SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-24908
TRANSPORT CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1386925
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1769 YANKEE DOODLE ROAD
EAGAN, MINNESOTA 55121
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (612) 686-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES __X__ NO ____
As of August 11, 1997, the Company had outstanding 6,575,994 shares of Common
Stock, $.01 par value.
This Form 10-Q consists of 13 pages.
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Condensed Balance Sheets as of
June 30, 1997 and December 31, 1996......................... Page 3
Condensed Statements of Earnings for the
three and six months ended June 30, 1997 and 1996........... Page 4
Condensed Statements of Cash Flows for the
six months ended June 30, 1997 and 1996..................... Page 5
Notes to Condensed Financial Statements....................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... Page 7
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........... Page 10
Item 5. Other Information............................................. Page 10
Item 6. Exhibits and Reports on Form 8-K.............................. Page 11
Exhibit 11 Statement re: Computation of Net Earnings per Weighted
Common and Common Equivalent Share .............. Page 12
Exhibit 27 Financial Data Schedule........................... Page 13
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- -------------
ASSETS: (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 37,523 $ 6,340,991
Trade receivables, net of allowance for doubtful accounts 16,858,934 12,617,377
Other receivables 642,322 656,753
Operating supplies 670,703 810,180
Deferred income taxes 2,483,000 2,113,000
Prepaid expenses and tires 3,120,954 2,102,271
------------- -------------
Total current assets 23,813,436 24,640,572
Revenue equipment, at cost 105,491,288 94,691,320
Less: accumulated depreciation (29,471,785) (25,121,215)
------------- -------------
Net revenue equipment 76,019,503 69,570,105
Property, other equipment, and improvements:
Land, buildings, and improvements 13,986,464 11,042,479
Furniture and other equipment 6,040,436 5,183,786
Less: accumulated depreciation (5,554,520) (4,879,203)
------------- -------------
Net property, other equipment, and improvements 14,472,380 11,347,062
Other assets, net 2,626,310 3,113,171
------------- -------------
TOTAL ASSETS $ 116,931,629 $ 108,670,910
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank $ 1,410,000 $ 0
Current maturities of long-term debt 15,299,113 15,258,593
Accounts payable 2,903,188 2,607,861
Checks issued in excess of cash balances 641,154 350,950
Due to independent contractors 1,746,038 1,385,364
Accrued expenses 12,121,047 10,837,326
------------- -------------
Total current liabilities 34,120,540 30,440,094
Long term debt, less current maturities 22,759,362 21,837,713
Deferred income taxes 14,608,000 13,310,000
Stockholders' equity:
Common stock 65,731 64,960
Additional paid-in capital 23,149,402 23,851,516
Retained earnings 22,228,594 19,166,627
------------- -------------
Total stockholders' equity 45,443,727 43,083,103
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 116,931,629 $ 108,670,910
============= =============
</TABLE>
* Based upon audited financial statements.
