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, 1998
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: (651) 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 10, 1998, the Company had outstanding 7,915,303 shares of Common
Stock, $.01 par value.
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 ..........................Page 3
Consolidated Statements of Earnings for the three and
six months ended June 30, 1998 and 1997 ......................Page 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 ......................Page 5
Notes to Consolidated Financial Statements .....................Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................Page 7
PART II OTHER INFORMATION
Item 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
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS: (unaudited) *
Current assets:
Cash and cash equivalents $ 66 $ 1,383
Trade receivables, net of allowance for doubtful accounts 19,474 17,482
Other receivables 964 4,757
Operating supplies 960 989
Deferred income taxes 3,628 3,945
Prepaid expenses and tires 3,189 1,921
--------- ---------
Total current assets 28,281 30,477
Revenue equipment, at cost 145,072 126,886
Less: accumulated depreciation (36,871) (29,871)
--------- ---------
Net revenue equipment 108,201 97,015
Property, other equipment, and improvements:
Land, buildings, and improvements 17,421 17,120
Furniture and other equipment 8,105 7,082
Less: accumulated depreciation (6,887) (6,177)
--------- ---------
Net property, other equipment, and improvements 18,639 18,025
Deposit on acquisition 15,800 0
Other assets, net 2,174 2,276
--------- ---------
TOTAL OTHER ASSETS 17,974 2,276
--------- ---------
TOTAL ASSETS $ 173,095 $ 147,793
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank $ 11,670 $ 0
Current maturities of long-term debt 22,083 19,077
Accounts payable 4,593 3,557
Checks issued in excess of cash balances 1,803 0
Due to independent contractors 1,793 518
Accrued expenses 11,968 9,563
--------- ---------
Total current liabilities 53,910 32,715
Long term debt, less current maturities 42,953 44,618
Deferred income taxes 21,421 19,652
Stockholders' equity:
Common stock 67 66
Additional paid-in capital 24,312 23,824
Retained earnings 30,432 26,918
--------- ---------
Total stockholders' equity 54,811 50,808
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 173,095 $ 147,793
========= =========
</TABLE>
* Based upon audited financial statements.
3
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARES AND EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
AMOUNT AMOUNT AMOUNT AMOUNT
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 53,075 $ 46,369 $ 102,563 $ 89,844
OPERATING EXPENSES:
Salaries, wages, and benefits 16,059 12,827 1,165 25,189
Fuel, maintenance, and other expense 6,405 6,209 3,202 12,577
Purchased transportation 15,238 13,744 9,397 27,216
Revenue equipment leases 949 1,261 1,915 2,545
Depreciation and amortization 4,694 3,848 9,104 7,554
Insurance, claims, and damage 1,390 1,436 2,915 2,777
Taxes and licenses 915 856 1,750 1,655
Communication 653 531 1,265 1,066
Other general and administrative expenses 2,139 1,509 4,072 3,138
(Gain) on disposition of equipment (47) (51) (59) (359)
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 48,395 42,170 94,726 83,358
----------- ----------- ----------- -----------
OPERATING INCOME 4,680 4,199 7,837 6,486
Interest expense 1,075 755 2,190 1,419
Interest income (25) (6) (116) (58)
----------- ----------- ----------- -----------
INTEREST EXPENSE, NET 1,050 749 2,074 1,361
EARNINGS BEFORE INCOME TAXES 3,630 3,450 5,763 5,125
Provision for income taxes 1,416 1,376 2,249 2,063
----------- ----------- ----------- -----------
NET EARNINGS $ 2,214 $ 2,074 $ 3,514 $ 3,062
=========== =========== =========== ===========
Earnings per common share
Basic $ 0.33 $ 0.31 $ 0.53 $ 0.47
Diluted $ 0.33 $ 0.31 $ 0.52 $ 0.45
Average common shares outstanding
Basic 6,712,746 6,590,141 6,691,223 6,552,883
Diluted 6,785,200 6,728,434 6,776,435 6,732,131
</TABLE>
4
<PAGE>
TRANSPORT CORPORATION OF AMERICAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JUNE 30,
-----------------------
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 3,514 $ 3,062
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 9,104 7,554
Gain on disposition of equipment (59) (359)
Deferred income taxes 2,086 928
Changes in operating assets and liabilities:
Trade receivables (1,992) (4,243)
Other receivables 3,793 15
Operating supplies 29 139
Prepaid expenses and tires (1,268) (1,019)
Accounts payable 1,036 296
Due to independent contractors 1,275 361
Accrued expenses 2,405 1,284
-------- --------
Net cash provided by operating activities 19,923 8,018
-------- --------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (20,449) (15,098)
Payments for purchases of property, other equipment,
and leasehold improvements 0 0
Increase in other assets (1,409) (3,849)
Deposit on acquisition (15,800)
Proceeds from disposition of equipment 1,115 2,666
-------- --------
Net cash used in investing activities (36,543) (16,281)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 489 257
Payments for repurchase and retirement of common stock 0 (958)
