SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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.)
1715 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 November 7, 2000, the Company had outstanding 8,331,083 shares of Common
Stock, $.01 par value.
This Form 10-Q consists of 13 pages.
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999....................Page 3
Consolidated Statements of Earnings for the three
and nine months ended September 30, 2000 and 1999...........Page 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 2000 and 1999...............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
Item 3. Quantitative and Qualitative Disclosure about Market
Risk........................................................Page 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................Page 13
2
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ITEM 1. FINANCIAL STATEMENTS
Transport Corporation of America, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 352 $ 745
Trade accounts receivable, net 34,648 30,133
Other receivables 757 1,522
Operating supplies - inventory 1,279 1,479
Deferred income tax benefit 4,355 4,035
Prepaid expenses and tires 2,685 1,924
------------ ------------
Total current assets 44,076 39,838
Property and equipment:
Land, buildings, and improvements 21,591 21,469
Revenue equipment 233,423 228,709
Other equipment 21,727 15,122
------------ ------------
Total property and equipment 276,741 265,300
Less accumulated depreciation (77,585) (59,479)
------------ ------------
Property and equipment, net 199,156 205,821
Other assets, net 27,028 26,482
------------ ------------
Total assets $ 270,260 $ 272,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and capital lease obligations $ 15,439 $ 14,899
Accounts payable 5,905 5,913
Checks issued in excess of cash balances 6,026 2,127
Due to independent contractors 3,452 2,908
Accrued expenses 13,037 13,395
------------ ------------
Total current liabilities 43,859 39,242
Long term debt and capital lease
obligations, less current maturities 93,157 106,106
Deferred income taxes 33,909 31,396
Common stock with non-detachable put, 1,155,000 and
1,200,000 shares, respectively 19,508 20,268
Stockholders' equity:
Common stock 71 71
Additional paid-in capital 30,083 29,209
Retained earnings 49,673 45,849
------------ ------------
Total stockholders' equity 79,827 75,129
------------ ------------
Total liabilities and stockholders' equity $ 270,260 $ 272,141
============ ============
</TABLE>
3
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Transport Corporation of America, Inc.
Consolidated Statements of Earnings
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues $ 73,549 $ 70,722 $ 219,180 $ 212,901
Operating expenses:
Salaries, wages, and benefits 20,929 19,667 62,997 59,083
Fuel, maintenance, and other expenses 10,210 7,778 30,029 22,855
Purchased transportation 23,438 24,459 70,941 72,640
Revenue equipment leases 42 497 211 2,199
Depreciation and amortization 7,353 6,690 21,852 18,707
Insurance, claims and damage 1,739 1,477 6,158 5,350
Taxes and licenses 1,271 1,344 3,815 3,944
Communications 777 838 2,600 2,424
Other general and administrative expenses 2,641 2,001 7,879 6,487
Loss (gain) on sale of equipment 66 (395) (261) (535)
------------ ------------ ------------ ------------
Total operating expenses 68,466 64,356 206,221 193,154
------------ ------------ ------------ ------------
Operating income 5,083 6,366 12,959 19,747
Interest expense 2,388 2,040 6,798 5,538
Interest income (5) (8) (107) (35)
------------ ------------ ------------ ------------
Interest expense, net 2,383 2,032 6,691 5,503
------------ ------------ ------------ ------------
Earnings before income taxes 2,700 4,334 6,268 14,244
Provision for income taxes 1,053 1,690 2,444 5,562
------------ ------------ ------------ ------------
Net earnings $ 1,647 $ 2,644 $ 3,824 $ 8,682
============ ============ ============ ============
Net earnings per share:
Basic $ 0.20 $ 0.32 $ 0.46 $ 1.07
============ ============ ============ ============
Diluted $ 0.17 $ 0.31 $ 0.39 $ 1.02
============ ============ ============ ============
Average common shares outstanding:
Basic 8,330,780 8,244,409 8,324,452 8,085,156
Diluted 9,881,214 8,501,913 9,777,874 8,503,673
</TABLE>
4
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Transport Corporation of America, Inc.