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
AMOUNT AMOUNT AMOUNT AMOUNT
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 46,368,579 $ 41,225,259 $ 89,843,804 $ 80,019,437
OPERATING EXPENSES:
Salaries, wages, and benefits 12,825,954 11,111,748 25,187,662 22,480,630
Fuel, maintenance, and other expense 5,997,700 5,650,291 12,211,422 11,625,985
Purchased transportation 13,744,282 11,545,448 27,216,256 22,181,690
Revenue equipment leases 1,261,357 1,772,823 2,546,085 3,550,315
Depreciation and amortization 3,848,263 3,430,593 7,554,222 6,738,117
Insurance, claims, and damage 1,647,065 1,403,441 3,141,818 2,764,411
Taxes and licenses 856,177 794,783 1,654,964 1,576,130
Communication 530,379 476,063 1,065,542 962,041
Other general and administrative expenses 1,509,287 1,248,866 3,138,282 2,576,486
(Gain) loss on disposition of equipment (51,089) 12,335 (358,713) (11,868)
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 42,169,375 37,446,391 83,357,540 74,443,937
------------ ------------ ------------ ------------
OPERATING INCOME 4,199,204 3,778,868 6,486,264 5,575,500
Interest expense 755,644 683,693 1,419,600 1,370,804
Interest income (6,519) (3,564) (58,303) (6,222)
------------ ------------ ------------ ------------
INTEREST EXPENSE, NET 749,125 680,129 1,361,297 1,364,582
EARNINGS BEFORE INCOME TAXES 3,450,079 3,098,739 5,124,967 4,210,918
Provision for income taxes 1,376,000 1,302,000 2,063,000 1,769,000
------------ ------------ ------------ ------------
NET EARNINGS $ 2,074,079 $ 1,796,739 $ 3,061,967 $ 2,441,918
============ ============ ============ ============
Net earnings per weighted common and
common equivalent share $ 0.31 $ 0.27 $ 0.45 $ 0.36
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 6,728,434 6,725,373 6,732,131 6,716,825
============ ============ ============ ============
</TABLE>
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30,
------------------------------
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 3,061,967 $ 2,441,918
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 7,554,222 6,738,117
Gain on disposition of equipment (358,713) (11,868)
Deferred income taxes 928,000 1,317,000
Changes in operating assets and liabilities:
Trade receivables (4,241,557) (387,804)
Other receivables 14,431 1,841,180
Operating supplies 139,477 101,798
Prepaid expenses and tires (1,018,683) (927,349)
Accounts payable 295,327 (756,168)
Due to independent contractors 360,674 792,916
Accrued expenses 1,283,721 26,185
------------ ------------
Net cash provided by operating activities 8,018,866 11,175,925
------------ ------------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (15,097,408) (5,709,450)
Payments for purchases of property, other equipment,
and leasehold improvements (3,848,728) (1,855,987)
Increase in other assets (2,490) (21,798)
Proceeds from disposition of equipment 2,665,261 786,415
------------ ------------
Net cash used in investing activities (16,283,365) (6,800,820)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 255,845 11,126
Payments for repurchase and retirement of common stock (957,187) 0
Proceeds from issuance of long-term debt 7,424,780 4,500,239
Principal payments on long-term debt (6,462,611) (4,923,025)
Proceeds from issuance of notes payable to bank 8,685,000 21,888,000
Principal payments on notes payable to bank (7,275,000) (24,118,000)
Net checks issued in excess of cash balances 290,204 (283,047)
------------ ------------
Net cash provided by financing activities 1,961,031 (2,924,707)
------------ ------------
INCREASE (DECREASE) IN CASH (6,303,468) 1,450,398
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,340,991 165,173
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,523 $ 1,615,571
============ ============
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 1,417,229 $ 1,372,887
Income taxes, net 509,485 187,051
</TABLE>
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Condensed Financial Statements
1. Interim Condensed Financial Statements (unaudited)
The unaudited interim condensed financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary to a fair statement of the interim periods. They have been
prepared in accordance with the instructions to Form 10-Q, Article 10
of Regulation S-X and, accordingly, do not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
These statements should be read in conjunction with the
financial statements and footnotes included in the Company's most
recent annual financial statements on Form 10-K for the year ended
December 31, 1996. The policies described in that report are used in
preparing quarterly reports.
