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, 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 August 4, 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
June 30, 2000 and December 31, 1999..........................Page 3
Consolidated Statements of Earnings for the three
and six months ended June 30, 2000 and 1999..................Page 4
Consolidated Statements of Cash Flows for the
six months ended June 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 4. Submission of Matters to a Vote of Security Holders..........Page 13
Item 6. Exhibits and Reports on Form 8-K.............................Page 13
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ITEM 1. FINANCIAL STATEMENTS
Transport Corporation of America, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 553 $ 745
Trade accounts receivable, net 32,980 30,133
Other receivables 937 1,522
Operating supplies - inventory 1,295 1,479
Deferred income tax benefit 4,483 4,035
Prepaid expenses and tires 3,735 1,924
------------ ------------
Total current assets 43,983 39,838
Property and equipment:
Land, buildings, and improvements 21,521 21,469
Revenue equipment 235,829 228,709
Other equipment 19,499 15,122
------------ ------------
Total property and equipment 276,849 265,300
Less accumulated depreciation (70,901) (59,479)
------------ ------------
Property and equipment, net 205,948 205,821
Other assets, net 27,166 26,482
------------ ------------
Total assets $ 277,097 $ 272,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and capital lease obligations $ 15,865 $ 14,899
Accounts payable 5,121 5,913
Checks issued in excess of cash balances 3,928 2,127
Due to independent contractors 2,937 2,908
Accrued expenses 13,841 13,395
------------ ------------
Total current liabilities 41,692 39,242
Long term debt and capital lease
obligations, less current maturities 105,373 106,106
Deferred income taxes 32,385 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 30,042 29,209
Retained earnings 48,026 45,849
------------ ------------
Total stockholders' equity 78,139 75,129
------------ ------------
Total liabilities and stockholders' equity $ 277,097 $ 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 Six months ended
June 30, June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues $ 73,431 $ 75,034 $ 145,631 $ 142,179
Operating expenses:
Salaries, wages, and benefits 21,346 20,681 42,068 39,416
Fuel, maintenance, and other expenses 9,988 8,244 19,819 15,077
Purchased transportation 23,254 24,517 47,503 48,181
Revenue equipment leases 88 833 169 1,702
Depreciation and amortization 7,313 6,284 14,499 12,017
Insurance, claims and damage 2,397 1,956 4,419 3,873
Taxes and licenses 1,260 1,300 2,544 2,600
Communications 937 847 1,823 1,586
Other general and administrative expenses 2,455 2,156 5,238 4,486
Loss (gain) on sale of equipment 182 (186) (327) (140)
------------ ------------ ------------ ------------
Total operating expenses 69,220 66,632 137,755 128,798
------------ ------------ ------------ ------------
Operating income 4,211 8,402 7,876 13,381
Interest expense 2,240 1,917 4,410 3,498
Interest income (99) (15) (102) (27)
------------ ------------ ------------ ------------
Interest expense, net 2,141 1,902 4,308 3,471
------------ ------------ ------------ ------------
Earnings before income taxes 2,070 6,500 3,568 9,910
Provision for income taxes 807 2,541 1,391 3,872
------------ ------------ ------------ ------------
Net earnings $ 1,263 $ 3,959 $ 2,177 $ 6,038
============ ============ ============ ============
Net earnings per share:
Basic $ 0.15 $ 0.49 $ 0.26 $ 0.75
============ ============ ============ ============
Diluted $ 0.12 $ 0.46 $ 0.22 $ 0.71
============ ============ ============ ============
Average common shares outstanding:
Basic 8,323,991 8,114,121 8,321,253 8,005,530
Diluted 10,356,660 8,635,082 9,725,636 8,504,554
</TABLE>
4
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Transport Corporation of America, Inc.
Consolidated Statements of Cash Flows
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 2,177 $ 6,038
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 14,499 12,017
Gain on sale of equipment (327) (140)
Deferred income taxes 1,347 2,936
Changes in operating assets and liabilities:
Trade receivable (2,847) (2,940)
Other receivable 585 (428)
Operating supplies 184 (85)
Prepaid expenses and tires (1,811) (1,510)
Accounts payable (791) (2,689)
Due to independent contractors 29 1,165
Accrued expenses 445 1,519
---------- ----------
Net cash provided by operating activities 13,490 15,883
---------- ----------
Investing activities:
Payments for purchases of revenue equipment (7,549) (30,176)
Payments for purchases of property and other equipment (4,682) (4,313)
Increase in other assets 0 (252)
Acquisition of business, net of cash acquired 0 (2,179)
Proceeds from sales of equipment 5,028 9,871
---------- ----------
Net cash used in investing activities (7,203) (27,049)
---------- ----------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 73 173
Proceeds from issuance of long-term debt 0 165
Principal payments on long-term debt (7,853) (14,101)
Proceeds from issuance of notes payable to bank 65,170 83,850
Principal payments on notes payable to bank (65,670) (58,550)
Change in net checks issued in excess of cash balances 1,801 757
---------- ----------
Net cash (used in) provided by financing activities (6,479) 12,294
---------- ----------
Net increase (decrease) in cash (192) 1,128
Cash and cash equivalents, beginning of period 745 448
---------- ----------
Cash and cash equivalents, end of period $ 553 $ 1,576
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 4,354 $ 3,415
Income taxes, net 448 617
Non-cash investing and financing transactions:
Capital lease obligations incurred in 2000 for $8.6 million
of new revenue equipment
Transfer to common stock of 45,000 shares of common stock
with the non-detachable put valued at $16.89
</TABLE>
5
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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 six month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2000.
