seven (7) days, prior to the occurrence of any of the following events: (i)
dissolution or liquidation of the Company other than in conjunction with a
bankruptcy of the Company or any similar occurrence, (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 75% or more of the outstanding
Stock of the Company.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or Restricted Stock subject to
an award hereunder (based on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee); provided, however, that in
the event payment is made in the form of shares of Restricted Stock, the
optionee will receive a portion of the option shares in the form of, and in an
amount equal to, the Restricted Stock award tendered as payment by the optionee.
If the terms of an option so permit, or the Committee, in its sole discretion,
so permits, an optionee may elect to pay all or part of the option exercise
price by having the Company withhold from the shares of Stock that would
otherwise be issued upon exercise that number of shares of Stock having a Fair
Market Value equal to the aggregate option exercise price for the shares with
respect to which such election is made. No shares of Stock shall be issued until
full payment therefor has been made. An optionee generally shall have the rights
to dividends and other rights of a shareholder with respect to shares subject to
the option when the optionee has given written notice of exercise, has paid in
full for such shares, and, if requested, has given the representation described
in paragraph (a) of Section 10.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title 1 of the Employee Retirement Income Security Act, or the
rules thereunder, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of nine months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after nine months (or such shorter period as
the Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is shorter. In the event of termination of employment by reason of Disability,
if an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. Unless otherwise determined by
the Committee, if an optionee's employment by the Company and any Subsidiary or
Parent Corporation terminates by reason of Retirement, any Stock Option held by
such optionee may thereafter be exercised to the extent it was exercisable at
the time of such Retirement, but may not be exercised after three months (or
such shorter period as Committee shall specify at grant) from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is shorter. In the event of termination of employment by reason
of Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option may be exercised to the extent it was exercisable at such termination for
the lesser of three months or the balance of the option's term.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.
(k) Directors Who Are Not Employees. Each person who is not an employee
of the Company or its Subsidiaries who on and after the date this Plan is
adopted is elected or reelected to the Board at any annual or special meeting of
the shareholders of the Company shall as of the date of such meeting
automatically be granted a Stock Option to purchase 2,000 shares of the
Company's Stock at an exercise price per share equal to 100% of the Fair Market
Value of a share of the Company's Stock on the date of the grant of the Stock
Option; provided, that any director who is not an employee may decline receipt
of said Stock Option. All such Stock Options shall be designated as
Non-Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-Qualified
Stock Options to officers and key employees of the Company, except that the term
of each such Stock Option shall be equal to five years, which term shall expire
30 days after termination of service as a director, unless the Board, in its
discretion, shall waive or modify the term of the grant.
In the event discretionary Stock Options are granted to members of the
Committee, such Stock Options shall be granted by the Board.
SECTION 6. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
In the event that Restricted Stock awards are granted to members of the
Committee, such awards shall be granted by the Board.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Transport
Corporation of America, Inc. 1995 Stock Plan and an
Agreement entered into between the registered owner and
Transport Corporation of America, Inc. Copies of such Plan
and Agreement are on file in the executive offices of
Transport Corporation of America, Inc.
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 6,
the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional shares of Restricted Stock (to the
extent shares are available under Section 3 and subject to paragraph
(f) of Section 10). Certificates for shares of Unrestricted Stock shall
be delivered to the grantee promptly after, and only after, the period
of forfeiture shall have expired without forfeiture in respect of such
shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c)(iv) of this Section 6, upon termination of employment for
any reason during the Restriction Period, all shares still subject to
restriction shall thereupon be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
(v) All restrictions with respect to any participant's shares
of Restricted Stock shall lapse or be deemed to have lapsed or been
terminated on the tenth (10th) business day prior to the occurrence of
any of the following events: (i) dissolution or liquidation of the
Company, other than in conjunction with a bankruptcy of the Company or
any similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of substantially
all of the assets of the Company or 75% or more of the outstanding
Stock of the Company.
SECTION 7. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option or Restricted Stock award
theretofore granted, without the optionee's or participant's consent, or (ii)
which without the approval of the stockholders of the Company would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934, Section 422 of the Code or any other regulatory requirements. Further,
paragraph k of Section 5 shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.