Proceeds from issuance of long-term debt 10,577 7,425
Principal payments on long-term debt (9,236) (6,464)
Proceeds from issuance of notes payable to bank 11,670 8,685
Principal payments on notes payable to bank 0 (7,275)
Net checks issued in excess of cash balances 1,803 290
-------- --------
Net cash provided by financing activities 15,303 1,960
-------- --------
INCREASE (DECREASE) IN CASH (1,317) (6,303)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,383 6,341
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 66 $ 38
======== ========
Supplemental disclosure of cashflow information:
Cash paid during the period
for:
Interest, net $ 2,183 $ 1,417
Income taxes, net 71 510
</TABLE>
5
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Consolidated Financial Statements
1. Interim Financial Statements (unaudited)
The unaudited interim consolidated financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary to a fair statement of the interim periods. They have been
prepared in accordance with the instructions to Form 10-Q, Article 10 of
Regulation S-X and, accordingly, do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
These financial 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,
1997. The policies described in that report are used in preparing
quarterly reports. Certain balances from prior periods have been
reclassified to conform to current presentation.
The Company's business is seasonal. Operating results for the six
month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
2. New Accounting Pronouncements
The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME, in
the first quarter of 1998. There were no components of comprehensive
income which require disclosure in any of the periods presented herein.
3. Commitments
As of June 30, 1998 the Company had commitments for the purchase of
approximately $37 million of revenue equipment and land, net of
anticipated proceeds from the disposition of used equipment.
4. Acquisition of North Star Transport, Inc.
On June 30, 1998, the Company made a $15.8 million cash deposit,
derived from existing cash and borrowings under the Company's credit
facility, for the acquisition of North Star Transport, Inc. ("North Star")
which became effective on July 1, 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 1998 and 1997
Operating revenues increased 14.5% to $53.1 million for the quarter
ended June 30, 1998 from $46.4 million for the quarter ended June 30,
1997. Greater freight volumes from existing customers continued as the
primary source of revenue growth. Revenues per mile were $1.25 per mile in
the second quarter of 1998, compared to $1.29 per mile for the same period
of 1997, reflecting a continued trend in 1998 toward longer lengths of
haul and reduced accessorial demands. Equipment utilization, as measured
by average revenue per tractor per week, was $2,905 during the second
quarter of 1998, compared to $2,837 in the second quarter of 1997.
Pre-tax margin (earnings before income taxes as a percentage of
operating revenues) including the effect of an approximately $211,000 loss
related to Transport International Express, Inc. ("T.I.E."), the Company's
airport-to-airport expedited less-than-truckload service, were 6.8% in the
second quarter of 1998, compared to 7.4% in the same period of 1997.
Efficiency, as measured by average annualized revenues per non-driver
employee, improved 2.0% to $561,200 for the second quarter of 1998,
compared to $550,400 for the same period of 1997. Salaries, wages, and
benefits as a percentage of operating revenues increased to 30.3% in the
second quarter of 1998, compared to 27.7% for the same period of 1997,
resulting primarily from a relative increase in the number of employee
drivers during 1998, additional personnel for the Company's driver
training program, and administrative and operating personnel in T.I.E.,
which commenced operations in the third quarter of 1997. Reflecting a
lower average number of independent contractors during the second quarter
of 1998, compared to the same period of 1997, the miles driven by
independent contractors declined 4.3% as a percentage of all miles driven
in the second quarter of 1998. As a result,, purchased transportation
decreased as a percentage of operating revenues to 28.7% in the second
quarter of 1998 from 29.6% for the same period of 1997. As of June 30,
1998 and 1997, the Company utilized 424 and 464 independent contractors,
respectively. The decline of fuel, maintenance, and other expenses as a
percentage of operating revenues to 12.1% in the second quarter of 1998,
when compared to 13.4% in the second quarter of 1997, reflects moderating
fuel prices and somewhat lower tire and maintenance expenses, partially
offset by an increase in miles driven by employee drivers as a percent of
total miles during the second quarter of 1998, when compared to the same
period of 1997. Revenue equipment leases decreased as a percentage of
operating revenues to 1.8% in the second quarter of 1998 from 2.7% for the
same period of 1997, a continuation of an historical trend resulting from
the expanded use of debt financed equipment in place of leased equipment.
