<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission File No. 000-22490
LANDAIR SERVICES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1120025
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
430 AIRPORT ROAD
GREENEVILLE, TENNESSEE 37745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 636-7000
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
------ ------
The number of shares outstanding of the registrant's common stock, $.01 par
value, as of November 8, 1996 was 5,949,382.
<PAGE> 2
TABLE OF CONTENTS
LANDAIR SERVICES, INC.
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income -
Three month and nine month periods ended
September 30, 1996 and September 30, 1995 4
Condensed Consolidated Statements of Cash Flows -
Nine month periods ended September 30, 1996 and
September 30, 1995 5
Notes to Condensed Consolidated Financial Statements -
September 30, 1996 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
EXHIBIT INDEX 13
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited) (Note)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26 $ 3,834
Accounts receivable, less allowance of $199 in 1996 and $292 in 1995 22,815 17,788
Other current assets 3,620 4,136
-------- --------
Total current assets 26,461 25,758
Property and equipment 95,163 89,699
Less accumulated depreciation and amortization (24,735) (17,577)
-------- --------
70,428 72,122
Other assets 534 399
-------- --------
Total assets $ 97,423 $ 98,279
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,470 $ 5,074
Accrued expenses 6,505 5,637
Current portion of long-term debt 6,653 8,158
Current portion of capital lease obligations 1,955 1,089
-------- --------
Total current liabilities 19,583 19,958
Long-term debt, less current portion 22,080 27,030
Capital lease obligations, less current portion 8,937 8,825
Deferred income taxes 6,983 5,822
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value;
Authorized shares - 20,000,000
Issued and outstanding shares - 5,949,382 in 1996 and
5,864,200 in 1995 59 59
Additional paid-in capital 26,141 25,562
Retained earnings 13,640 11,023
-------- --------
Total shareholders' equity 39,840 36,644
-------- --------
Total liabilities and shareholders' equity $ 97,423 $ 98,279
======== ========
</TABLE>
NOTE: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date, but does not include all of the financial
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three month periods ended Nine month periods ended
------------------------------ ----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenue $ 39,295 $ 37,451 $ 115,167 $ 109,640
Operating expenses:
Purchased transportation 12,629 13,027 37,471 40,674
Salaries, wages, and employee benefits 10,911 9,556 31,898 27,546
Fuel and fuel taxes 2,573 2,284 8,175 6,384
Operating leases 1,603 1,468 4,374 4,619
Depreciation and amortization 2,687 2,142 7,909 6,296
Insurance and claims 2,440 1,950 6,153 5,224
Other operating expenses 4,326 4,211 12,692 11,472
--------- --------- --------- ---------
37,169 34,638 108,672 102,215
Income from operations 2,126 2,813 6,495 7,425
Other income (expense):
Interest expense (694) (779) (2,288) (2,195)
Other, net 0 46 26 252
--------- --------- --------- ---------
(694) (733) (2,262) (1,943)
Income before income taxes 1,432 2,080 4,233 5,482
Income taxes 545 900 1,616 2,362
--------- --------- --------- ---------
Net income $ 887 $ 1,180 $ 2,617 $ 3,120
========= ========= ========= =========
Net income per share:
Primary $ .15 $ .20 $ .43 $ .52
========= ========= ========= =========
Fully diluted $ .15 $ .20 $ .43 $ .52
========= ========= ========= =========
Dividends declared per share $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine month periods ended
-----------------------------
September 30, September 30,
1996 1995
------------- -------------
(In thousands)
<S> <C> <C>
Cash from operations $ 7,180 $ 11,587
Investing activities:
Proceeds from disposal of property and equipment 2,700 2,188
Purchases of property and equipment (6,028) (21,886)
Decrease in restricted capital lease funds -- 156
Other (135) (59)
-------- --------
(3,463) (19,601)
Financing activities:
Proceeds from long-term debt 1,664 13,504
Payments of long-term debt (8,119) (5,881)
Payments of capital lease obligations (1,649) (900)
Proceeds from exercise of stock options 579 349
-------- --------
(7,525) 7,072
-------- --------
Increase (decrease) in cash and cash equivalents $ (3,808) $ (942)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
LANDAIR SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine month
period ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Landair Services, Inc. annual report on Form 10-K for
the year ended December 31, 1995.
NOTE 2 - NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. Common
stock equivalents consist of outstanding stock options and have been included
in the calculation of net income per share using the treasury stock method.
NOTE 3 - INCOME TAXES
For the three month and nine month periods ended September 30, 1996 and
September 30, 1995, the effective income tax rate varied from the statutory
federal income tax rate of 34% primarily due to the effect of state income
taxes, net of the federal benefit, and permanent differences (principally meals
and entertainment).
NOTE 4 - CONTINGENCIES
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes none of these actions, individually or in the aggregate,
will have a material adverse effect on the financial condition or results of
operations of the Company.
6
<PAGE> 7
NOTE 5 - CHANGE IN ACCOUNTING ESTIMATE
During 1996, the Company changed the estimated useful life of tires in service
to reflect the increased warranty periods provided by the tire manufacturers.
The change resulted in a decrease in other operating expenses of $140,000 and
$280,000, an increase in net earnings of $87,000 and $173,000 and an increase
in earnings per share of $0.01 and $0.03 for the three month and nine month
periods ended September 30, 1996, respectively.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth expenses as a percentage of operating revenue
for the periods indicated.