SECTION 9. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock awards shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
Federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock
awards under the Plan (not including Stock Options) are not required to make any
payment or provide consideration other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includable as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection with
any grant or award made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company, pursuant to which the participant shall be required to offer to the
Company upon termination of employment for any reason any shares that the
participant acquired under the Plan, with the price being the then Fair Market
Value of the Stock or, in the case of a termination for Cause, an amount equal
to the cash consideration paid for the Stock, subject to such other terms and
conditions as the Committee may specify at the time of grant. The Committee may,
at the time of the grant of an award under the Plan, provide the Company with
the right to repurchase, or require the forfeiture of, shares of Stock acquired
pursuant to the Plan by any participant who, at any time within two years after
termination of employment with the Company, directly or indirectly competes
with, or is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief executive or chief financial officer) certifies in writing that
under Section 3 sufficient shares are available for such reinvestment (taking
into account then outstanding Stock Options and other Plan awards).
SECTION 11. Effective Date of Plan.
The Plan was approved by the Board and became effective on March 21,
1995. The Plan was further amended by the Board on December 5, 1996.
EXHIBIT 11.1
TRANSPORT CORPORATION OF AMERICA, INC.
Computation of Earnings per Common Share
<TABLE>
<CAPTION>
Three months ended December 31
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of common
shares outstanding 6,496,039 6,420,205 5,604,604
Dilutive effect of outstanding stock
options and warrants 239,145 293,510 457,272
---------- ---------- ----------
Weighted average number of common and
common equivalent share outstanding 6,735,184 6,713,715 6,061,876
========== ========== ==========
Net earnings $1,732,910 $1,342,964 $1,127,641
========== ========== ==========
Net earnings per weighted common and
common equivalent share $ 0.26 $ 0.20 $ 0.19
========== ========== ==========
Years ended December 31
----------------------------------------
1996 1995 1994
---------- ---------- ----------
Weighted average number of common
shares outstanding 6,441,723 6,360,992 4,882,995
Dilutive effect of outstanding stock
options and warrants 276,628 348,230 429,204
Adjustment for options and warrants issued
within one year of offering 70,103
---------- ---------- ----------
Weighted average number of common and
common equivalent share outstanding 6,718,351 6,709,222 5,382,302
========== ========== ==========
Net earnings $6,293,899 $6,106,107 $4,209,392
========== ========== ==========
Net earnings per weighted common and
common equivalent share $ 0.94 $ 0.91 $ 0.78
========== ========== ==========
</TABLE>
Independent Auditors' Consent
The Board of Directors
Transport Corporation of America, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-90896,333-934 and 33-96576) on Form S-8 of Transport Corporation of America,
Inc. of our reports dated February 7, 1997 relating to the balance sheets of
Transport Corporation of America, Inc. as of December 31, 1996 and 1995 and the
related statements of earnings, changes in stockholders' equity and cash flows
and the related financial statement schedule for each of the years in the
three-year period ended December 31, 1996, which reports appear in the December
31, 1996 annual report on Form 10-K of Transport Corporation of America, Inc.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,340,991
<SECURITIES> 0
<RECEIVABLES> 12,930,377
<ALLOWANCES> 313,000
<INVENTORY> 810,180
<CURRENT-ASSETS> 24,640,572
<PP&E> 110,917,370
<DEPRECIATION> 30,000,203
<TOTAL-ASSETS> 108,670,910
<CURRENT-LIABILITIES> 30,440,094
<BONDS> 21,837,713
0
0
<COMMON> 64,960
<OTHER-SE> 43,018,143
<TOTAL-LIABILITY-AND-EQUITY> 108,670,910
<SALES> 0
<TOTAL-REVENUES> 164,666,098
<CGS> 0
<TOTAL-COSTS> 151,270,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,823,839
<INCOME-PRETAX> 10,661,899
<INCOME-TAX> 4,368,000
<INCOME-CONTINUING> 6,293,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,293,899
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
</TABLE>