Depreciation and amortization for the second quarter of 1998 was 8.8% of
operating revenues, compared to 8.3% for the same period of 1997,
primarily reflecting additions to
<PAGE>
company-owned equipment, compared to the year-ago period. Insurance,
claims and damage as a percentage of operating revenues improved to 2.6%,
in the second quarter of 1998 from 3.1% for the same period of 1997
primarily as a result of lower insurance premiums and favorable accident
costs in the second quarter of 1998, when compared to the same period of
1997. Other general and administrative expenses as a percentage of
operating revenues were 4.0% in the second quarter of 1998, compared 3.3%
for the same period of 1997, primarily reflecting incremental driver
hiring and training expenses in 1998.
Net interest expense in the second quarter of 1998 was 2.0% of
operating revenues, compared to 1.7% for the same period of 1997,
primarily a reflection of the higher average in 1998 of outstanding debt
associated with revenue equipment purchases when compared to 1997.
The effective tax rate for the second quarter of 1998 was 39.0%,
compared to the 39.9% effective tax rate for the second quarter of 1997.
The lower effective rate in 1998 was primarily due to a continued decline
in Company per diem payments, which are not fully deductible for income
tax purposes, when compared to the second quarter of 1997. 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 $2.2 million, or 4.2% of operating revenues for the quarter
ended June 30, 1998 from $2.1 million, or 4.5% of operating revenues for
the quarter ended June 30, 1997.
Six Months Ended June 30, 1998 and 1997
Operating revenues increased 14.2% to $102.6 million for the six
months ended June 30, 1998 from $89.8 million for the first six months of
1997. Greater freight volumes from existing customers continued as the
primary source of revenue growth. Revenues per mile were $1.25 per mile in
the first six months of 1998 compared to $1.28 per mile for the same
period of 1997, reflecting a continued trend in 1998 toward longer lengths
of haul and reduced accessorial demands. Equipment utilization, as
measured by average revenues per tractor per week, improved to $2,842
during the first six months of 1998 from $2,798 for the same period of
1997.
Pre-tax margin (earnings before income taxes as a percentage of
operating revenues) was 5.6% in the first six months of 1998, compared to
5.7% for the same period of 1997. Efficiency, as measured by average
annualized revenues per non-driver employee, increased 2.7% to $554,700
for the first six months of 1998 from $540,100 for the same period of
1997. Salaries, wages, and benefits as a percentage of operating revenues
rose to 30.4% in the first six months of 1998, compared to 28.0% for the
same period of 1997, resulting primarily from an increase in the number of
employee drivers during 1998, additional personnel for
<PAGE>
the Company's driver training program, and administrative and operating
personnel in T.I.E., which commenced operations in the third quarter of
1997. Independent contractor miles declined 3.2% in the first six months
of 1998, compared to the same period of 1997, primarily as a result of a
lower average number of independent contractors during the first six
months of 1998 compared to the same period of 1997. Correspondingly,
purchased transportation declined as a percentage of operating revenues to
28.7% in the first six months of 1998 from 30.3% for the same period of
1997. Fuel, maintenance, and other expenses decreased as a percentage of
operating revenues to 12.9% in the first six months of 1998 from 14.0% for
the same period of 1997, reflecting lower fuel prices and maintenance
expenses, and favorable winter operating conditions in the first quarter
of 1998, partially offset by an increase in miles driven by employee
drivers as a percent of total miles in 1998, compared to 1997. Revenue
equipment leases decreased as a percentage of operating revenues to 1.9%
in the first six months of 1998 from 2.9% for the same period of 1997,
primarily as a result of the expanded use of debt financed equipment.
Depreciation and amortization increased as a percentage of operating
revenues to 8.9% in the first six months of 1998, compared to 8.4% for the
same period of 1997, primarily reflecting increases of company-owned
equipment over year-ago levels. Other general and administrative expenses
as a percentage of operating revenues were 4.0% in the first six months of
1998, compared 3.5% for the same period of 1997, reflecting incremental
driver hiring and training expenses in 1998 for programs which were
expanded in the last half of 1997.
In the first six months of 1998, gain on the disposition of
equipment was $59,000, compared to a gain of $359,000 in the first six
months of 1997, due to the fewer number of equipment dispositions in 1998,
when compared to 1997.
Net interest expense in the first six months of 1998 was 2.0% of
operating revenues, compared to 1.5% for the same period of 1997,
primarily a reflection of the higher average in 1998 of outstanding debt
associated with revenue equipment purchases, when compared to 1997.
The effective tax rate for the first six months of 1998 was 39.0%,
compared to the 40.3% effective tax rate for the first six months of 1997.
