SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 30, 1996
Commission File Number 0-2936
SCHWERMAN TRUCKING CO.
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(Exact Name of Registrant as Specified in its Charter)
Wisconsin 39-0767397
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
P. O. Box 1601, 611 South 28th Street, Milwaukee, Wisconsin 53201
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (414) 671-1600
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None N/A
Securities registered pursuant to Section 12(g) of the Act:
7% Cumulative Preferred Stock, $10.00 par value
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(Title of Class)
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
---
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding at May 31, 1996
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Common Stock, $1 par value 422,089
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2)
Any proxy or information statement; and (3) Any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of 1933.
The listed documents should be clearly described for
identification purposes.
Proxy statement for the 1996 Annual Meeting of Stockholders
incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1 BUSINESS
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General
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Schwerman Trucking Co. (the "Company"), a Wisconsin corporation, is a
99.9% owned subsidiary of Evergreen Holding Corp. ("Evergreen"). Unless
the context states otherwise, the reference to the Company includes the
following wholly owned subsidiary: Schwerman Real Estate & Development
Corp. During Fiscal 1996, the Company dissolved Schwerman Trucking Co. of
Va., Inc., a wholly owned subsidiary. During fiscal 1995, the Company
dissolved Haul Transport of Va., Inc., a wholly owned subsidiary.
The Company's operations primarily consist of the transportation of
liquid and dry commodities in bulk in tank-type trailer equipment. The
Company uses approximately 600 diesel tractors and 1,100 trailers of
varying types in its operations. This equipment is either owned or leased.
Commodities are principally transported from either a manufacturing or
distribution center to either further processors or ultimate consumers.
The Company is also engaged in leasing a liquid tank farm having a total
capacity of about 9 million gallons. Schwerman Real Estate & Development
Corp. owns many of the terminal properties utilized by the Company in its
business.
HISTORICAL INFORMATION
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The Company commenced doing business in 1913 when the founder, Fred
Schwerman Sr., built his first motor truck. During the Company's formative
years, operations were concentrated within Wisconsin, specializing in
hauling road building materials and building supplies in dump trucks.
During the 1940's the bulk tank trailer was developed, opening vast new
avenues for providing service. The Company capitalized on this development
by formally organizing as a corporation in 1947 and greatly expanding the
size and scope of the services provided to its customers. During the
1950's and 1960's, cement accounted for approximately 90% of revenue as the
Company was the nation's largest motor carrier of cement. In 1966, the
Company decided to diversify to lessen its dependence on a single commodity
and because of the seasonal nature of the cement business, especially in
the northern part of the country. The diversification program started with
the acquisition of a liquid chemical carrier in the Southeastern section of
the country. Through subsequent acquisitions and growth, the Company has
successfully diversified into other areas while remaining as one of the
largest tank truck carriers in the country.
As evidence of the diversification, the Company has authority to haul
numerous commodities. However, the more significant commodities hauled
by the Company can be grouped into three categories. The comparative
percentages of operating revenues derived from each of these categories for
the last five years are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March
---------------------------------
Product 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cement 64.8 64.9 63.7 60.2 56.0
Liquid and dry chemicals 26.7 24.1 25.2 26.4 32.2
Food, fertilizers and
miscellaneous
products 8.5 11.0 11.1 13.4 11.8
</TABLE>
<PAGE>
Seasonality
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The Company's business activity and employment levels are subject to
seasonal variation, primarily in respect to transportation of cement. The
level of business and employment declines in the winter months in the
northern part of the country because of reduced shipper sales of cement to
the construction industry.
Competition
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The Company experiences intense competition from other motor carriers
(common, contract and private), railroads, water carriers and pipelines.
Regulation
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The Company has authority to operate in interstate commerce in 48 states
and the District of Columbia, and in intrastate commerce in 25 states,
principally in the eastern 2/3 of the continental United States. In
addition, the Company has authority to operate in the Ontario, Quebec, New
Brunswick and Nova Scotia provinces of Canada and the Company is conducting
an interline arrangement out of Mexico.
The Motor Carrier Act of 1980 substantially changed the National
Transportation Policy as it pertained to motor carrier activity governed by
federal regulation and more particularly the Interstate Commerce
Commission. Among the more important features of the 1980 Act was the
relaxation of entry requirements for motor carriers. Under the new law,
the ICC was mandated to authorize the issuance of certificates if it found
that the applicant was fit, willing and able to provide a motor carrier
service and in addition, that the proposed service would serve a useful
public purpose, responsive to public demand or need unless the protestants
could show the service to be inconsistent with public convenience and
necessity. Furthermore, as pertinent to the Company's operations as a
liquid and dry bulk carrier, the Act created a 10% plus or minus zone of
rate flexibility within which the Commission would not investigate,
suspend, revise or revoke any rate on the basis of reasonableness.
Finally, extensive revisions were made to the joint ratemaking
activities of motor carriers authorized by the 1948 Reed-Bulwinkle Act,
which, in effect, provided an anti-trust exemption to motor carriers who
were members of rate bureaus engaged in fixing transportation rates for
members involved. On July 1, 1984, discussion of or voting upon single-
line rates by members of a collective ratemaking organization became
illegal.
In August 1994, the Federal government passed the Federal Aviation
Administration Authorization Act. As a result of this legislation, on
January 1, 1995, states were no longer able to regulate intrastate motor
carrier transportation, except for matters relating to safety and
insurance.
Recent regulations relating to environmental pollution control and
reduction have contributed to increasing tractor costs. The Company
believes it is in full compliance with present regulations. Proposed
standards in forthcoming years are expected to substantially increase the
cost and maintenance expense of new tractors.
Additional regulations have been issued relating to underground storage
tanks. These regulations required annual tank tightness tests beginning in
1989 for any tanks over 20 years old and would require improved spill
detection and containment by 1998. The Company does not have any remaining
underground tanks that have to be upgraded or replaced by 1998.
<PAGE>
Safety Program and Insurance
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The Company emphasizes its safety program. The safety director
supervises all safety activity including driver training, terminal
inspections to assure compliance with, U.S. Department of Transportation,
Occupational Safety & Health Administration, Environmental Protection
Agency and Company safety regulations, and road checks to observe driver
performance. Safety meetings are held on a periodic basis for all drivers
and a carefully prepared program of instruction is presented. During
fiscal 1995, the Company opened a driver training center in Chattanooga.
The Company carries cargo insurance, certain workers' compensation,
bodily injury and property damage insurance with policy limits of
$20,000,000 per occurrence under a retrospective rating plan and certain
workers' compensation under a large deductible plan. The Company is liable
for the first $250,000 per occurrence under these coverages, and to date,
the Company has never had a claim for amounts in excess of the policy
limits. The Company self-insures as to collision losses to its revenue
equipment and is self-insured under its medical plan up to a maximum annual
amount of approximately $1,000,000.