The Company's business is seasonal. Operating results for the
six month period ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
2. Commitments
As of June 30, 1997 the Company had commitments for the
purchase of approximately $19.6 million of revenue equipment, net of
proceeds from the planned future disposition of used equipment, $1.3
million for the purchase of a facility in Columbus, Ohio, and $1.1
million for the construction of a replacement facility in Kansas City,
Missouri. The Company has arranged to finance the revenue equipment
purchases; the remaining commitments are expected to be financed by
cash flows from operating activities.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 1997 and 1996
Operating revenues increased 12.5% to $46.4 million for the
quarter ended June 30, 1997 from $41.2 million for the quarter ended
June 30, 1996. Greater freight volumes from existing customers
continued as the primary source of revenue growth. Revenues per mile
improved to $1.31 per mile in the second quarter of 1997 from $1.29 per
mile for the same period of 1996 as a result of moderate rate increases
and fewer empty miles as a percentage of total miles in the second
quarter of 1997, compared to the second quarter of 1996. Equipment
utilization, as measured by average revenue per tractor per week, rose
to $2,891 during the second quarter of 1997, from $2,749 in the second
quarter of 1996.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) were 7.5% in the second quarter of 1997,
unchanged from the same period of 1996. Efficiency, as measured by
average annualized revenues per non-driver employee, improved 2.7% to
$550,400 for the second quarter of 1997, compared to $536,000 for the
same period of 1996. Salaries, wages, and benefits as a percentage of
operating revenues increased to 27.7% in the second quarter of 1997,
compared to 27.0% for the same period of 1996, due primarily to an
increase in the driver pay scale during 1997. At June 30, 1997 there
were 464 independent contractors, an increase of 41 from 423 a year
prior. Reflecting the increase in the number of independent
contractors, independent contractor miles increased 16.9% in the second
quarter of 1997, compared to the same period of 1996. Accordingly,
purchased transportation increased as a percentage of operating
revenues to 29.6% in the second quarter of 1997 from 28.0% for the same
period of 1996. The decline of fuel, maintenance, and other expenses as
a percentage of operating revenues to 12.9% in the second quarter of
1997, when compared to 13.7% in the second quarter of 1996, reflects
the increase of independent contractor miles as a percent of total
miles and the moderating fuel prices during the second quarter of 1997,
when compared to the same period of 1996. Revenue equipment leases
decreased as a percentage of operating revenues to 2.7% in the second
quarter of 1997 from 4.3% for the same period of 1996, as a result of
the expanded use of debt financed equipment in place of leased
equipment and an increase in independent contractors. Depreciation and
amortization for the second quarter of 1997 was 8.3% of operating
revenues, unchanged from the same period of 1996. Insurance, claims and
damage as a percentage of operating revenues increased to 3.6% in the
second quarter of 1997 from 3.4% for the same period of 1996 as a
result of slightly higher accident costs in the second quarter of 1997,
when compared to the same period of 1996.
The effective tax rate for the second quarter of 1997 was
39.9%, compared to the 42.0% effective tax rate for the second quarter
of 1996. The lower effective rate in 1997 was primarily due to a
continued decline in Company per diem
<PAGE>
payments, which are not fully deductible for income tax purposes, when
compared to the second quarter of 1996. The Company pays certain of its
drivers a per diem allowance while on the road to cover meals and other
expenses.
As a consequence of the items discussed above, net earnings
increased to $2.1 million, or 4.5% of operating revenues for the
quarter ended June 30, 1997 from $1.8 million, or 4.3% of operating
revenues for the quarter ended June 30, 1996.
Six Months Ended June 30, 1997 and 1996
Operating revenues increased 12.3% to $89.8 million for the
six months ended June 30, 1997 from $80.0 million for the first six
months of 1996. Increases in freight volumes from existing customers
continued as the primary source of revenue growth. Revenues per mile
improved to $1.31 per mile in the first six months of 1997 from $1.27
per mile for the same period of 1996 as a result of moderate rate
increases in 1997 and fewer empty miles as a percentage of total miles
in 1997, compared to 1996. Equipment utilization, as measured by
average revenues per tractor per week, improved 8.0% to $2,869 during
the first six months of 1997 from $2,656 for the same period of 1996.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) increased to 5.7% in the first six months of
1997 from 5.3% for the same period of 1996. Efficiency, as measured by
average annualized revenues per non-driver employee, increased 4.9% to
$540,100 for the first six months of 1997 from $514,700 for the same
period of 1996. Independent contractor miles increased 17.9% in the
first six months of 1997, compared to the same period of 1996, as a
result of the increase in the average number of contractors during the
first six months of 1997 compared to the same period of 1996.