Consolidated Statements of Cash Flows
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net earnings $ 3,824 $ 8,682
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 21,852 18,707
Gain on sale of equipment (261) (535)
Deferred income taxes 2,999 5,563
Changes in operating assets and liabilities:
Trade receivable (4,515) (4,384)
Other receivable 765 (1,010)
Operating supplies 200 (197)
Prepaid expenses and tires (761) (959)
Accounts payable (7) (1,811)
Due to independent contractors 544 823
Accrued expenses (359) 269
------------ ------------
Net cash provided by operating activities 24,281 25,148
------------ ------------
Investing activities:
Payments for purchases of revenue equipment (8,057) (53,333)
Payments for purchases of property and other equipment (7,073) (6,213)
Increase in other assets 0 (346)
Acquisition of business, net of cash acquired 0 (2,611)
Proceeds from sales of equipment 7,438 17,943
------------ ------------
Net cash used in investing activities (7,692) (44,560)
------------ ------------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 114 988
Proceeds from issuance of long-term debt 0 165
Principal payments on long-term debt (12,145) (18,043)
Proceeds from issuance of notes payable to bank 90,620 114,866
Principal payments on notes payable to bank (99,470) (81,866)
Change in net checks issued in excess of cash balances 3,899 4,022
------------ ------------
Net cash (used in) provided by financing activities (16,982) 20,132
------------ ------------
Net increase (decrease) in cash (393) 720
Cash and cash equivalents, beginning of period 745 448
------------ ------------
Cash and cash equivalents, end of period $ 352 $ 1,168
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized $ 6,466 $ 5,439
Income taxes, net 471 634
</TABLE>
Non-cash investing and financing transactions:
Capital lease obligations incurred in 2000 for $8.6 million of new revenue
equipment.
Transfer in 2000 to common stock of 45,000 shares of common stock with the
non-detachable put valued at $16.89.
5
<PAGE>
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Consolidated Financial Statements
1. Interim Consolidated Financial Statements (unaudited)
The unaudited interim consolidated financial statements
contained herein reflect all adjustments which, in the opinion of
management, are necessary to a fair statement of the interim
periods. They have been prepared in accordance with the instructions
to Form 10-Q, Article 10 of Regulation S-X and, accordingly, do not
include all the information and footnotes required by accounting
principles generally accepted in the United States of America 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, 1999. The policies described in that report are
used in preparing quarterly reports. Certain balances from prior
periods have been restated to conform to current presentation.
The Company's business is seasonal. Operating results for the
three and nine month periods ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
2. Commitments
As of September 30, 2000 the Company had commitments for the
purchase of approximately $300,000 of non-revenue equipment.
In April 1999, the Company entered into a five year lease for
the construction of a new $13.0 million headquarters facility in
Eagan, MN. Construction has been completed and monthly payments of
approximately $95,000 commenced in the third quarter of 2000.
3. Common Stock with Non-detachable Put
In January 2000, 45,000 shares of common stock with a
non-detachable put valued at $16.89 per share were transferred,
thereby eliminating the put right associated with such shares. Put
rights associated with 1,155,000 shares at $16.89 remain
outstanding.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three Months Ended September 30, 2000 and 1999
Operating revenues were $73.5 million for the quarter ended
September 30, 2000, compared to $ 70.7 million for the quarter ended
September 30, 1999. Revenue increases in 2000 were primarily
attributable to fuel surcharges, partially offset by an unplanned
shutdown for several weeks by a major customer. Furthermore, third
quarter 1999 revenues were abnormally low due to computer database
problems. Reflecting shifts in customer freight mix and a lower
percentage of empty miles driven, revenues per mile, excluding fuel
surcharges, were $1.27 per mile in the third quarter of 2000,
compared to $1.25 per mile for the same period of 1999. Equipment
utilization, as measured by average revenues per tractor per week,
including fuel surcharges, was $2,838 during the third quarter of
2000, compared to $2,584 for the third quarter of 1999. This
increase was attributable to higher equipment utilization and added
fuel surcharge revenues in the third quarter of 2000.