Employment and Employee Relations
- ---------------------------------
The Company has approximately 880 employees at peak periods of
employment during the year. Of this number, approximately 61% are members
of various local unions of the International Brotherhood of Teamsters,
Chauffuers, Warehousemen and Helpers of America, and the International
Association of Machinists. Negotiation of agreements is conducted by the
Company individually and in some instances as part of industry-wide
bargaining. The Company continues to make every effort to keep its wage
scales and other contract provisions competitive with those of other
carriers in the respective locations.
Directors and Executive Officers of the Company
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The executive officers and directors of the Company are:
Name Current Office Officer Since Age
- ----------------- ------------------- ------------- ---
Jack F. Schwerman Chairman of the Board, 1981 43
President, Treasurer
and Chief Executive
and Operating Officer
David S. Harris Vice President - Sales 1977 60
Geoffrey M. Redman Vice President - Purchasing 1983 51
Carl L. Schwerman None n/a 61
No family relationship exists among the above named persons, except that
Carl L. Schwerman is the uncle of Jack F. Schwerman. Each of the officers
serves at the pleasure of the Board of Directors.
All of the officers and directors are full time employees of the Company
except Carl L. Schwerman. Mr. Carl L. Schwerman previously held the
positions of Chairman of the Board and Chief Executive Officer, among
others, with the Company.
<PAGE>
ITEM 2 PROPERTIES
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The executive offices of the Company are in Milwaukee, Wisconsin where
the executive officers and many general administrative functions of the
Company are located. The following properties are used in the Company's
operations:
Leased Properties
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Executive Offices:
611 South 28th Street (1)
Milwaukee, Wisconsin
Terminals:
Atlanta, Georgia Kosmosdale, Kentucky Norfolk, Virginia
Baltimore, Maryland Leeds, Alabama Oglesby, Illinois
Bonner Springs,Kansas* Lexington, Kentucky Richmond, Virginia
Clinchfield, Georgia Milwaukee, Wisconsin Roanoke, Virginia
El Paso, Texas Mitchell, Indiana Somerset, Pennsylvania
Frederick, Maryland Nashville, Tennessee Wampum, Pennsylvania
Greencastle, Indiana Neville Island, Pennsylvania
Owned Properties
---------------
Bulk Distribution Center:
Madison, Wisconsin*
Terminals:
Augusta, Georgia Evendale, Ohio* Maryneal, Texas
Bainbridge, Georgia Fairborn, Ohio Odessa, Texas
Brady, Texas Lehigh Valley,Pennsylvania Paulding, Ohio
Brunswick, Georgia* Lima, Ohio Savannah, Georgia
Charleston, South Carolina* Logansport, Indiana York, Pennsylvania
Chattanooga, Tennessee
(1) The Company paid rent of $8,000 per month to Evergreen Holding Corp.,
a related party, in fiscal 1996 under a net lease expiring on March 31,
1999. In the opinion of management, the terms and conditions of this lease
are at least as favorable as could be obtained from other lessors.
* - Inactive
ITEM 3 LEGAL PROCEEDINGS
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The Company is currently involved, as a defendant, in legal actions in
the normal course of its business. In addition, the Company has been named
as a PRP (Potentially Responsible Party) at several sites requiring
environmental clean-up, none of which has involved any courtroom
litigation. In the opinion of management, the disposition of these actions
will not have a material effect on its operations.
The Company also has on file various claims involving motor carrier
accidents and contamination of commodities transported. In the opinion of
management, the disposition of such claims will not have a material effect
on its operations.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No event or circumstance reportable under this Item 4 occurred during
the fourth quarter of the fiscal year covered by this report.
<PAGE>
PART II
ITEM 5 MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
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MATTERS
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(a) Price Range of Common Stock
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Approximately 99% of the Company's common stock is owned by Evergreen
Holding Corp. which is owned by immediate members of the Schwerman family
and various Trusts, all as more fully depicted in Item 12 of this Report.
Since the stock is not actively traded on any exchange or in the over-the-
counter market, there is no price range.
(b) Number of Equity Security Holders
---------------------------------
Number of Record Holders
Title of Class (as of March 30, 1996)
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$1.00 par value 2
Common Stock
(c) Dividends
---------
The Company has from time to time paid cash dividends on its common
stock. The last dividend of $0.25 per share was declared in 1978 and paid
in January of 1979. Payment of dividends will be at the discretion of the
Company's Board of Directors, subject to approval by the Company's
principal lender, as required by certain debt agreements and will depend,
among other factors, on earnings, status of preferred stock dividend
arrearage, capital requirements and the operating and financial condition
of the Company.
<PAGE>
<TABLE>
ITEM 6 SELECTED FINANCIAL DATA (not covered by report of independent
accountants)
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<CAPTION>
Fiscal Year Ended
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March
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(In thousands of dollars except per share amounts)
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Revenues $58,282 $60,730 $56,216 $54,441 $49,831
Operating expenses 55,767 57,026 54,508 52,025 48,121
Interest expense, net 1,236 1,016 820 830 1,202
Income tax expense 505 1,068 359 620 209
Extraordinary loss, net -- 367 -- -- --
Net income 774 1,253 529 966 299
Dividend requirements on
preferred shares (1) 105 101 106 106 106
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Net income applicable to
common shares $ 669 $1,152 $423 $860 $ 193
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Total assets $30,610 $27,558 $24,953 $21,979 $23,422
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Long-term obligations $11,809 $10,575 $ 7,425 $ 4,730 $ 7,276
------- ------- ------- ------- -------
Stockholders' equity $ 8,008 $ 7,339 $ 6,544 $ 6,121 $ 5,235
------- ------- ------- ------- -------
Net income per common
share $ 1.58 $ 2.73 $ 1.00 $ 2.04 $ .46
------- ------- ------ ------ -------
Cash dividends per share:
Preferred stock $ .70 $2.975 $ .70 $ .525 $ --
Common stock $ -- $ -- $ -- $ -- $ --
<FN>
(1) Includes 7% cumulative dividend. Fiscal 1995 is net of discount on
preferred stock redemption.
</TABLE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
-------------
This discussion supplements the detailed information presented in the
Consolidated Financial Statements and footnotes.
In March 1996, the Company opened two terminals in Pennsylvania, one
in Somerset and one in Wampum. These two terminals will contribute to the
Company's cement operations. In fiscal 1994, the Company opened a terminal
in Baltimore and two terminals in North Carolina, one in Winston-Salem and
one in Selma. These three terminals have contributed to the Company's
cement operations. Also, in fiscal 1994, the Company closed its Chicago
terminal as part of the Company's commitment to streamline operations and
reduce costs. Some of the business that this terminal hauled is now being
handled by other terminals in the area.