2. Commitments
As of June 30, 2000 the Company had commitments for the purchase
of approximately $200,000 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 $90,000 will commence 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.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three Months Ended June 30, 2000 and 1999
Operating revenues were $73.4 million for the quarter ended June
30, 2000, compared to $ 75.0 million for the quarter ended June 30,
1999. Revenue increases attributable to the acquisition of Robert
Hansen Trucking in May 1999 and fuel surcharges were offset by soft
freight demand among the Company's customers. Reflecting shifts in
customer freight mix and a higher percentage of empty miles driven,
revenues per mile, excluding fuel surcharges, were $1.26 per mile in
the second 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 $2,748 during the
second quarter of 2000, compared to $2,831 for the second quarter of
1999, reflecting lower equipment utilization in the second quarter of
2000, compared to the year ago period.
During the second quarter of 2000, a greater proportion of miles
was 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 second quarter of 2000,
when compared to the same quarter of 1999. At June 30, 2000, there
were 1,288 tractors assigned to company drivers and 739 tractors owned
by independent contractors, compared to 1,338 tractors assigned to
company drivers and 845 tractors owned by independent contractors at
June 30, 1999. Efficiency, as measured by average annualized revenues
per non-driver employee, was $557,300 for the second quarter of 2000,
compared to $603,700 for the same period of 1999.
Salaries, wages, and benefits as a percentage of operating
revenues were 29.1% in the second quarter of 2000, compared to 27.6%
for the same period of 1999. The increase is primarily a reflection of
a higher proportion of company drivers in the second 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 13.6 % in the second quarter of 2000,
compared to 11.0% in the second quarter of 1999. The increase in 2000
over the year ago period reflects the higher proportion of miles
driven by company drivers and significantly higher fuel prices in
2000. The Company estimates that significantly higher fuel costs in
the second quarter of 2000, partially offset by fuel surcharge
revenues, reduced
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pre-tax income by approximately $0.2 million, when compared to the
second quarter of 1999.
Purchased transportation as a percentage of operating revenues
decreased to 31.7% in the second quarter of 2000, compared to 32.7%
for the 1999 period, reflecting the lower proportion of miles driven
by independent contractors in the second quarter of 2000 than in the
year ago period.
Revenue equipment leases decreased as a percentage of operating
revenues to 0.1% in the second quarter of 2000 from 1.1% for the same
period of 1999 as a result of a decrease in the use of operating
leases in 2000.
Depreciation and amortization increased to 10.0% of operating
revenues for the second quarter of 2000, compared to 8.4% for the
second 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 3.3% in the second quarter of 2000, compared to 2.6% in
the second quarter of 1999. The increase is primarily a result of
higher accident and claims experience in the second quarter of 2000,
compared to the year ago period.
Other general and administrative expenses as a percentage of
operating revenues were 3.3% in the second quarter of 2000, compared
to 2.9% in the second quarter of 1999. The increase is primarily a
result of higher driver hiring and training expenses in the second
quarter of 2000 than for the year ago period.
Net interest expense increased as a percentage of operating
revenues to 2.9% for the second quarter 2000 from 2.5% for the second
quarter 1999 as a result of higher interest rates and average debt
balances in the second quarter of 2000, compared to the year ago
period.
Loss on the disposition of revenue equipment was $182,000 in the
second quarter of 2000, compared to a gain of $186,000 in the second
quarter of 1999, reflecting lower net proceeds versus the Company's
book value of revenue equipment disposed in the second quarter of
2000, when compared to the year ago period.
The effective tax rate for the second quarters of 2000 and 1999
was 39.0% and 39.1%, respectively.
8
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As a result of the items discussed above, the Company's operating
ratio (operating expenses as a percentage of operating revenues) was
94.3% during the second quarter of 2000, compared to 88.8% for the
year ago quarter. Net earnings were $1.3 million, or 1.7% of operating
revenues, for the quarter ended June 30, 2000, compared to $4.0
million, or 5.3% of operating revenues, for the quarter ended June 30,
1999.
