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 MARCH 31, 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 May 10, 2000, the Company had outstanding 7,163,546 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
March 31, 2000 and December 31, 1999..........................Page 3
Consolidated Statements of Earnings for the
three months ended March 31, 2000 and 1999....................Page 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 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
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................Page 11
Page 2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Transport Corporation of America, Inc.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(unaudited) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 722 $ 745
Trade accounts receivable, net 32,348 30,133
Other receivables 2,965 1,522
Operating supplies - inventory 1,396 1,479
Deferred income tax benefit 4,010 4,035
Prepaid expenses and tires 4,592 1,924
------------ ------------
Total current assets 46,033 39,838
Property and equipment:
Land, buildings, and improvements 21,622 21,469
Revenue equipment 237,431 228,709
Other equipment 17,297 15,122
------------ ------------
Total property and equipment 276,350 265,300
Less accumulated depreciation (65,246) (59,479)
------------ ------------
Property and equipment, net 211,104 205,821
Other assets, net 26,320 26,482
------------ ------------
Total assets $ 283,457 $ 272,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and capital lease obligations $ 15,910 $ 14,899
Accounts payable 6,841 5,913
Checks issued in excess of cash balances 4,827 2,127
Due to independent contractors 3,389 2,908
Accrued expenses 13,781 13,395
------------ ------------
Total current liabilities 44,748 39,242
Long term debt and capital lease
obligations, less current maturities 110,607 106,106
Deferred income taxes 31,746 31,396
1.2 million shares of common stock with non-detachable put 19,508 20,268
Stockholders' equity:
Common stock 71 71
Additional paid-in capital 30,014 29,209
Retained earnings 46,763 45,849
------------ ------------
Total stockholders' equity 76,848 75,129
------------ ------------
Total liabilities and stockholders' equity $ 283,457 $ 272,141
============ ============
</TABLE>
* Based upon audited financial statements
Page 3
<PAGE>
Transport Corporation of America, Inc.
Consolidated Statements of Earnings
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Operating revenues $ 72,200 $ 67,145
Operating expenses:
Salaries, wages, and benefits 20,722 18,735
Fuel, maintenance, and other expenses 9,831 6,833
Purchased transportation 24,249 23,664
Revenue equipment leases 81 869
Depreciation and amortization 7,186 5,733
Insurance, claims and damage 2,022 1,917
Taxes and licenses 1,284 1,300
Communications 886 739
Other general and administrative expenses 2,783 2,330
(Gain) loss on sale of equipment (509) 46
------------ ------------
Total operating expenses 68,535 62,166
------------ ------------
Operating income 3,665 4,979
Interest expense 2,170 1,581
Interest income (3) (12)
------------ ------------
Interest expense, net 2,167 1,569
------------ ------------
Earnings before income taxes 1,498 3,410
Provision for income taxes 584 1,331
------------ ------------
Net earnings $ 914 $ 2,079
============ ============
Net earnings per share:
Basic $ 0.11 $ 0.26
============ ============
Diluted $ 0.10 $ 0.25
============ ============
Average common shares outstanding:
Basic 8,318,514 7,896,938
Diluted 9,094,612 8,374,025
</TABLE>
Page 4
<PAGE>
Transport Corporation of America, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
2000 1999
---------- ----------
(unaudited)
<S> <C> <C>
Operating activities:
Net earnings $ 914 $ 2,079
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 7,186 5,733
(Gain) loss on sale of equipment (509) 46
Deferred income taxes 375 1,300
Changes in operating assets and liabilities:
Trade receivable (2,215) (3,176)
Other receivable (1,443) (848)
Operating supplies 83 47
Prepaid expenses and tires (2,668) (2,269)
Accounts payable 929 (1,962)
Due to independent contractors 481 1,199
Accrued expenses 385 829
---------- ----------
Net cash provided by operating activities 3,518 2,978
---------- ----------
Investing activities:
Payments for purchases of revenue equipment (1) (7,333) (17,279)
Payments for purchases of property and other equipment (2,441) (1,383)
Increase in other assets 0 (19)
Proceeds from sales of equipment 3,335 5,532
---------- ----------
Net cash used in investing activities (6,439) (13,149)
---------- ----------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants (2) 45 127
Principal payments on long-term debt (3,897) (3,247)
Proceeds from issuance of notes payable to bank 28,370 44,400
Principal payments on notes payable to bank (24,320) (32,400)
Change in net checks issued in excess of cash balances 2,700 1,777
---------- ----------
Net cash provided by financing activities 2,898 10,657
---------- ----------
Net increase (decrease) in cash (23) 486
Cash and cash equivalents, beginning of period 745 448
---------- ----------
Cash and cash equivalents, end of period $ 722 $ 934
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,152 $ 1,562
Income taxes, net 417 401
</TABLE>
(1) Capital lease obligations of $5.4 million were incurred when the Company
entered into leases for new revenue equipment in March 2000.