Results of Operations
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Total revenue was $58,282,000 in fiscal 1996 compared to $60,730,000
and $56,216,000 in fiscal 1995 and 1994, respectively. The $2,448,000 or
4.0% decrease in fiscal 1996 revenue as compared to fiscal 1995 is due to a
6.5% decrease in shipments and a 5.4% decrease in miles, offset in part by
a slight increase in the average payload compared to fiscal 1995. The
Company experienced a decrease in revenues from hauling cement in fiscal
<PAGE>
1996 compared to fiscal 1995 as a result of a major customer selling one of
its plants and a softening in the construction industry. Revenues from
hauling chemicals and other products decreased by approximately $920,000 in
fiscal 1996 as compared to fiscal 1995. The $4,514,000 or 8.0% increase in
fiscal 1995 revenue as compared to fiscal 1994 is due to a 5.1% increase in
shipments compared to fiscal 1994 and from rate increases instituted by the
Company. The Company experienced an increase in revenues from hauling
cement in fiscal 1995 compared to fiscal 1994 as a result of continuing
strength in the construction industry and a milder winter which lengthened
the season for hauling cement. Although cement accounted for a larger
percentage of the operating revenues for fiscal 1995 the Company
experienced an increase in non-cement revenues of $980,000 as compared to
fiscal 1994.
The Company has added to its sales force to increase its sales efforts
in the non-cement segment of its business. As a result of this change, and
the opening of the two new terminals in Pennsylvania, management looks
forward to the Company's revenues returning to a pattern of growth.
Total operating expenses were $55,767,000 in fiscal 1996 as compared
to $57,026,000 and $54,508,000 in fiscal 1995 and 1994, respectively. The
$1,259,000 or 2.2% decrease in fiscal 1996 as compared to fiscal 1995 is
due to decreased volume, offset by higher benefit costs and higher
depreciation. The $2,518,000 or 4.6% increase in fiscal 1995 as compared to
fiscal 1994 is due primarily to increased volume.
Salaries, wages and fringe benefits decreased $810,000 or 2.9% in
fiscal 1996 compared to fiscal 1995 as a result of the decrease in volume,
offset by higher benefit costs and wage rate increases. The $3,449,000 or
14.0% increase in fiscal 1995 compared to fiscal 1994 is the result of the
increase in volume, higher benefit costs and from more of the Company's
loads being hauled by Company drivers.
Insurance and workers' compensation costs decreased $374,000 or 10.7%
in fiscal 1996 as compared to fiscal 1995 and decreased $290,000 or 7.6% in
fiscal 1995 compared to fiscal 1994. As a result of its commitment to its
safety programs the Company has experienced a decline in accident and
workers' compensation claims over the past several years. These expenses
have also decreased as a result of the Company, in fiscal 1995, increasing
the level of its self insurance for most of its cargo insurance, workers'
compensation, bodily injury, property damage insurance and collision to its
revenue equipment up to $250,000 per occurrence from $175,000 per
occurrence.
Depreciation and amortization increased $633,000 or 20.4% in fiscal
1996 compared to fiscal 1995, and increased $799,000 or 34.6% in fiscal
1995 compared to fiscal 1994, primarily due to higher depreciation recorded
on the 56 tractors purchased in fiscal 1996, and 77 tractors purchased in
fiscal 1995, as compared to the depreciation costs on the tractors that
were retired. In addition, over the past several years the Company has
acquired more tractors and trailers than it retired.
Purchased transportation decreased $599,000 or 10.2% in fiscal 1996 as
compared to fiscal 1995. This decrease relates to a $554,000 or 6.5%
decrease in revenue hauled by owner operators. The decrease of $1,197,000
or 17.0% in fiscal 1995 as compared to fiscal 1994 relates to a $2,031,000
or 18.8% decrease in revenue hauled by owner operators. The decrease in
this expense for fiscal 1995 is offset in large part by the increase in
salaries, wages and fringe benefits and depreciation and amortization, in
that the Company has to pay for the additional Company drivers and
depreciate the additional Company tractors. The reduction in the revenue
hauled by owner operators is due in part to the Company increasing the size
of its own fleet and in part to the Company occasionally having difficulty
leasing owner operators in some areas of the country.
Rent expense decreased $282,000 or 19.7% in fiscal 1996 as compared to
fiscal 1995 and decreased $407,000 or 22.2% in fiscal 1995 as compared to
fiscal 1994. The decrease in fiscal 1996 as compared to fiscal 1995 is
primarily due to the Company leasing fewer tractors and trailers through
operating leases. Most of the equipment that the Company is leasing
through operating leases is leased from an affiliated company. The Company
enjoys the advantage of having a more flexible fleet size through these
operating leases. The decrease in fiscal 1995 as compared to fiscal 1994
is due in part to the expiration of some operating leases to lease tractors
and trailers. Some of this equipment was purchased and some was returned
to the lessor.
<PAGE>
Other operating expenses increased $308,000 or 5.2% in fiscal 1996 as
compared to fiscal 1995 and increased $131,000 or 2.3% in fiscal 1995 as
compared to fiscal 1994. The increase in fiscal 1996 as compared to fiscal
1995 is due to increased internal tank cleaning costs, increased
communication costs associated with a new computerized dispatching system
and higher costs for compliance with environmental regulations. The
increase in fiscal 1995 as compared to fiscal 1994 is substantially related
to the increase in volume.
In fiscal 1995, the Company sold two properties that were former
terminal sites for $208,000 realizing a gain of approximately $187,000.
Also, the Company sold eight storage bins realizing a gain of approximately
$195,000.
Other
- -----
Interest expense was $1,236,000 in fiscal 1996 as compared to
$1,015,000 and $820,000 in fiscal 1995 and 1994, respectively. The
$220,000 increase in fiscal 1996 compared to fiscal 1995 is primarily due
to higher debt outstanding. The $196,000 or 23.8% increase in fiscal 1995
compared to fiscal 1994 is due to higher interest rates and higher
borrowings to finance equipment purchases.
The effective tax rates for fiscal 1996, 1995 and 1994 were 39.5%,
39.7% and 40.4%, respectively. The effective rates are increased above the
Federal rate of 34% primarily as a result of state income taxes and
nondeductible expenses.
In fiscal 1995, the Company reported an extraordinary loss of
$367,034, net of a $245,000 tax benefit, to write-off the unamortized
portion of its operating rights. Effective January 1, 1995, the Company's
operating rights became worthless as a result of the Federal government
passing the Federal Aviation Administration Authorization Act which
effectively deregulated intrastate motor carrier transportation.
Financial Condition
- -------------------
The Company is primarily engaged in motor transportation authorized by
the U.S. Department of Transportation and various state regulatory
agencies, and as such, the terms for payment of freight charges are
prescribed by the regulatory agencies. The Company has an average accounts
receivable turnover of approximately 15 times per year. In addition,
terminal facilities and revenue equipment account for approximately 65% of
the total assets of the Company.
At March 30, 1996 and March 25, 1995, the Company's total current
liabilities exceeded total current assets. This is primarily due to a
portion of the Company's financing for revenue equipment being reported as
a current liability, while revenue equipment itself is reported as a
noncurrent asset. The Company generates sufficient cash flows from
operations to meet all of its current obligations, with depreciation on
revenue equipment being a major portion of the cash flows generated.