Correspondingly, purchased transportation increased as a percentage of
operating revenues to 30.3% in the first six months of 1997 from 27.7%
for the same period of 1996. Fuel, maintenance, and other expenses
decreased as a percentage of operating revenues to 13.6% in the first
six months of 1997 from 14.5% for the same period of 1996, reflecting
the increase of independent contractor miles as a percent of total
miles and somewhat lower fuel prices in 1997, compared to 1996. Revenue
equipment leases decreased as a percentage of operating revenues to
2.9% in the first six months of 1997 from 4.4% for the same period of
1996, primarily as a result of an increase in independent contractors
and the expanded use of debt financed equipment.
In the first six months of 1997, gain on the disposition of
equipment was $359,000, compared to a gain of $12,000 in the first six
months of 1996, due to the larger number of equipment dispositions in
1997, when compared to 1996.
The effective tax rate for the first six months of 1997 was 40.3%,
compared to the 42.0% effective tax rate for the first six months of
1996. The lower effective rate
<PAGE>
in 1997 is due to a decline in Company per diem payments, which are not
fully deductible for income tax purposes, when compared to the first
six months of 1996. The Company pays certain of its drivers a per diem
allowance while on the road to cover meals and other expenses.
As a consequence of the items discussed above, net earnings
increased to $3.1 million, or 3.4% of operating revenues, for the six
months ended June 30, 1997 from $2.4 million, or 3.1% of operating
revenues, for the six months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $8.0 million in
the first six months of 1997. The working capital deficit as of June
30, 1997 was $10.3 million, compared to the $5.8 million deficit which
existed as of December 31, 1996. The working capital deficit at June
30, 1997 includes $15.3 million of current maturities of long-term debt
associated with the purchase of revenue equipment. Historically, the
Company has operated effectively with current liabilities in excess of
current assets through a combination of operating profits, collections
on accounts receivable, and other cash management strategies.
Management expects to continue to do so while meeting its obligations.
The increase in trade receivables reflects business growth as well as a
general trend toward slower customer payments. Accrued liabilities
include normal provisions for accident and workers' compensation claims
associated with the Company's self-insured retention insurance program,
less claim payments actually made. The Company believes that reserves
are adequate for expected future claim payments.
Investing activities in the first half of 1997 consumed net
cash of $16.3 million, primarily for the purchase of new revenue
equipment including 77 tractors and 370 trailers, less proceeds from
the disposition of used equipment, including 66 tractors and 72
trailers. These expenditures were financed through a combination of
cash generated by operations, long-term debt financing and proceeds
from equipment dispositions. As of June 30, 1997 the Company had
commitments for the purchase of approximately $19.6 million of revenue
equipment, net of proceeds from the planned future disposition of used
equipment, $1.3 million for the purchase of a facility in Columbus,
Ohio, and $1.1 million for the construction of a replacement facility
in Kansas City, Missouri. The Company has arranged to finance the
revenue equipment purchases; the remaining commitments are expected to
be financed by cash flows from operating activities.
Net cash provided by financing activities was $2.0 million in
the first half of 1997. Payments under the Company's term loan
agreements were $6.5 million. The primary source of financing was the
issuance of $7.4 million of long-term debt associated with the purchase
of revenue equipment.
<PAGE>
The Company maintains a $15 million credit facility with a
bank, consisting of a $10 million line of credit, secured primarily by
its accounts receivable, and an additional $5 million line of credit
secured by revenue equipment not otherwise pledged. The credit
facility, which expires in May, 1999, is used to meet short-term
operating cash requirements as well as letter of credit requirements
associated with the Company's self-insured retention arrangements. As
of June 30, 1997, there was $1.4 million outstanding debt under this
line of credit and there was $2.8 million of outstanding letters of
credit which reduced the amount available under the line of credit.