(2) In January 2000, 45,000 shares of common stock with the non-detachable put
valued at $16.89 per share were converted to common stock.
Page 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 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, 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 month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2000.
2. Commitments
As of March 31, 2000 the Company had commitments for the
purchase of approximately $3.3 million of revenue equipment.
In April 1999, the Company entered into a five year lease for
the construction of a new headquarters facility in Eagan, MN. The
Company anticipates that lease payment for this facility will
commence in the second quarter of 2000, based upon estimated
construction costs of $13 million.
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 converted to
common stock.
Page 6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three Months Ended March 31, 2000 and 1999
Operating revenues increased 7.5% to $72.2 million for the
quarter ended March 31, 2000, from $67.1 million for the quarter
ended March 31, 1999. Additional revenues attributable to the
acquisition of Robert Hansen Trucking, Inc., which became effective
May 1, 1999, revenue growth from existing customers and revenues
associated with fuel surcharges were the primary factors of the
revenue increase in the first quarter of 2000, when compared to the
same quarter in 1999. Reflecting shifts in customer freight mix and
a higher percentage of empty miles driven, revenues per mile,
excluding fuel surcharges, were $1.25 per mile in the first quarter
of 2000, compared to $1.28 per mile for the same period of 1999.
Equipment utilization, as measured by average revenues per tractor
per week, including fuel surcharges, was $2,612 during the first
quarter of 2000, compared to $2,617 for the first quarter of 1999.
During the first quarter of 2000, a greater proportion of
miles were driven by company drivers versus independent contractors
than in the year-ago quarter. Accordingly, several expense
categories increased as a percentage of revenue in the first quarter
of 2000, when compared to the same quarter in 1999. At March 31,
2000 there were 1,304 company drivers and 776 independent
contractors, compared to 1,111 company drivers and 900 independent
contractors at March 31, 1999.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) was 2.1% in the first quarter of 2000,
compared to 5.1% for the same period of 1999. The Company estimates
that significantly higher fuel costs in the first quarter of 2000,
partially offset by fuel surcharge revenues, reduced pre-tax margin
by approximately $1 million, or 1.4% of operating revenues, when
compared to the first quarter of 1999. Also during the first quarter
of 2000, the Company incurred approximately $0.4 million of one-time
expenses associated with the terminated merger with USFreightways
Corporation. Efficiency, as measured by average annualized revenues
per non-driver employee, was $546,000 for the first quarter of 2000,
compared to $564,000 for the same period of 1999. Salaries, wages,
and benefits as a percentage of operating revenues increased to
28.7% in the first quarter of 2000, compared to 27.9% for the same
period of 1999. The increase is primarily a reflection of a higher
percentage of company drivers in the first quarter of 2000, compared
to the same period of 1999. Miles driven by company drivers in the
first quarter of 2000 increased 13.7% over the same quarter of 1999
as a result of an increase in the percentage of company drivers
versus independent contractors. Reflecting the higher proportion of
miles driven by company drivers and significantly higher fuel prices
in the
Page 7
<PAGE>
first quarter of 2000, fuel, maintenance, and other expenses, as a
percentage of operating revenues, increased to 13.6% in the first
quarter of 2000, compared to 10.2% in the first quarter of 1999.
Correspondingly, purchased transportation decreased as a percentage
of operating revenues to 33.6% in the first quarter of 2000,
compared to 35.2% for the same quarter of 1999. Revenue equipment
leases decreased as a percentage of operating revenues to 0.1% in
the first quarter of 2000 from 1.3% for the same period of 1999 as a
result of a decrease in the use of operating leases. Depreciation
and amortization was 9.9% of operating revenues for the first
quarter of 2000, compared to 8.5% for the first quarter of 1999,
primarily due to a greater proportion of company-owned equipment in
2000. Improved accident and claims experience resulted in a decrease
of insurance, claims and damage expense as a percentage of operating
revenues to 2.8% in the first quarter of 2000 from 2.9% in the first
quarter of 1999. Other general and administrative expenses as a
percentage of operating revenues were 3.9% in the first quarter of
2000, compared to 3.5% in the first quarter of 1999 due primarily to
$0.4 million for one-time expenses associated with the terminated
merger in the first quarter of 2000. Net interest expense increased
as a percentage of operating revenues to 3.0% for the first quarter
2000 from 2.3% for the first quarter 1999 as a result of higher
interest rates and average debt balances in 2000, compared to the
year-ago quarter.