The lower effective rate in 1998 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 1997. 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 $3.5 million, or 3.4% of operating revenues, for the six
months ended June 30, 1998 from $3.1 million, or 3.4% of operating
revenues, for the six months ended June 30, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $19.9 million in the
first six months of 1998. The working capital deficit as of June 30, 1998
was $25.6 million, compared to the $2.2 million deficit which existed as
of December 31, 1997. The working capital deficit at June 30, 1998
includes $11.7 million of notes payable to bank, a reduction of cash
balances associated with a $15.8 million cash deposit on the acquisition
of North Star Transport, Inc. ("North Star"), and $22.1 million of current
maturities of long-term debt associated with revenue equipment. Both
revenue equipment and the acquisition deposit are treated as non-current
assets on the balance sheet. The Company has historically operated
effectively with current liabilities in excess of current assets through a
combination of operating profits, collections on accounts receivable,
proceeds from the disposition of equipment, and other cash management
strategies. Upon completion of the credit facility noted below, the
Company plans to replace a substantial portion of current maturities of
long-term debt with non-current debt.
Investing activities in the first six months of 1998 consumed net
cash of $36.5 million, including $15.8 million for a deposit on the
acquisition of North Star and $20.4 million for the purchase of 116 new
tractors and 250 new trailers, as well as other equipment and
improvements, net of proceeds from the disposition of used equipment. As
of June 30, 1998 the Company had commitments for the purchase of
approximately $37 million of revenue equipment and land, net of
anticipated proceeds from the disposition of used equipment. The Company
has arranged to finance the revenue equipment purchases.
Net cash provided by financing activities was $15.3 million in the
first six months of 1998, including borrowing of $11.7 million under the
Company's credit facility as a result of a deposit on the acquisition of
North Star, proceeds of $10.6 million from the issuance of long-term debt
associated with the purchase of revenue equipment, less payments of $9.2
million under the Company's term loan agreements.
The Company amended its bank credit facility in the second quarter
of 1998, providing for an increase to $25 million in anticipation of
funding the cash portion of its acquisition of North Star. The amended
credit facility, which expires at the end of August, 1998, is secured
primarily by accounts receivable and revenue equipment not otherwise
pledged. The Company is completing negotiations of a $100 million
unsecured credit facility and expects to have that facility in place prior
to the end of August, 1998. The replacement credit facility, which expires
three years from the commencement date, will be used to retire a
substantial portion of existing long-term debt upon commencement of the
facility. Thereafter, the facility will be used to meet working capital
needs, make purchases of revenue equipment and other assets, satisfy
letter of credit
<PAGE>
requirements associated with the Company's self-insured retention
arrangements, and for acquisitions. At June 30, 1998, there were letters
of credit outstanding totaling $3.6 million under this program and
outstanding borrowings of $11.7 million.
The Company expects to continue to fund its liquidity needs and
anticipated capital expenditures with cash flows from operations,
equipment dispositions, and the credit facility.
FORWARD-LOOKING STATEMENTS
The Company has included various statements in this Management's
Discussion and Analysis and Results Of Operations which may be considered
as forward-looking statements of expected future results of operations or
events made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such statements, based upon
management's interpretation of currently available information, are
subject to risks and uncertainties that could cause future financial
results or events to differ materially from those which are presented.
Such risks and factors include general economic conditions, competition in
the transportation industry, governmental regulation, the Company's
ability to recruit, train and retain qualified drivers, the cost of fuels,
customer decisions to meet their transportation needs, the ability of the
Company to maintain a higher level of service than its competitors, the
integration of its acquisition of North Star, the ultimate success of TIE,
adverse weather conditions, and other factors outside the Company's
control. The Company wishes to caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date
made.
YEAR 2000
The company believes that it is on schedule with its project to
complete, during 1998, the replacement and upgrade of those computer
systems which are not currently Year 2000 compliant. Any of the Company's
computer programs, or its vendors' or customers' computer programs, that
recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company utilizes a number
of computer programs across its entire operation. The Company's project to
replace and upgrade non-compliant systems is part of a larger on-going
initiative to replace all key operational support systems within the
Company. The Company is also contacting its vendors and customers,
particularly those with whom EDI transactions are exchanged with the
objective of identifying and resolving Year 2000 issues by mid-1999.
Currently, the Company believes that the costs of addressing the year 2000
issue will not have a material adverse impact on its financial position.
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On May 21, 1998 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 6,279,515 23,567
Michael J. Paxton 6,279,316 23,766
Robert J. Meyers 6,267,394 35,688
Anton J. Christianson 6,279,516 23,566
Kenneth J. Roering 6,279,516 23,566
William D. Slattery 6,267,103 35,979
(b) The Company's shareholders approved the selection of KPMG Peat
Marwick LLP as independent public accountants by a vote of
6,275,442 shares in favor, 4,975 shares against and 22,665
shares abstaining.