The Company expects to continue to fund its liquidity needs
and anticipated capital expenditures with cash flows from operations,
long-term debt financing and operating leases, equipment dispositions,
and the line of credit.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On May 13, 1997 the Company held its Annual Meeting of Shareholders. At
the meeting, the following actions were taken:
(a) The following persons were elected to the Company's Board of
Directors:
Votes For Votes Withheld
--------- --------------
James B. Aronson 5,148,766 4,116
Dennis M. Mathisen 5,140,961 11,921
Anton J. Christianson 5,148,861 4,021
Michael J. Paxton 5,148,861 4,021
Kenneth J. Roering 5,148,861 4,021
(b) The Company's shareholders approved the amendments to the
Company's 1986 Stock Option Plan and the 1995 Stock Plan by a
vote of 4,984,602 shares voting in favor, 161,025 voting
against, and 7,255 shares abstaining or subject to broker
non-votes.
(c) The Company's shareholders approved the selection of KPMG Peat
Marwick LLP as independent public accountants by a vote of
5,132,757 shares voting in favor, 11,681 shares against and
8,444 shares abstaining.
Item 5. Other Information:
On May 19, 1997 the Company named Chief Executive Officer James B.
Aronson as Chairman of the Board, and elected Robert J. Meyers as
President and Chief Operating Officer, succeeding Mr. Aronson. On July
24, 1997, Mr. Meyers was also appointed to the Board of Directors, to
serve until the next Annual Meeting of Shareholders.
<PAGE>
On May 20, 1997 the Company announced the formation of a wholly-owned
subsidiary, Transport International Express, Inc.. The subsidiary will
offer airport-to-airport, expedited less-than-truckload service.
Operations will commence in the third quarter of 1997.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description Page
------ ----------- ----
11 Statement re: Computation of Net Earnings per Weighted
Common and Common Equivalent Share.................... 12
27 Financial Data Schedule................................... 13
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORT CORPORATION OF AMERICA, INC.
Date: August 13, 1997 /s/ James B. Aronson
-------------------- ---------------------------------------
James B. Aronson
Chief Executive Officer
/s/ Robert J. Meyers
--------------------------------------
Robert J. Meyers
President, Chief Operating Officer, and
Chief Financial Officer (Principal
Financial and Accounting Officer)
EXHIBIT 11
TRANSPORT CORPORATION OF AMERICA, INC.
Computation of Net Earnings per Weighted Common
and Common Equivalent Share
(unaudited)
Three months ended June 30,
------------------------
1997 1996
------------------------
Weighted average number of common
shares outstanding 6,590,141 6,421,809
Dilutive effect of outstanding stock
options and warrants 138,293 303,564
------------------------
Weighted average number of common and
common equivalent shares outstanding 6,728,434 6,725,373
========================
Net earnings $2,074,079 $1,796,739
========================
Net earnings per weighted common and
common equivalent share $ 0.31 $ 0.27
========================
Six months ended June 30,
------------------------
1997 1996
------------------------
Weighted average number of common
shares outstanding 6,552,883 6,421,338
Dilutive effect of outstanding stock
options and warrants 179,248 295,487
------------------------
Weighted average number of common and
common equivalent shares outstanding 6,732,131 6,716,825
========================
Net earnings $3,061,967 $2,441,918
========================
Net earnings per weighted common and
common equivalent share $ 0.45 $ 0.36
========================
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,523
<SECURITIES> 0
<RECEIVABLES> 16,858,934
<ALLOWANCES> 0
<INVENTORY> 670,703
<CURRENT-ASSETS> 23,813,436
<PP&E> 125,518,188
<DEPRECIATION> 35,026,305
<TOTAL-ASSETS> 116,931,629
<CURRENT-LIABILITIES> 34,120,540
<BONDS> 22,759,362
0
0
<COMMON> 65,731
<OTHER-SE> 45,377,996
<TOTAL-LIABILITY-AND-EQUITY> 116,931,629
<SALES> 0
<TOTAL-REVENUES> 89,843,804
<CGS> 0
<TOTAL-COSTS> 83,357,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,419,600
<INCOME-PRETAX> 5,124,967
<INCOME-TAX> 2,063,000
<INCOME-CONTINUING> 3,061,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,061,967
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