Total notes payable and long term debt was $14,141,000 and $11,711,000
at March 30, 1996 and March 25, 1995, respectively. The $2,430,000
increase in debt is due to the Company borrowing $5,647,000 to purchase new
revenue equipment less $3,002,000 paid as scheduled debt payments. The
Company's borrowings on revolving credit loans and notes payable decreased
by $215,000 at March 30, 1996 versus March 25, 1995. The revolving credit
loans support the Company's working capital needs during the year.
Management believes it has adequate financing available under this line of
credit to meet working capital requirements.
In April 1996, the Company took delivery on 63 new diesel tractors at
a cost of approximately $4.2 million. The Company financed this purchase
over five years through capital leases and the terms include interest rates
ranging from 6.6% to 7.3% and nine monthly installments per year of
approximately $93,000.
Environmental Matters
- ---------------------
Environmental regulations impact the cost of operations in a number of
areas. Anti-pollution devices on new tractors have increased the cost of
the equipment. Partially offsetting these higher costs will be the savings
from greater fuel economy. The new tractors the Company acquired should
achieve approximately 7.0 miles per gallon of fuel versus the Company
average of 6.1 miles per gallon in fiscal 1996.
<PAGE>
Other recent federal, state and local regulations involving testing
and updating underground storage tanks, disposal of waste oil, used oil
filters and tank cleaning effluents increase the complexity and cost of
Company's operations. Since the entire industry is impacted by these
requirements, the Company is not at a competitive disadvantage; however,
profit margins are squeezed.
Cash Flows
- ----------
Net cash provided by operating activities for the years ended March
30, 1996, March 25, 1995 and March 26, 1994 was $5,263,000, $5,198,000 and
$3,618,000, respectively. The $65,000 increase in cash provided by
operating activities in fiscal 1996 as compared to fiscal 1995 is primarily
the result of the $758,000 increase in cash as a result of reduction in
accounts and notes receivable offset in part by the $479,000 decrease in
net income between the two years. The $1,580,000 increase in cash provided
by operating activities in fiscal 1995 as compared to fiscal 1994 is
primarily the result of the $725,000 increase in net income between the two
years and $1,402,000 increase in adjustments for noncash items in net
income such as depreciation and amortization, provision for deferred income
taxes, the gain on the sale of property, plant and equipment and the
extraordinary loss. These increases in cash are offset by a $543,000
decrease in cash resulting from changes in working capital, primarily the
changes in the receivable from parent and affiliates and accrued
liabilities.
Net cash used in investing activities was $3,959,000, $569,000 and
$1,419,000 in fiscal 1996, fiscal 1995 and fiscal 1994, respectively. The
$3,390,000 increase in cash used by investing activities in fiscal 1996 as
compared to fiscal 1995 is due in part to the timing of cash flows for
trailer purchases. In prior years, trailers were generally purchased and
financed simultaneously. This was reported as noncash additions. In
fiscal 1996, through an agreement with the financing company, the Company
purchased the trailers and then obtained financing subsequent to their
delivery. The $850,000 decrease in cash used in investing activities in
fiscal 1995 as compared to fiscal 1994 is due to a $334,000 increase in
proceeds from the sale of excess property and equipment and a $516,000
decrease in other capital spending
Net cash used in financing activities was $1,278,000, $4,633,000 and
$2,376,000 for the years ended March 30, 1996, March 25, 1995 and March 26,
1994, respectively. The $3,355,000 decrease in cash used by financing
activities in fiscal 1996 compared to fiscal 1995 is due to the $2,044,000
in borrowings to finance trailer purchases plus the $1,961,000 decrease in
scheduled debt payments, less a $339,000 decrease in preferred stock
dividend payments. The $2,257,000 increase in cash used in financing
activities in fiscal 1995 as compared to fiscal 1994 is due to a $1,599,000
reduction in borrowings on the revolving credit loans versus a $1,182,000
increase in fiscal 1994 and a $339,000 increase in preferred stock
dividends, to pay the dividends in arrears. These increases are offset in
part by $788,000 in loan proceeds to finance a balloon payment on a capital
lease and a $156,000 decrease in other scheduled debt payments. In fiscal
1996, the Company paid $105,000 in preferred stock dividends, representing
the required dividends for four quarters.
Management's Responsibility for Financial Statements
- ----------------------------------------------------
The management of the Company is responsible for the integrity of the
financial statements of the Company. These statements, prepared by the
Company in accordance with generally accepted accounting principles applied
on a consistent basis, make full disclosure of the Company's financial
affairs.
The Board of Directors is responsible for assuring that management
fulfills its responsibilities in the preparation of financial statements.
Representatives of the Board of Directors review the scope of the audits
and meet with the independent public accountants and management of the
Company to review their activities and insure that each is properly
discharging its responsibilities.
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
To Schwerman Trucking Co.:
We have audited the accompanying consolidated balance sheets
of Schwerman Trucking Co. (a Wisconsin corporation and subsidiary
of Evergreen Holding Corp.) and subsidiaries as of March 30, 1996
and March 25, 1995 and the related consolidated statements of
income, retained earnings and cash flows for the fiscal years
ended March 30, 1996, March 25, 1995 and March 26, 1994. These
consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Schwerman Trucking Co. and subsidiaries as
of March 30, 1996 and March 25, 1995 and the results of their
operations and their cash flows for the fiscal years ended March
30, 1996, March 25, 1995 and March 26, 1994 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole.
The schedule listed in the index to Item 14(a)2 for the fiscal
years ended March 30, 1996, March 25, 1995 and March 26, 1994 is
presented for purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
June 14, 1996.