During the third quarter of 2000, a greater proportion of
miles were driven by company drivers versus independent contractors
than in the year- ago quarter. Accordingly, several expenses as a
percentage of revenue shifted among categories in the third quarter
of 2000, when compared to the same quarter of 1999. At September 30,
2000, there were 1,287 tractors assigned to company drivers and 746
tractors owned by independent contractors, compared to 1,246 and 825
tractors, respectively, at September 30, 1999. Efficiency, as
measured by average annualized revenues per non-driver employee, was
$559,000 for the third quarter of 2000, compared to $536,800 for the
same period of 1999.
Salaries, wages, and benefits as a percentage of operating
revenues were 28.4% in the third quarter of 2000, compared to 27.8%
for the same period of 1999. The increase is primarily a reflection
of a higher proportion of company drivers in the third quarter of
2000, compared to the same period of 1999, partially offset by
favorable benefits experience in 2000.
Fuel, maintenance, and other expenses, as a percentage of
operating revenues, were 13.9 % in the third quarter of 2000,
compared to 11.0% in the third quarter of 1999. The increase in 2000
over the year-ago period reflects significantly higher fuel prices
in 2000 and the higher proportion of miles driven by company
drivers. The Company's fuel surcharge revenue program recovered most
of the effect of significantly higher fuel costs in the third
quarter of 2000, when compared to the third quarter of 1999.
Purchased transportation as a percentage of operating revenues
decreased to 31.9% in the third quarter of 2000, compared to 34.6%
for the 1999 period. The
7
<PAGE>
decrease reflects the lower proportion of miles driven by
independent contractors in the third quarter of 2000 than in the
year-ago period, partially offset by increased pass-through in 2000
of fuel surcharge revenues to independent contractors.
Revenue equipment leases decreased as a percentage of
operating revenues to 0.1% in the third quarter of 2000 from 0.7%
for the same period of 1999 as a result of a decrease in the use of
operating leases.
Depreciation and amortization increased to 10.0% of operating
revenues for the third quarter of 2000, compared to 9.5% for the
third quarter of 1999, primarily due to a greater proportion of
company-owned equipment in 2000.
Insurance, claims and damage expense as a percentage of
operating revenues was 2.4% in the third quarter of 2000, compared
to 2.1% in the third quarter of 1999. The increase is primarily a
result of favorable accident and claims experience in the year-ago
period.
Other general and administrative expenses as a percentage of
operating revenues were 3.6% in the third quarter of 2000, compared
to 2.8% in the third quarter of 1999. The increase is primarily a
result of higher driver hiring and training expenses and incremental
headquarters facility rental expense in the third quarter of 2000,
when compared to the year-ago period.
Net interest expense increased as a percentage of operating
revenues to 3.2% for the third quarter 2000 from 2.9% for the third
quarter 1999 primarily as a result of higher interest rates in third
quarter of 2000, compared to the year-ago period.
Loss on the disposition of revenue equipment was $66,000 in
the third quarter of 2000, compared to a gain of $395,000 in the
third quarter of 1999, reflecting lower net proceeds versus the
Company's book value of revenue equipment disposed in the third
quarter of 2000, when compared to the year-ago period.
The effective tax rates for the third quarters of both 2000
and 1999 were 39.0%.
As a result of the items discussed above, the Company's
operating ratio (operating expenses as a percentage of operating
revenues) was 93.1% during the third quarter of 2000, compared to
91.0% for the year-ago quarter. Net earnings were $1.6 million, or
2.2% of operating revenues, for the quarter ended September 30,
2000, compared to $2.6 million, or 3.7% of operating revenues, for
the quarter ended September 30, 1999.