Item 5. Other Information:
Effective July 1, 1998, the Company completed its purchase of
North Star Transport, Inc., a private truckload carrier based in Eagan,
Minnesota. The purchase price consisted of a $15.8 million cash deposit
and 1.2 million shares of the Company's common stock. The Company made
a filing on Form 8-K respecting the transaction on July 15, 1998.
As disclosed in this year's Proxy Statement, the deadline for
submission of shareholder proposals pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for inclusion in the
Company's Proxy Statement for its 1999 Annual Meeting of Shareholders
is December 11, 1998. Additionally, if the Company receives notice of a
separate shareholder proposal after April 6, 1999, such proposal will
be considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the
persons named in proxies solicited by the Board of Directors of the
Company for its 1999 Annual Meeting of Shareholders may exercise
discretionary voting power with respect to such proposal.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description Page
------ ----------- ----
10.1 Amendment dated as of June 24, 1998 to Credit Agreement
<PAGE>
between Firstar Bank of Minnesota, N.A. and the Company....
11 Statement re: Computation of Net Earnings per Share........14
27 Financial Data Schedule....................................15
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
June 30, 1998.
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/ Robert J. Meyers
----------------------------------------------------
Robert J. Meyers
President and Chief Operating Officer
/s/ Michael D. Kandris
----------------------------------------------------
Michael D. Kandris
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT amends that certain Credit Agreement dated as of May 15,
1997 (the "AGREEMENT"), by and between Transport Corporation of America, Inc., a
Minnesota corporation ("BORROWER") and Firstar Bank of Minnesota, National
Association (the "BANK"). All capitalized terms not otherwise defined herein
shall have the meanings set forth in the Agreement.
1. DEFINITIONS. The following definitions are hereby deleted and replaced
with the following
"ADJUSTED LIBOR RATE" shall mean, for any Interest Period and the
applicable LIBOR Rate Advance, the per annum rate of interest equal to the
sum of (a) one hundred twenty-five basis points (1.25%), plus (b) the per
annum rate (rounded up, if necessary, to the nearest one-sixteenth of one
percent (1/16%)) determined by dividing (i) the LIBOR Rate for such LIBOR
Rate Advance and related Interest Period, by (ii) an amount equal to one
minus the stated maximum rate (expressed as a decimal) of all reserve
requirements (including any basic, marginal, emergency, supplemental,
special or other reserves) that is specified from time to time during an
Interest Period by the Board of Governors of the Federal Reserve System
(or any successor agency) for funding "Eurocurrency Liabilities" pursuant
to Regulation D of such Board or any other then applicable successor
regulation, without benefit of credit or prorations, exemptions or offsets
which might otherwise be available to the Bank from time to time under
Regulation D.
"BORROWING BASE" shall mean an amount equal to the sum of (a)
eighty-five percent (85%) of all Eligible Accounts, plus (b) seventy-five
percent (75%) of the net book value of Eligible Equipment, each as
determined as of the last day of the most recent calendar month and at
such other times as may be required by the Bank.
"BORROWING BASE CERTIFICATE" shall mean the certificate in the form
of Exhibit A to this First Amendment, or such other form prescribed by the
Lender from time-to-time pursuant to Section 6.18 of the Credit Agreement.
"ELIGIBLE EQUIPMENT" shall mean all certificated tractors and
trailers owned by the Borrower as equipment and used for transport in the
ordinary course of the Borrower's business and listed on Schedule B to the
Security Agreement or any schedule of pledged equipment delivered by the
Borrower to the Bank pursuant to Section 6.18(h) of the Credit Agreement,
provided such trucks and trailers:
(a) (i) are subject to a perfected, first priority security
interest in favor of the Bank in accordance with all
applicable state titling statutes and are free and clear of
all other Liens, or (ii) between the Closing Date (as defined
in the North Star Acquisition Agreement) and August 31, 1998,
are subject to a negative pledge granted in accordance to
Section 5 of the First Amendment to Credit Agreement;
(b) are in good condition free from any defects that would
negatively affect the market value thereof in a material way;
<PAGE>
(c) are not, as reasonably determined by the Bank, unusable in the
ordinary course of Borrower's business; and
(d) are insured against loss or damage in accordance with the
provisions of the Security Agreement.
"NORTH STAR ACQUISITION AGREEMENT" shall mean that certain Stock
Purchase Agreement By and Among Transport Corporation of America, Inc.,
North Star Transport, Inc. and The Shareholders of North Star Transport,
Inc. dated as of May 20, 1998, a true copy of which has been delivered to
the Bank.