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the fiscal years ended March 30, 1996, March 25, 1995 and March 26, 1994
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Operating revenues $55,182,826 $57,629,248 $53,168,815
Equipment and other rentals
831,350 783,350 670,760
Other
2,267,475 2,317,436 2,376,127
----------- ----------- -----------
58,281,651 60,730,034 56,215,702
Operating expenses: ----------- ----------- -----------
Salaries, wages and fringe benefits 27,280,631 28,091,097 24,642,385
Fuel and fuel taxes 5,441,687 5,561,156 5,309,603
Parts, repairs and tires 3,669,762 3,974,888 3,833,435
Insurance and workers'
compensation 3,136,649 3,510,987 3,801,229
Depreciation and amortization 3,739,124 3,105,728 2,307,005
Purchased transportation 5,251,924 5,850,503 7,047,534
Rent expense 1,145,618 1,427,384 1,834,832
Other operating expenses 6,189,348 5,881,436 5,750,712
(Gain) on disposal of property,
plant and equipment, net (87,957) (377,312) (19,156)
---------- ---------- ----------
55,766,786 57,025,867 54,507,579
---------- ---------- ----------
Operating income 2,514,865 3,704,167 1,708,123
Interest expense, net 1,236,273 1,015,841 820,461
---------- ---------- ----------
Income before income taxes
and extraordinary item 1,278,592 2,688,326 887,662
Federal and state income taxes 505,000 1,068,000 359,000
---------- ---------- ----------
Income before extraordinary item 773,592 1,620,326 528,662
Extraordinary item - write off of
operating rights, net of an
income tax benefit of $245,000 -- 367,034 --
---------- ---------- ----------
Net incom 773,592 1,253,292 528,662
Less dividend requirements on preferred
stock, net of discount on preferred
stock redemption 104,823 101,200 105,950
---------- ---------- ----------
Net income applicable to
common stock $ 668,769 $ 1,152,092 $ 422,712
=========== =========== ===========
Net income per common share $ 1.58 $ 2.73 $ 1.00
<FN>
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the fiscal years ended March 30, 1996, March 25, 1995 and March 26,1994
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $5,186,920 $4,379,125 $3,956,413
Net income 773,592 1,253,292 528,662
Cash dividends on preferred stock
($0.70 per share in 1996,
$2.975 per share in 1995 and,
$0.70 per share in 1994) (104,823) (445,497) (105,950)
---------- ---------- ----------
Balance, end of year $5,855,689 $5,186,920 $4,379,125
========== ========== ==========
<FN>
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 30, 1996 and March 25, 1995
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 113,476 $ 87,702
Accounts receivable, trade (less allowance
for losses of $40,000 in 1996 and 1995) 4,033,387 4,133,229
Other accounts and notes receivable 801,451 1,262,769
Operating supplies and parts 1,072,286 1,042,136
Tires in service 741,079 745,540
Prepaid expenses 620,267 615,367
Other current assets 258,661 218,319
---------- ----------
Total current assets 7,640,607 8,105,062
---------- ----------
Property, plant and equipment, at cost:
Land 692,118 663,878
Buildings 4,502,083 4,032,901
Revenue equipment 42,763,675 37,182,920
Other equipment 4,353,553 4,118,825
Leasehold improvements 3,187,060 2,900,692
---------- ----------
55,498,489 48,899,216
Less accumulated depreciation and
amortization
(34,528,615) (31,839,996)
---------- ----------
Property, plant and equipment, net 20,969,874 17,059,220
---------- ----------
Net receivable from parent and affiliates 589,972 1,248,363
Other noncurrent assets 1,409,482 1,145,008
---------- ----------
Total assets $30,609,935 $27,557,653
<FN>
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 30, 1996 and March 25, 1995
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
----------- -----------
<S> <C> <C>
Current liabilities:
Current portion of long term debt $ 3,042,540 $ 2,226,147
Accounts payable 2,043,522 2,291,342
Accrued liabilities:
Salaries and wages 687,223 790,277
Vacations and benefit plans 1,413,884 1,316,748
Taxes other than income 415,045 498,470
Insurance 719,876 489,661
Interest 65,234 58,541
Other 299,256 346,062
Income taxes payable 31,755 84,128
Deferred income taxes - current 328,230 367,659
----------- -----------
Total current liabilities 9,046,565 8,469,035
----------- -----------
Long term debt 11,098,695 9,485,233
Other noncurrent liabilities 710,610 1,089,518
Deferred income taxes 1,746,025 1,174,596
Stockholders' equity:
Preferred stock, 7% cumulative, $10 par
value; authorized 350,000 shares,
149,747 shares issued and outstanding,
aggregate redemption value and
liquidation preference of $1,572,344
plus accumulated dividends 1,497,470 1,497,470
Common stock, $1 par value; authorized
1,000,000 shares, 422,089 shares
issued and outstanding 422,089 422,089
Additional paid-in capital 232,792 232,792
Retained earnings 5,855,689 5,186,920
----------- -----------
Total stockholders' equity 8,008,040 7,339,271
----------- -----------
Total liabilities and stockholders' equity $30,609,935 $27,557,653
=========== ===========
<FN>
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended March 30, 1996, March 25, 1995 and March 26, 1994
<CAPTION>
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 773,592 $ 1,253,293 $ 528,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,739,124 3,717,762 2,307,005
Provision for deferred income taxes 532,000 425,000 76,000
Provision for doubtful accounts (12,089) 3,425 6,761
(Gain) on disposal of property,
plant and equipment (87,957) (377,312) (19,156)
Changes in assets and liabilities:
Accounts and notes receivable 573,249 (185,252) (1,284,893)
Operating supplies and parts (30,150) (113,582) (74,639)
Tires in service, prepaid expenses
and other current assets (40,781) 18,490 105,218
Receivable from parent and affiliates 658,391 425,921 970,139
Other noncurrent assets (264,474) 9,162 94,257
Accounts payable (247,820) 276,312 158,710
Accrued liabilities 100,759 175,973 558,665
Income taxes payable (52,373) (287,208) (468,728)
Other noncurrent liabilities (378,908) (144,261) 659,601
----------- ---------- -----------
Net cash provided by
operating activities 5,262,563 5,197,723 3,617,602
----------- ---------- -----------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 243,510 475,099 140,949
Payments for property, plant
and equipment (4,202,512) (1,043,802) (1,560,352)
----------- ----------- -----------
Net cash used in investing
activities (3,959,002) (568,703) (1,419,403)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long term debt 2,044,415 788,000 1,250,209
Payments of long term debt (3,217,379) (4,963,494) (3,520,730)
Redemption of preferred stock -- (12,477) --
Preferred stock dividends (104,823) (445,498) (105,950)
----------- ----------- ----------
Net cash used in financing
activities (1,277,787) (4,633,469) (2,376,471)
----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents 25,774 (4,449) (178,272)
Cash and cash equivalents:
Beginning of year 87,702 92,151 270,423
----------- ----------- -----------
End of year $ 113,476 $ 87,702 $ 92,151
=========== =========== ===========
Cash paid during the year for:
Interest $ 1,229,580 $ 1,016,980 $ 830,064
Income taxes $ 25,373 $ 685,208 $ 751,728
<FN>
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
1. DESCRIPTION OF THE BUSINESS
---------------------------
Schwerman Trucking Co. (the "Company"), a Wisconsin corporation, is
a 99.9% owned subsidiary of Evergreen Holding Corp. (the "Parent").
Unless the context states otherwise, the reference to the Company
includes Schwerman Real Estate & Development Corp., a wholly owned
subsidiary.
The Company's operations primarily consist of the transportation of
liquid and dry commodities, principally dry cement, in bulk in tank-
type trailers. Commodities are principally transported from either a
manufacturing or distribution center to either a further processor or
the ultimate consumers, primarily in the eastern 2/3 of the continental
United States. The Company's business activity and employment levels
are subject to seasonal variation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
FISCAL YEAR - The Company's fiscal year ends on the last Saturday in
March. The 1996, 1995 and 1994 fiscal years presented include 53
weeks, 52 weeks and 52 weeks, respectively.
BASIS OF CONSOLIDATION - The consolidated financial statements include
the accounts of Schwerman Trucking Co. and its subsidiaries all of
which are wholly owned.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION - The Company recognizes revenue, and direct costs,
when the shipment is complete.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION - The cost of property,
plant and equipment, less estimated residual value, is depreciated on
the straight-line method for accounting purposes based upon the
following estimated useful lives:
Revenue equipment 5-10 years
Other equipment 2-10 years
Buildings 25-30 years
Leasehold improvements are amortized over the lesser of the lease term
or their estimated useful lives. Maintenance and repairs of equipment
and properties are charged to expense as incurred; significant
improvements are capitalized. Upon disposal of property and equipment,
the cost of the asset retired and the related accumulated depreciation
are eliminated from the accounts, and the resulting gain or loss is
included in the results of operations.