8
<PAGE>
Nine Months Ended September 30, 2000 and 1999
Operating revenues were $219.2 million for the nine months
ended September 30, 2000, compared to $212.9 million for the first
nine months of 1999. Revenue increases were primarily attributable
to fuel surcharges and the acquisition of Robert Hansen Trucking,
Inc. in May 1999. Revenue per mile, excluding fuel surcharges, was
$1.26 in the first nine months of 2000, compared to $1.27 for the
same period of 1999. The change in revenue per mile reflects shifts
in the Company's freight mix. Equipment utilization, as measured by
average revenue per tractor per week, including fuel surcharges, was
$2,731 during the first nine months of 2000, compared to $2,677 for
the same period of 1999.
As a result of changes in the relative proportion of company
drivers versus independent contractors during the first nine months
of 2000 compared to the year-ago period, a higher percentage of
miles were driven by company drivers in 2000. Accordingly, several
expenses as a percentage of revenues shifted among categories in the
first nine months of 2000 when compared to the same period of 1999.
Efficiency, as measured by average annualized revenues per
non-driver employee, was $554,000 for the first nine months of 2000
compared to $567,400 for the same period of 1999.
Salaries, wages, and benefits, as a percentage of operating
revenues, were 28.7% in the first nine months of 2000, compared to
27.8% for the same period of 1999. The increase in 2000 primarily
reflects higher driver wages due to an increase in the proportion of
miles driven by employee drivers when compared to the year-ago
period.
Fuel, maintenance, and other expenses increased as a
percentage of operating revenues to 13.7% in the first nine months
of 2000 from 10.7% for the same period of 1999. The increase
primarily reflects significantly higher fuel prices in the current
year and the higher proportion of miles driven by company drivers.
The Company estimates that significantly higher fuel costs in the
first nine months of 2000, partially offset by fuel surcharge
revenues, reduced pre-tax income by approximately $1.1 million, when
compared to the year-ago period.
Purchased transportation decreased as a percentage of
operating revenues to 32.4% in the first nine months of 2000 from
34.1% for the same period of 1999. The decrease reflects the lower
proportion of miles driven by independent contractors in the first
nine months of 2000 than in the year-ago period, partially offset by
increased pass-through in 2000 of fuel surcharge revenues to
independent contractors.
9
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Revenue equipment leases decreased as a percentage of
operating revenues to 0.1% in the first nine months of 2000 from
1.0% for the same period of 1999, primarily as a result of a
decrease in the use of operating leases.
Depreciation and amortization increased as a percentage of
operating revenues to 10.0% in the first nine months of 2000,
compared to 8.8% for the same period of 1999, primarily reflecting
the greater proportion of company-owned equipment in the first nine
months of 2000.
Insurance, claims and damage expense as a percentage of
operating revenues was 2.8% in the first nine months of 2000,
compared to 2.5% in the same period of 1999. The increase is
primarily a result of favorable accident and claims experience in
the year-ago period.
Other general and administrative expenses as a percentage of
operating revenues were 3.6% in the first nine months of 2000,
compared to 3.0% for the same period of 1999. The increase in the
first nine months of 2000 is primarily a result of one-time expenses
associated with the terminated merger in early 2000, higher driver
hiring and training expenses, and incremental headquarters facility
expenses, than for the year-ago period.
Net interest expense in the first nine months of 2000 was 3.0%
of operating revenues, compared to 2.6% for the same period of 1999.
The increase is primarily a reflection of higher average interest
rates and outstanding debt during the first nine months of 2000,
when compared to 1999.
The effective tax rates for the nine-month periods of both
2000 and 1999 were 39.0%.
As a result of the items discussed above, the Company's
operating ratio (operating expenses as a percentage of operating
revenues) was 94.1% during the first nine months of 2000, compared
to 90.7% for the year-ago period. Net earnings were $3.8 million, or
1.7% of operating revenues, for the first nine months of 2000,
compared to $8.7 million, or 4.1% of operating revenues, for the
nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $24.3 million in
the first nine months of 2000. Working capital as of September 30,
2000 was $0.2 million, compared to $0.6 million as of December 31,
1999.