"REVOLVING NOTE" shall mean the Revolving Credit Note dated May 15,
1998, made payable by the Borrower to the order of the Bank in the
original principal amount of $25,000,000.
"TERMINATION DATE" shall mean the earlier of August 31, 1998 or the
date on which an Event of Default has occurred and the Bank determines to
extinguish its commitment hereunder.
2. REVOLVING LOAN. Article III of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"ARTICLE III. REVOLVING LOAN
3.1 NATURE OF LOAN COMMITMENT/MAXIMUM OF ADVANCES. Subject to the terms and
conditions of this Agreement, the Bank shall make Advances to the Borrower
from time to time from the date hereof to the Termination Date in an
aggregate principal amount not to exceed at any time the lesser of (i)
Twenty-Five Million Dollars ($25,000,000) less the sum of (a) the L/C
Amount and (b) the Obligation of Reimbursement or (ii) the Borrowing Base
less the sum of (a) the L/C Amount and (b) the Obligation of Reimbursement
(the "Revolving Credit Commitment"). All Advances pursuant to the
Revolving Credit Commitment, including Advances made by the Bank pursuant
to Section 2.1 for Borrower's Obligation of Reimbursement, shall be
evidenced by the Revolving Note; provided that the Borrower shall be
obligated to pay only the amount that is actually disbursed hereunder,
together with accrued interest on the outstanding balance at the rates
provided in Section 3.4 hereof. The Borrower may borrow, prepay and
reborrow within such limit pursuant to this Agreement and the Revolving
Note.
3.2 TYPES OF ADVANCES; CERTAIN LIMITATIONS. Each Advance by the Bank under the
Revolving Credit Commitment may be either a LIBOR Rate Advance or a Prime
Rate Floating Advance. LIBOR Rate Advances and Prime Rate Floating Rate
Advances may be outstanding at the same time; provided, however, that no
more than eight (8) LIBOR Rate Advances may be outstanding at any one
time. The principal amount of each LIBOR Rate Advance shall be not less
than $100,000 or an integral multiple thereof.
3.3 PURPOSE FOR ADVANCES. Except with the prior written consent of the Bank,
all Advances under Article III shall be used exclusively for the
Borrower's working capital and other general business purposes; provided
that up to $15,800,000 of Advances
<PAGE>
under Article III may be used for acquisition financing for the purpose of
acquiring North Star Transport.
3.4 COMPUTATION OF INTEREST. The Advances under the Revolving Credit
Commitment shall bear interest on the unpaid principal amount thereof as
follows:
(i) For LIBOR Rate Advances, at a fluctuating rate per annum equal to
the Adjusted LIBOR Rate, and
(ii) For Floating Rate Advances, at a fluctuating rate per annum equal to
the Prime Rate Floating Rate less one hundred forty basis points
(1.40%) per annum.
All interest payable on Advances shall be computed on the basis of
actual days elapsed and a year of 360 days. Interest shall be payable
monthly in arrears on the last business day of each month commencing on
June 30, 1998, and at maturity.
3.5 MATURITY. The Revolving Note shall be expressed to mature on the earlier
of: (i) August 31, 1998 or (ii) upon the occurrence of an Event of
Default. All amounts outstanding under the Revolving Note shall be
immediately due and payable at maturity (whether by acceleration or
otherwise).
3.6 RECORDKEEPING. Bank shall record in its records, the date and amount of
each Advance made thereon by Bank, and each repayment thereof. The
aggregate unpaid principal amount so recorded shall be presumptive
evidence of the principal amount of the Advances owing and unpaid by the
Borrower thereon. The failure to so record any such amount or any error in
so recording any such amount shall not, however, limit or otherwise affect
the Obligations of the Borrower hereunder or under the Revolving Note to
repay the principal amount of the Advances together with all interest
accrued thereon.
3.7 NON-USE FEES. The Borrower agrees to pay the Bank, not later than ten (10)
days after receipt of a statement therefor, a fee equal to one-quarter of
one percent (1/4 %) per annum times the average daily unused portion of
the Revolving Credit Commitment, payable quarterly in arrears commencing
July 1, 1998, and as of the maturity date of the Revolving Note."
3.8 Section 5.6(b) is hereby deleted in its entirety and replaced with the
following:
"CONVERSION OF LIBOR RATE ADVANCES TO FLOATING RATE ADVANCES.