OPERATING SUPPLIES AND PARTS - Replacement parts, fuel and supply items
are stated at the lower of average cost or market.
<PAGE>
TIRES IN SERVICE - Tires purchased with revenue equipment are
capitalized as part of the revenue equipment and depreciated over the
estimated useful life of the equipment. Replacement tires are held as
operating supplies until placed in service at which point they are
amortized on a straight-line basis over twenty-four months.
OPERATING RIGHTS - In August 1994, the Federal government passed the
Federal Aviation Administration Authorization Act. As a result of this
legislation, on January 1, 1995, states are no longer able to regulate
intrastate motor carrier transportation, except for matters relating to
safety and insurance. Therefore, any existing authorities have limited
value and consequently the Company wrote-off the unamortized balance of
its intrastate operating rights in fiscal 1995. The write-off is
presented on the income statement as an extraordinary item, net of the
tax benefit of $245,000.
INSURANCE - The Company has an insurance program, administered by its
Parent, which provides for the retention of certain risks (primarily
property damage, injury and workers' compensation) up to defined
limits. The Parent allocates total expense under these plans based on
a pro rata percentage of revenue or payroll of each subsidiary. This
program requires that the Company, through its Parent, maintain a
deposit in favor of the insurance carrier sufficient to cover estimated
losses. The deposit totaled $900,000 at March 30, 1996 and March 25,
1995 and is included in receivable from Parent and affiliates.
The Company, working with loss runs provided by its insurance carrier,
estimates future costs of open claims in recording the insurance
accrual.
STATEMENTS OF CASH FLOWS - The Company defines cash equivalents as
short-term investments with maturities generally of three months or
less.
The Company had noncash property, plant and equipment additions
totaling $3,602,819 in 1996, $5,539,250 in 1995 and $3,837,270 in 1994,
which were financed through equipment obligations and capital leases.
3. LONG TERM DEBT
--------------
Long term debt consist of the following:
<TABLE>
<CAPTION>
March 30, March 25,
1996 1995
----------- -----------
<S> <C> <C>
Revolving credit note with interest at 0.75%
over prime, payable August 1997. (a) $ 3,015,000 $ 3,230,000
Equipment obligations with interest rates
ranging from 7.54% to 11.55%, payable in
varying installments through 2002. 8,486,893 4,940,904
Capitalized lease obligations with interest
rates ranging from 5.82% to 11.58% payable
in varying installments through 1999. 2,639,342 3,540,476
----------- ----------
14,141,235 11,711,380
Less current portion 3,042,540 2,226,147
----------- -----------
$11,098,695 $ 9,485,233
=========== ===========
<FN>
(a)The prime rate was 8.25% and 9.0% at March 30, 1996 and March
25, 1995, respectively.
</TABLE>
<PAGE>
The approximate maturities of long term debt are as follows:
1997 $ 3,042,540
1998 5,817,986
1999 2,288,066
2000 1,922,012
2001 424,371
Subsequent to 2001 646,260
-----------
$14,141,235
===========
The Company has a revolving credit agreement with its principal
bank. As of March 30, 1996 there is a revolving credit note up to
$5,250,000 due August 31, 1997 with interest at 0.75% over prime, not
to exceed 80% of eligible accounts receivable, plus $1,750,000. At
March 30, 1996, $3,015,000 was outstanding on this revolving credit
note. This agreement, as amended, requires the maintenance of certain
financial ratios such as debt service coverage ratios, debt to worth
ratios and other requirements, a limitation on annual preferred
dividend payments of $446,000 for fiscal 1995 and $105,000 for each
fiscal year thereafter, limitations on capital expenditures and
restrictions on incurring additional indebtedness and liens other than
under this agreement.
Substantially all of the property, plant and equipment and accounts
receivable of the Company are pledged as collateral under the credit
and term loan agreements and other long term debt obligations.
The Company is guaranteeing approximately $1,600,000 of debt of its
Parent and an affiliate. In addition, substantially all of the
Company's debt is guaranteed by its Parent.
In April 1996, the Company took delivery of 63 new diesel tractors
that it purchased for approximately $4,200,000. The Company financed
this purchase with capital leases over 5 years with interest rates
ranging from 6.6% to 7.3% and nine monthly installments per year of
approximately $93,000 per month.
4. INCOME TAXES
------------
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ---------- --------
<S> <C> <C> <C>
Current Federal and State:
Federal $(12,000) $ 550,000 $254,000
State (15,000) 93,000 29,000
-------- ---------- --------
(27,000) 643,000 283,000
Deferred 532,000 425,000 76,000
-------- ---------- --------
$505,000 $1,068,000 $359,000
======== ========== ========
</TABLE>
Beginning in fiscal 1995, the Company and its subsidiaries are
included in the consolidated Federal income tax return of its Parent.
The Company calculates its tax provision on a stand alone basis and
makes payments on its Federal income tax liability through its Parent.
Due to voting rights held by preferred shareholders, in fiscal 1994,
the Company and its subsidiaries filed a consolidated Federal income
tax return on a stand-alone basis.
<PAGE>
The Company elected to adopt Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
effective with the start of fiscal 1994. This adoption did not
materially effect the Company's existing deferred income taxes.
Deferred income taxes are determined based upon the difference between
the book and the tax basis of the Company's assets and liabilities.
Deferred taxes are provided at the tax rates expected to be in effect
when these differences reverse.
Temporary differences which give rise to the net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Tires amortized for financial reporting
purposes, expensed for tax purposes $ 296,432 $ 298,216 $ 293,701
Differences between the book and tax
basis of property, plant and equipment 2,680,711 2,087,046 1,472,908
Other, net 477,613 535,145 579,632
---------- ---------- ----------
Gross liabilities 3,454,756 2,920,407 2,346,241
---------- ---------- ----------
Accruals and reserves not currently
deductible (649,570) (800,714) (748,976)
Difference between book and tax
treatment of interest charged on
advances to affiliates (475,932) (434,438) (379,010)
Alternative minimum tax (255,000) (143,000) (101,000)
---------- ----------- -----------
Gross assets (1,380,502) (1,378,152) (1,228,986)
----------- ----------- -----------
Net deferred income tax liability $ 2,074,254 $ 1,542,255 $ 1,117,255
=========== =========== ===========
</TABLE>
The net deferred income tax liability is classified in the
consolidated balance sheet as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Deferred income taxes - current $ 328,229 $ 367,659 $ 362,768
Deferred income taxes 1,746,025 1,174,596 754,487
---------- ---------- ----------
$2,074,254 $1,542,255 $1,117,255
========== ========== ==========
</TABLE>
The following summarizes differences between the Company's effective
income tax rate and the Federal statutory tax rate:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of
Federal income tax benefit 2.8 4.2 4.3
Nondeductible expenses 2.7 1.5 2.1
---- ---- ----
Effective tax rate 39.5% 39.7% 40.4%
==== ==== ====
</TABLE>
5. LEASES
------
The Company is obligated under both capital and operating leases.