Six Months Ended June 30, 2000 and 1999
Operating revenues increased 2.4% to $145.6 million for the six
months ended June 30, 2000 from $142.2 million for the first six
months of 1999. Revenue increases attributable to the acquisition of
Robert Hansen Trucking, Inc. in May 1999 and fuel surcharges were
partially offset by soft freight demand among the Company's customers,
particularly in the second quarter of 2000. Revenue per mile,
excluding fuel surcharges, was $1.26 in the first six months of 2000
compared to $1.28 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 $2,679 during the first six months of
2000, compared to $2,726 for the same period of 1999. The decline
reflects lower equipment utilization in the first six months of 2000,
compared to the year ago period.
As a result of changes in the relative proportion of company
drivers versus independent contractors during the first six 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 six
months of 2000, when compared to the first six months of 1999.
Efficiency, as measured by average annualized revenues per non-driver
employee, was $551,500 for the first six months of 2000 compared to
$583,900 for the same period of 1999.
Salaries, wages, and benefits, as a percentage of operating
revenues, were 28.9% in the first six months of 2000, compared to
27.7% 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 13.6% in the first six months of 2000 from
10.6% for the same period of 1999. The increase in the 2000 period
primarily reflects the higher proportion of miles driven by
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company drivers and significantly higher fuel prices. The Company
estimates that significantly higher fuel costs in the first six months
of 2000, partially offset by fuel surcharge revenues, reduced pre-tax
income by approximately $1.2 million, when compared to the year ago
period.
Purchased transportation decreased as a percentage of operating
revenues to 32.6% in the first six months of 2000 from 33.9% for the
same period of 1999, reflecting the lower proportion of miles driven
in the first six months of 2000 by independent contractors versus
company drivers, compared to the year ago period.
Revenue equipment leases decreased as a percentage of operating
revenues to 0.1% in the first six months of 2000 from 1.2% for the
same period of 1999, primarily as a result of a decrease in the use of
leases.
Depreciation and amortization increased as a percentage of
operating revenues to 10.0% in the first six months of 2000, compared
to 8.5% for the same period of 1999, primarily reflecting the greater
proportion of company-owned equipment in the first six months of 2000.
Insurance, claims and damage expense as a percentage of operating
revenues was 3.0% in the first six months of 2000, compared to 2.7% in
the same period of 1999, primarily a reflection of higher accident and
claims experience in the first six months of 2000, compared to the
year ago period.
Other general and administrative expenses as a percentage of
operating revenues were 3.6% in the first six months of 2000, compared
to 3.2% for the same period of 1999. The increase in the first six
months of 2000 is primarily a result of one-time expenses associated
with the terminated merger in early 2000 and higher driver hiring and
training expenses than for the year ago period.
Net interest expense in the first six months of 2000 was 2.9% of
operating revenues, compared to 2.5% for the same period of 1999,
primarily a reflection of the higher average outstanding debt and
interest rates during the first six months of 2000 when compared to
1999, and additional debt associated with the acquisition of Robert
Hansen Trucking, Inc. in May 1999.
10
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The effective tax rates for the first six months of 2000 and 1999
were 39.0% and 39.1%, respectively.
As a result of the items discussed above, the Company's operating
ratio (operating expenses as a percentage of operating revenues) was
94.6% during the first six months of 2000, compared to 90.6% for the
year ago period. Net earnings were $2.2 million, or 1.5% of operating
revenues, for the first six months of 2000, compared to $6.0 million,
or 4.2% of operating revenues, for the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $13.5 million in
the first six months of 2000. Working capital as of June 30, 2000 was
$2.3 million, compared to $0.6 million as of December 31, 1999.
Investing activities in the first six months of 2000 consumed net
cash of $7.2 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. The Company also entered into
capital leases during the first six months of 2000 for 40 new tractors
and 250 new trailers having an aggregate value of $8.6 million. As of
June 30, 2000, the Company had commitments for the purchase of
approximately $200,000 of non-revenue equipment. Payments associated
with the Company's new leased $13.0 million headquarters facility will
commence starting in the third quarter 2000.
Net cash consumed by financing activities was $6.5 million in the
first six months of 2000, including $0.5 million representing net
repayments to the Company's credit facility and $7.9 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 June 30, 2000, there were outstanding borrowings
of $89.5 million and letters of credit outstanding totaling $0.5
million under this credit facility, in addition
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to $2.6 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.
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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 $89.5 million was outstanding at
June 30, 2000. The agreement bears interest at a variable rate, which
was 7.7% at June 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 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 1,155,000 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.
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PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On May 17, 2000 the Company held its Annual Meeting of
Shareholders. At the meeting, the following persons were elected to
the Company's Board of Directors:
Votes For Votes Withheld
--------- --------------
William D. Slattery 6,889,994 33,473
Robert J. Meyers 6,888,874 34,593
Anton J. Christianson 6,895,092 28,375
Michael J. Paxton 6,895,092 28,375
Kenneth J. Roering 6,890,892 32,575
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 June
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: August 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)
14