Notwithstanding Section 5.6(a), if such Section would otherwise be
applicable but the Bank could lawfully maintain the LIBOR Rate Advances at
the Prime Rate less 1.40% per annum then, during such period as the Bank
cannot maintain the LIBOR Rate Advances at the Adjusted LIBOR Rate, the
LIBOR Rate Advances shall bear interest at a per rate equal to Prime Rate
less 1.40% per annum in effect from time to time. If the Bank determines
that all events or conditions making it unlawful or impossible for the
Bank to maintain the LIBOR Rate Advances at the Adjusted LIBOR Rate cease
to exist, then Advances may again bear interest at the Adjusted LIBOR
Rate, subject to the other terms and conditions of this Agreement."
<PAGE>
4. MANDATORY PREPAYMENT. Section 5.1 is deleted in its entirety and replaced
with the following:
"If at any time the outstanding Obligations of the Borrower exceeds the
Revolving Credit Commitment, the Borrower shall immediately repay the excess."
5. NEGATIVE PLEDGE OF EQUIPMENT. The Borrower agrees that it shall not create
or permit to exist any security interest on any of its trucks and trailers
that have not previously been pledged to any other party, whether now
owned or hereafter acquired. Simultaneously with the execution of this
Amendment, the Borrower shall deliver to the Lender a schedule of such
previously unpledged trucks and trailers, setting forth the net
depreciated book value of each such truck or trailer, certified as correct
by the Borrower's chief financial officer. Borrower agrees that, at the
request of the Lender, it shall promptly deliver certificates of title and
completed applications for notation of the Lender's lien for each such
truck and trailer.
6. PRECONDITIONS TO EFFECTIVENESS. This Amendment shall only become effective
upon (a) the execution of the Amendment and the Revolving Credit Note by
the Borrower and the Bank, and (b) execution and delivery by the Borrower
of (i) the items described in Paragraph 3 above; (ii) a current Borrowing
Base Certificate; (iii) an opinion of Borrower's counsel satisfactory to
the Lender's counsel; and (iv) any and all additional related documents
referred to in this Amendment or as otherwise may be required by the
Lender.
7. CONSENT AND ACKNOWLEDGMENT OF CORPORATE GUARANTORS. By executing the
acknowledgment below, TCA of Ohio, Inc. and Transport International
Express, Inc. (each a "Corporate Guarantor@ and collectively, the
"Corporate Guarantors@) each hereby (a) consents to each and all of the
provisions of this Amendment, and (b) acknowledges and agrees that the
Guaranty executed by it and delivered to the Lender remains in full force
and effect in accordance with its original terms, not subject to any
defense, counterclaim or right of setoff.
8. REPRESENTATIONS REAFFIRMED. The Borrower and each Corporate Guarantor
hereby warrants and represents to the Lender that (a) each and all of the
representations and warranties set forth and contained in the Loan
Agreement and the other Loan Documents are true, correct and complete in
all respects as of the date hereof, and (b) no Default or Event of Default
has occurred and is continuing as of the date hereof.
9. NO WAIVERS. The Borrower and each Corporate Guarantor hereby acknowledges
and agrees that by executing and delivering this Agreement to the Lender
it is not waiving any existing Defaults or Event of Default, whether known
or unknown, nor is the Lender waiving any of its rights or remedies under
the Loan Agreement or any of the Loan Documents, provided, however that
the Bank does consent to Borrower entering into and consummating the
transaction contemplated by the North Star Acquisition Agreement in
accordance with the terms thereof, and the Bank hereby waives any Event of
Default under Section 6.23 of the Agreement for doing so.
10. NO SET-OFF. The Borrower and each Corporate Guarantor acknowledges to and
agrees with the Lender that no events, conditions or circumstances have
arisen or exist as of the date hereof which would give the Borrower the
right to assert a defense, counterclaim and/or setoff to any claim by the
Lender for payment of the Obligations, and if any so exist as of the date
hereof, whether know or unknown, absolute or contingent, liquidated or
unliquidated, the same are hereby waived.
<PAGE>
11. RELEASE. The Borrower and each Corporate Guarantor hereby releases the
Lender and each of its officers, directors, agents, employees, legal
counsel and other representatives from any and all claims, demands, causes
of action, liability, damage, loss, cost and expense arising from and/or
which it has paid, incurred or sustained or believe it has paid, incurred
or sustained, known or unknown, absolute or contingent, liquidated or
unliquidated, as a result of or related to (a) the transactions evidenced
by or related to the Loan Documents and any and all other documents,
agreements or instruments related thereto, or (b) any acts or omissions of
the Lender or any of its officers, directors, agents, employees, legal
counsel or other representatives in connection therewith or related
thereto, or (c) the extension or denial of credit.