The assets recorded under capital lease agreements are as follows:
<TABLE>
<CAPTION>
March 30, March 25,
1996 1995
----------- -----------
<S> <C> <C>
Revenue equipment $ 4,189,459 $ 6,785,642
Less accumulated amortization
(1,129,052) (2,676,486)
----------- -----------
$ 3,060,407 $ 4,109,156
=========== ===========
</TABLE>
The charge to income resulting from amortization of assets recorded
under capital leases is included in depreciation and amortization in
the consolidated statements of income.
<PAGE>
The future minimum lease payments on noncancellable leases at
March 30, 1996 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Fiscal Leases Leases
------ ---------- ----------
<S> <C> <C>
1997 $ 854,259 $ 263,236
1998 701,362 170,196
1999 701,363 114,996
2000 704,189 8,996
2001 -- 999
---------- ----------
$ 2,961,173 $ 558,423
==========
Less amounts
representing interest (321,831)
-----------
$ 2,639,342
===========
</TABLE>
The Company leases land under cancellable agreements as sites for
various terminals. The Company also leases some of its diesel tractors
and trailers under cancellable agreements. Many of these agreements
contain monthly or annual renewal options.
6. PREFERRED STOCK
---------------
The preferred stock is redeemable at the option of the Company at a
price of $10.50 per share plus accumulated dividends. In the event of
liquidation, preferred stockholders have a preferential right to
receive $10.50 per share plus accumulated dividends. At March 30,
1996, the Company is current on the preferred stock dividends. On
September 16, 1994, the Company paid a special dividend of $2.275 per
share on the Company's preferred stock. This special dividend of
$341,000 eliminated the thirteen quarters of arrearage on the preferred
stock and terminated the voting rights of the preferred stockholders.
On April 29, 1996 the Board of Directors voted to approve payment of
the quarterly preferred stock dividend of $.175 per share.
On February 1, 1994, the Company offered to purchase the preferred
stock of any stockholder owning 99 shares or less for $7.75 per share.
This offer to repurchase expired on March 25, 1994. In fiscal 1995,
the Company repurchased 1,610 shares of preferred stock at a cost of
$12,478.
In fiscal 1996, the Company made sinking fund contributions of
$150,000 to accumulate an amount equal to the redemption value of all
outstanding preferred stock. At March 30, 1996 and March 25, 1995, the
balance in the sinking fund is $1,355,786 and $1,114,414 respectively,
and is included in other noncurrent assets. The sinking fund consists
of a U.S. Treasury note, commercial paper and money market mutual
funds, which bear interest rates ranging from 3.14% to 7.5% at March
30, 1996. All investments in the sinking fund are classified as held-
to-maturity and, accordingly, are recorded at amortized cost.
7. RETIREMENT PLANS
----------------
Defined Contribution Plan -
---------------------------
The Evergreen Holding Corp. Profit Sharing and Employees' Savings
Plan is a defined contribution plan for eligible non-union employees.
The Company's annual contribution under this plan is based on the
consolidated profits of its Parent. The contribution is payable at not
less than 4% of each participant's compensation provided the
contribution does not exceed profit before taxes and profit sharing
contribution. The profit sharing provision was $295,000 in 1996,
$418,000 in 1995 and $190,000 in 1994.
<PAGE>
Union Pension Plans -
---------------------
Substantially all full-time union employees of the Company are
participants in various multiemployer pension plans (the "Plans"). The
Company contributed and charged to expense $1,145,000 in 1996,
$1,225,000 in 1995 and $1,166,000 in 1994 for the Plans. The Plans are
not administered by the Company, and contributions are determined in
accordance with provisions of negotiated labor contracts.
The Multiemployer Pension Amendments Act of 1980 (the "Act")
expanded the responsibilities of participating employers with respect
to multi-employer plans. The Act increased the employer's
responsibility for funding retirement benefits in excess of plan assets
and has specific requirements for funding upon plan termination or
Company withdrawal. The Company has the burden of funding its share of
any unfunded vested benefits over future years of participation in the
Plans.
The Company does not intend to withdraw from or terminate such
Plans. The Company's share of unfunded vested retirement benefits for
the Plans based on the information presently available from the Plans'
Administrators is approximately $3.5 million. This amount will
fluctuate in the future based on changes in future contribution levels,
retirement benefits and actuarial assumptions, and changes in the
contributing employer group.
Other Postretirement Benefits -
-------------------------------
The Company provides certain postretirement health care and life
insurance benefits for non-union employees. Health care benefits are
provided through a program of self-insurance, and retirees contribute
monthly premiums to the program sufficient to cover the cost of the
benefits, and accordingly there is no obligation for health care
benefits which needs to be recorded by the Company pursuant to
Financial Accounting Standards Board Statement No. 106, "Accounting for
Postretirement Benefits Other than Pensions"("SFAS No. 106").
The Company also provides certain death benefits to its non-union
employees. Employees who retire at age 55, or older, with at least 10
years of service retain these benefits during their retirement. Such
death benefits are funded by the Company through the purchase of split
dollar life insurance contracts designed to reimburse the Company for
its costs at the time the benefits are paid. The difference between
cash basis and accrual expense is not material.
8. NET INCOME PER COMMON SHARE
---------------------------
Net income per common share is computed after the 7% preferred
dividend requirements and is based upon the weighted average number of
common shares outstanding during the year.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
------------------------------------
The carrying value of cash and cash equivalents, accounts and notes
receivable, the sinking fund (other noncurrent assets) and accounts
payable approximate their fair market values. The fair market value of
the Company's long term debt is estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates
for similar types of borrowing arrangements. At March 30, 1996, the
carrying amount and fair market value of long term debt, including the
current portion of long term debt, was $14,141,000 and $14,048,000,
respectively. At March 25, 1995, the carrying amount and fair market
value of long term debt was $11,711,000 and $11,078,000, respectively.
Since there are no stated terms of repayment, it is impractical to
estimate the fair market value of the Company's receivable from parent
and affiliates.
<PAGE>
10. RELATED PARTY TRANSACTIONS
--------------------------
The Company leases its executive offices from its Parent. Annual
rentals under this lease, which has terms extending to March 31, 1999,
were $96,000 in 1996, 1995 and 1994.
The Company is leasing approximately 120 diesel tractors and 70
trailers from North American Bulk, a subsidiary of Evergreen Holding
Corp., at terms to cover the operating costs of the equipment. The
Company's expense related to these leases totaled $818,949, $861,745
and $1,108,885 in 1996, 1995 and 1994, respectively.
The Company utilizes various executive and administrative services,
principally data processing and accounting-related services, provided
by its Parent. The charges for these services approximate the actual
cost incurred by the Parent and totaled $3,623,000 in 1996, $3,841,000
in 1995 and $2,961,000 in 1994.