Investing activities in the first nine months of 2000 consumed
net cash of $7.7 million, primarily for the purchase of 40 new
tractors, 94 new trailers, and other equipment and improvements,
less proceeds from the disposition of used
10
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equipment. The Company also entered into capital leases during the
first nine months of 2000 for 40 new tractors and 250 new trailers
having an aggregate value of $8.6 million. As of September 30, 2000,
the Company had commitments for the purchase of approximately
$300,000 of non-revenue equipment. Payments associated with the
Company's new leased $13.0 million headquarters facility commenced
in the third quarter of 2000.
Net cash consumed by financing activities was $17.0 million in
the first nine months of 2000, including $8.9 million representing
net repayments to the Company's credit facility and $12.1 million
for repayment of long-term debt.
The Company has a credit agreement with seven major banks for
an unsecured credit facility with maximum combined borrowings and
letters of credit of $100 million. Amounts actually available under
the credit facility may be limited by the Company's accounts
receivable and unencumbered revenue equipment. The credit facility,
which expires in March 2002, is used to meet working capital needs,
purchase revenue equipment and other assets, satisfy letter of
credit requirements associated with the Company's self-insured
retention arrangements, and for acquisitions. At September 30, 2000,
there were outstanding borrowings of $81.2 million and letters of
credit outstanding totaling $0.7 million under this credit facility,
in addition to $1.0 million of other outstanding letters of credit.
The Company expects to continue to fund its liquidity needs and
anticipated capital expenditures with cash flows from operations and
the credit facility.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board (SFAS)
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes new standards for recognizing
all derivatives as either assets or liabilities, and measuring those
instruments at fair value. SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133," changed the effective date to fiscal
years beginning after June 15, 2000. The Company will be required to
adopt the new standard beginning with the first quarter of fiscal
2001. The impact of adoption on the Company's financial statements
has not yet been determined.
11
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FORWARD-LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, in the Company's
Annual Report, elsewhere in this Report, in future filings by the
Company with the SEC, in the Company's press releases, and in oral
statements made with the approval of an authorized executive officer
which are not historical or current facts, are forward-looking
statements made pursuant to safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results
and those presently anticipated or projected. The Company cautions
readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made. The following
important factors, among other things, in some cases have affected
and in the future could affect the Company's actual results and
could cause the Company's actual financial performance to differ
materially from that expressed in any forward-looking statement: (1)
the highly competitive conditions that currently exist in the
Company's market and the Company's ability to compete, (2) the
Company's ability to recruit, train, and retain qualified drivers,
(3) increases in fuel prices, and the Company's ability to recover
these costs from its customers, (4) changes in governmental
regulations applicable to the Company's operations, (5) adverse
weather conditions, (6) accidents, (7) the market for used revenue
equipment, and (8) downturns in general economic conditions
affecting the Company and its customers. The foregoing list should
not be construed as exhaustive and the Company disclaims any
obligation subsequently to revise or update any previously made
forward-looking statements. Unanticipated events are likely to
occur.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to certain market risks with its $100
million credit agreement, of which $81.2 million was outstanding at
September 30, 2000. The agreement bears interest at a variable rate,
which was 8.4% at September 30, 2000. Consequently, the Company is
exposed to the risk of greater borrowing costs if interest rates
increase. Although the Company does not currently employ derivatives
or similar instruments to hedge against increases in fuel prices,
fuel surcharge provisions enable the Company to reduce the effects
of price increases. The Company has 1,155,000 million shares of
common stock with a non-detachable Put option. The Put gives the
shareholder the right to sell some or all of the 1,155,000 shares of
the Company's common stock back to the Company at $16.89 per share,
payable in cash, during a 60-day period commencing June 30, 2001.
12
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description
------ -----------
11.1 Statement re: Computation of Net Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORT CORPORATION OF AMERICA, INC.
Date: November 8, 2000 /s/ Robert J. Meyers
--------------------- -----------------------------------------
Robert J. Meyers
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Keith R. Klein
-----------------------------------------
Keith R. Klein
Chief Financial Officer
(Principal Financial Officer)
13