12. MERGER. All prior oral and written communications, commitments, alleged
commitments, promises, alleged promises, agreements and alleged agreements
by or between the Lender and the Borrower are hereby merged into this
Agreement and the Loan Documents, and shall not be enforceable unless
expressly set forth in this Agreement and the Loan Documents.
13. NO OTHER AMENDMENTS. Except as expressly amended hereby or as previously
amended in writing, each of the Loan Agreement and the other Loan
Documents shall remain in full force and effect in accordance with their
original terms.
14. LEGAL EXPENSES. The Borrower shall pay and will reimburse the Bank on
demand for all reasonable out-of-pocket expenses incurred by the Bank
relating to this Amendment, including without limitation reasonable
attorneys' fees and legal expenses incurred for the preparation of this
Amendment.
15. COUNTERPARTS. This Amendment may be signed in any number of counterparts,
each of which shall be considered as an original, but when taken together
shall constitute one document.
16. AUTHORIZATION. The Borrower and each Corporate Guarantor represents and
warrants that the execution, delivery and performance of this Amendment
and the documents referenced herein are within the corporate powers of the
Borrower and have been duly authorized by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed this Amendment as of this
_____ day of ________, 1998.
FIRSTAR BANK OF MINNESOTA,
NATIONAL
ASSOCIATION
By:
-----------------------------------
Its:
-------------------------------
TRANSPORT CORPORATION OF AMERICA,
INC.
By:
-----------------------------------
Its:
-------------------------------
<PAGE>
ACKNOWLEDGMENT OF CORPORATE GUARANTORS:
TCA OF OHIO, INC. TRANSPORT INTERNATIONAL EXPRESS, INC.
By: By:
----------------------------------- -----------------------------------
Its: Its:
------------------------------- -------------------------------
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
TO: Firstar Bank of Minnesota, National Association (the "Bank")
Pursuant to the Credit Agreement between Transport Corporation of America,
Inc. ("Borrower") and the Bank ("Credit Agreement") dated May 15, 1997, as
amended, the undersigned hereby certifies and warrants that as of _________,
19___, the Borrower Base was as follows:
RECEIVABLES AND EQUIPMENT
Total Accounts $_________________
Less: Ineligible Accounts ($_________________)
Eligible Accounts $_________________
Times 85% = Borrowing Base Amount $_________________
Eligible Equipment (net book value) $_________________
Times 75% = Borrowing Base Amount $_________________
Total Borrowing Base $_________________
Revolving Loans $_________________
Undrawn Letters of Credit $_________________
Total Loans & Letters of Credit $_________________
Margin or (Deficiency) $_________________
The person signing this Borrowing Base Certificate on behalf of the
Borrower represents that he or she or it is authorized to do so by such party
and that it is true and correct to the best of his or her knowledge.
This Borrowing Base Certificate is subject to, and does not modify or in
any way affect the terms and conditions of the Credit Agreement. The terms and
conditions of the Credit Agreement shall supersede and control any inconsistent
terms or conditions of the Borrowing Base Certificate.
Transport Corporation of America, Inc.
Date _____________, 19____ --------------------------------------
Authorized Signature and Title
EXHIBIT 11.1
TRANSPORT CORPORATION OF AMERICA, INC.
Computation of Earnings per Common Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings $ 2,214,000 $ 2,074,000 $ 3,514,000 $ 3,062,000
- ------------------------------------------------------------------------------------------------------------
Average number of common
shares outstanding 6,712,746 6,590,141 6,691,223 6,552,883
Dilutive effect of outstanding stock
options and warrants 72,454 138,293 85,212 179,248
- ------------------------------------------------------------------------------------------------------------
Average number of common and common
equivalent shares outstanding 6,785,200 6,728,434 6,776,435 6,732,131
- ------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.33 $ 0.31 $ 0.53 $ 0.47
Diluted earnings per share $ 0.33 $ 0.31 $ 0.52 $ 0.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 66,000
<SECURITIES> 0
<RECEIVABLES> 19,474,000
<ALLOWANCES> 0
<INVENTORY> 960,000
<CURRENT-ASSETS> 28,281,000
<PP&E> 170,598,000
<DEPRECIATION> 43,758,000
<TOTAL-ASSETS> 173,095,000
<CURRENT-LIABILITIES> 53,910,000
<BONDS> 42,953,000
0
0
<COMMON> 67,000
<OTHER-SE> 54,744,000
<TOTAL-LIABILITY-AND-EQUITY> 173,095,000
<SALES> 102,563,000
<TOTAL-REVENUES> 102,563,000
<CGS> 0
<TOTAL-COSTS> 94,726,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,190,000
<INCOME-PRETAX> 5,763,000
<INCOME-TAX> 2,249,000
<INCOME-CONTINUING> 3,514,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,514,000
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