At March 30, 1996, the Company has an unsecured receivable of
$589,972 due from its Parent and affiliates. This receivable has no
terms for repayment, therefore this receivable has been classified as
noncurrent. Management of the Parent has indicated that it is their
intention to repay this amount.
11. MAJOR CUSTOMERS
---------------
The Company's largest customer accounted for motor carrier operating
revenues of approximately $7,442,000 in 1996, $6,962,000 in 1995 and
$5,823,000 in 1994. Another major customer accounted for motor carrier
operating revenues of approximately $5,656,000 in 1996, $8,033,000 in
1995 and $8,620,000 in 1994. Several of the Company's terminals are
located on property leased from this customer for nominal amounts.
<PAGE>
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- ------ ----------------------------------------------------
None
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- ------- -----------------------------------------------
Information called for by this Item 10 is incorporated by reference from
the section entitled "Election of Directors" in the Company's Proxy
Statement for the 1996 Annual Meeting of Stockholders. See also "Directors
and Executive Officers of the Company" on page 4 of this report.
ITEM 11 EXECUTIVE COMPENSATION
- ------- -----------------------
Information called for by this Item 11 is incorporated by reference from
the section entitled "Remuneration of Officers and Directors" in the
Company's Proxy Statement for the 1996 Annual Meeting of Stockholders.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
The following table sets forth, as of March 30, 1996, the information
with respect to common stock ownership of each person known by the Company
to own beneficially more than 5% of the shares of the Company's common
stock.
COMMON SHARES OWNED BENEFICIALLY
Name of Percent
Beneficial Owner Directly Indirectly of Shares
---------------- -------- ---------- ---------
Evergreen Holding Corp. (1) 421,789 - 99.9
(1) This company was formed on January 1, 1987 and is owned by
various members of the Schwerman family, including Jack F. Schwerman and
Carl L. Schwerman.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Company's executive office in Milwaukee is owned by its Parent,
Evergreen Holding Corp. The Company paid rent of $8,000 per month under a
5 year net lease beginning March 27, 1994.
The Company utilizes various services, principally data processing and
accounting related, provided by its Parent, Evergreen Holding Corp. The
charge for these services was $3,623,000 in 1996, which approximated the
actual cost incurred by Evergreen Holding Corp.
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a) 1. Financial Statements
--------------------
Included in Part II of this report:
Report of Independent Public Accountants
Consolidated Statements of Income for the fiscal years ended March
30, 1996,March 25, 1995 and March 26, 1994.
Consolidated Statements of Retained Earnings for the fiscal
years ended March 30, 1996, March 25, 1995 and March 26, 1994.
Consolidated Balance Sheets as of March 30, 1996 and March 25, 1995.
Consolidated Statements of Cash Flows for the fiscal years ended
March 30, 1996, March 25, 1995 and March 26, 1994.
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
----------------------------
Included in Part IV of this report:
For the fiscal years ended March 30, 1996, March 25, 1995 and March
26, 1994:
Schedule II--Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of conditions
under which they are required or because the required information is
given in the financial statements or notes thereto.
Separate financial statements and supplemental schedules of the
Company are omitted since the Company is primarily an operating company
and its subsidiaries, included in the consolidated financial statements
being filed, do not have a minority equity interest or indebtedness to
any person other than the Company in an amount which exceeds five
percent of the total assets as shown by the consolidated financial
statements as filed herein.
3. Exhibits
--------
(11) Schedule showing computations of average number of Common Shares
outstanding, as used in the calculations of per share earnings for
fiscal years ended March 30, 1996, March 25, 1995 and March 26, 1994.
(22) Subsidiaries of the Company
(27) Exhibit 27. Financial Data Schedule
(28) Proxy statement for the 1996 Annual Meeting of
Stockholders incorporated by reference into Part III.
(b) Reports on Form 8-K
-------------------
None
<PAGE>
<TABLE>
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the fiscal years ended March 30, 1996, March 25, 1995 and March 26, 1994
<CAPTION>
Description 1996 1995 1994
- ----------- -------- -------- --------
<S> <C> <C> <C>
Allowance for losses on
accounts receivable
Balance, beginning of year $ 40,000 $ 40,000 $ 62,000
Charged (credited) to expense (12,089) 3,425 6,761
Recoveries 39,072 884 284
Amounts written off (26,983) (4,309) (29,045)
-------- -------- --------
Balance, end of year $ 40,000 $ 40,000 $ 40,000
======== ======== ========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SCHWERMAN TRUCKING CO.
June 17, 1996
------------- BY:Jack F. Schwerman
-----------------
Date Jack F. Schwerman
Chairman of the Board,
Treasurer, President and
Chief Executive and Operating
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the Registrant
and in the capacities and on the date indicated
Director June 17, 1996
David S. Harris -------------
- --------------- Date
David S. Harris
Director June 17, 1996
Geoffrey M. Redman -------------
- ------------------
Geoffrey M. Redman Date
<PAGE>
<TABLE>
EXHIBIT (11)
SCHWERMAN TRUCKING CO. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
For the fiscal years ended March 30, 1996, March 25, 1995 and March 26, 1994
<CAPTION>
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Net income $ 773,592 $ 1,253,292 $ 528,662
Deduct dividend requirements on
preferred stock, net of discount
on preferred stock redemption 104,823 101,200 105,950
--------- ----------- ---------
Net income applicable to common shares $ 668,769 $ 1,152,092 $ 422,712
========= =========== =========
Weighted average number of common
shares outstanding 422,089 422,089 422,089
========= =========== =========
Net income per common share $ 1.58 $ 2.73 $ 1.00
========= =========== =========
</TABLE>
<PAGE>
EXHIBIT (22)
SUBSIDIARIES OF THE COMPANY
The Company has one (1) wholly owned subsidiary. A brief description of
the company's activities follows:
Schwerman Real Estate & Development Corp., a Wisconsin corporation
organized on June 5, 1973, is a wholly owned subsidiary holding title to a
wide variety of properties in the States of Georgia, Ohio, South Carolina,
Tennessee, and Virginia. (See Item 2, Properties in this report.)
----------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-30-1996
<PERIOD-START> Mar-26-1995
<PERIOD-END> Mar-30-1996
<CASH> 113476
<SECURITIES> 0
<RECEIVABLES> 4834838
<ALLOWANCES> (40000)
<INVENTORY> 1072286
<CURRENT-ASSETS> 7640607
<PP&E> 55498489
<DEPRECIATION> (34528615)
<TOTAL-ASSETS> 30609935
<CURRENT-LIABILITIES> 9046565
<BONDS> 11098695
<COMMON> 422089
0
1497470
<OTHER-SE> 6088481
<TOTAL-LIABILITY-AND-EQUITY> 30609935
<SALES> 58281651
<TOTAL-REVENUES> 58281651
<CGS> 0
<TOTAL-COSTS> 55766786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1236273
<INCOME-PRETAX> 1227592
<INCOME-TAX> 505000
<INCOME-CONTINUING> 773592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 773592
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
</TABLE>