Gain on the disposition of revenue equipment was $509,000 in
the first quarter of 2000, compared to a loss of $46,000 in the
first quarter of 1999 reflecting higher net proceeds versus the
Company's book value of disposed revenue equipment, when compared to
the year-ago quarter. The effective tax rate for the first quarters
of both 2000 and 1999 was 39.0%.
As a result of the items discussed above, net earnings were
$0.9 million, or 1.3% of operating revenues, for the quarter ended
March 31, 2000, compared to $2.1 million, or 3.1% of operating
revenues, for the quarter ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $3.5 million in
the first three months of 2000. Working capital as of March 31, 2000
was $1.3 million, compared to $0.6 million as of December 31, 1999.
Investing activities in the first three months of 2000
consumed net cash of $6.5 million, primarily for the purchase of 40
new tractors, 94 new trailers, and other equipment and improvements,
less proceeds from the disposition of used equipment. As of March
31, 2000, the Company had commitments for the purchase of
approximately $3.3 million of revenue equipment. Additionally, the
Company anticipates that lease payments
Page 8
<PAGE>
associated with its new headquarters facility, with estimated
construction costs of $13 million, will commence in the second
quarter of 2000.
Net cash provided by financing activities was $2.9 million in
the first three months of 2000, including $4.0 million representing
net proceeds from the Company's credit facility.
The Company has a credit agreement with seven major banks for
an un-secured 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 March 31, 2000,
there were outstanding borrowings of $94.1 million and letters of
credit outstanding totaling $3.0 million under this credit facility.
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.
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 wishes to
caution readers
Page 9
<PAGE>
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 $94.1 million was outstanding at
March 31, 2000. The agreement bears interest at a variable rate,
which was 7.1% at March 31, 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 approximately 1.2 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 1.2 million 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.
Page 10
<PAGE>
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
On February 2, 2000, the Company filed a Current Report on Form 8-K
to report under Item 5 (Other Events) that the Company had entered
into an Agreement and Plan of Merger with USFreightways Corporation
and one of its affiliates. On February 8, 2000, the Company and
USFreightways announced that the Merger had been terminated by
mutual agreement.
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: May 11, 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)
Page 11
EXHIBIT 11.1
Transport Corporation of America, Inc.
Computation of Earnings per Common Share
(In thousands, except share and per share amounts)
Three months ended
March 31,
--------------------------
2000 1999
----------- -----------
Net earnings $ 914 $ 2,079
=========== ===========
Average number of common
shares outstanding 7,163,514 6,696,938
Average number of common shares outstanding,
non-detachable put 1,155,000 1,200,000
----------- -----------
Average number of common shares outstanding,
including non-detachable put 8,318,514 7,896,938
Dilutive effect of outstanding stock
options and warrants 0 43,493
Dilutive effect of non-detachable put option 776,098 433,594
----------- -----------
Average number of common and dilutive potential
common shares outstanding 9,094,612 8,374,025
=========== ===========
Basic earnings per share $ 0.11 $ 0.26
=========== ===========
Diluted earnings per share $ 0.10 $ 0.25
=========== ===========
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 722,000
<SECURITIES> 0
<RECEIVABLES> 35,634,000
<ALLOWANCES> 0
<INVENTORY> 1,396,000
<CURRENT-ASSETS> 46,033,000
<PP&E> 276,350,000
<DEPRECIATION> 65,246,000
<TOTAL-ASSETS> 283,457,000
<CURRENT-LIABILITIES> 44,748,000
<BONDS> 110,607,000
0
0
<COMMON> 71,000
<OTHER-SE> 30,014,000
<TOTAL-LIABILITY-AND-EQUITY> 283,457,000
<SALES> 0
<TOTAL-REVENUES> 72,200,000
<CGS> 0
<TOTAL-COSTS> 68,535,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,170,000
<INCOME-PRETAX> 1,498,000
<INCOME-TAX> 584,000
<INCOME-CONTINUING> 914,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 914,000
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.10
</TABLE>