<TABLE>
<CAPTION>
Three month periods ended Nine month periods ended
----------------------------- ---------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Purchased transportation 32.1 34.8 32.5 37.1
Salaries, wages, and employee
benefits 27.8 25.5 27.7 25.1
Fuel and fuel taxes 6.5 6.1 7.1 5.8
Operating leases 4.1 3.9 3.8 4.2
Depreciation and amortization 6.8 5.7 6.9 5.7
Insurance and claims 6.2 5.2 5.3 4.8
Other operating expenses 11.1 11.3 11.1 10.5
----- ----- ----- ----
94.6 92.5 94.4 93.2
Income from operations 5.4 7.5 5.6 6.8
Other income (expense):
Interest expense (1.8) (2.1) (2.0) (2.0)
Other, net 0.0 0.1 0.0 0.2
----- ----- ----- ----
(1.8) (2.0) (2.0) (1.8)
----- ----- ----- ----
Income before income taxes 3.6 5.5 3.6 5.0
Income taxes 1.3 2.3 1.3 2.2
----- ----- ----- ----
Net income 2.3% 3.2% 2.3% 2.8%
===== ===== ===== ====
</TABLE>
Results of Operations
Operating revenue increased by $1.8 million, or 5%, to $39.3 million in the
third quarter of 1996 from $37.5 million in 1995. For the first nine months of
1996, operating revenue of $115.2 million was $5.5 million, or 5%, higher than
the same period in 1995. The Company's increased operating revenue reflects
additional volume from its Forward Air operations, which increased 30% and 24%,
respectively, during the third quarter and first nine months of 1996 compared
to the prior-year periods. The increase in Forward Air operating revenue was
partially offset by a decrease in Truckload and Dedicated operating revenue of
10% and 6% during the third quarter and first nine months of 1996,
respectively, because of fewer tractors in service and lower equipment
utilization in the Truckload operations.
The operating ratio (operating expenses as a percent of operating revenue) for
the three month and nine month periods ended September 30, 1996, was 94.6% and
94.4%, respectively,
8
<PAGE> 9
compared to 92.5% and 93.2% for the respective periods in 1995. Except as
explained below, operating expenses in the aggregate generally reflect
increases proportionate to the increased level of operations.
The components of operating expenses fluctuate between periods primarily
because of the ratio of owner-operators to Company-operated equipment.
Effective February 1996, the Company no longer pays per diem to line-haul
drivers as reimbursement for expenses incurred for out-of-town travel. Instead,
these drivers now receive a higher pay rate per mile. The effect of this change
caused a slight increase in the Company's salaries, wages and employee benefits
expense during the third quarter and first nine months of 1996.
During the first nine months of 1996, fuel prices increased by approximately
12% over the prior year, which increased fuel and fuel taxes by approximately
$850,000. Approximately 30% of the increase in fuel prices was passed on to
customers in the form of a fuel surcharge during the third quarter and first
nine months of 1996.
Operating leases decreased from 4.2% of operating revenue during the first nine
months of 1995 to 3.8% during the same period of 1996, while depreciation and
amortization increased from 5.7% of operating revenue during the first nine
months of 1995 to 6.9% in the same period of 1996. The decrease in operating
leases and increase in depreciation and amortization during the first nine
months of 1996 from the prior year resulted from increased ownership, rather
than leasing, of revenue equipment. The increase in depreciation and
amortization during the current year was also attributed to an increase in the
ratio of Company-operated equipment to owner-operators. The decrease in
operating leases during the first nine months of 1996, attributable to
increased ownership of revenue equipment, was partially offset by increased
rent for Forward Air terminals, which were upgraded or added during the year to
facilitate the Forward Air operation's growth.
Insurance and claims for the three month and nine month periods ended September
30, 1996, was 6.2% and 5.3%, respectively, compared to 5.2% and 4.8% for the
same period of 1995. The increase in insurance and claims is attributed to an
increase in accident costs over the prior year.
Included in income from operations for the third quarter and first nine months
of 1995 were gains on the sale of revenue equipment in the amount of $101,000
and $453,000, respectively, compared to $216,000 and $386,000 for the same
periods in 1996. Also, see Note 5 to the Condensed Consolidated Financial
Statements for the current year financial impact of a change in the estimated
useful life of tires in service.
9
<PAGE> 10
The effective tax rate for the third quarter and first nine months of 1996 was
38% compared to 43% for the same periods in 1995. The decrease in 1996 is
primarily due to a significant reduction in the Company's nondeductible meals
and entertainment expense (which were only partially deductible by the Company
for federal income tax purposes) resulting from discontinuance of the per diem
pay to line-haul drivers coupled with a reduction in the Company's effective
state income tax rate during 1996.
Liquidity and Sources of Capital
Cash flow from operations was $7.2 million for the first nine months of 1996
compared with $11.6 million in the same period of 1995. The $4.4 million
decrease was a result of increases in working capital accounts. Management
believes available borrowing under existing lines of credit, future borrowing
under installment notes for revenue equipment, and cash generated by operations
will be sufficient to fund its cash needs and anticipated capital expenditures
over the near term.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(a) Exhibits - The response to this portion of Item 6 is submitted as a
separate section of this report.
(b) Reports on Form 8-K - The Company did not file any reports on Form 8-K
during the three months ended September 30, 1996.
11
<PAGE> 12
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.
Landair Services, Inc.
Date: November 12, 1996 By: /s/ Edward W. Cook
---------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
12
<PAGE> 13
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (Electronic Filing Only)
13
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three month periods ended Nine month periods ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average outstanding shares 5,949 5,862 5,922 5,844
Net effect of dilutive stock options - based
on the treasury stock method using
the average market price 108 178 135 189
------ ------ ------ ------
Totals 6,057 6,040 6,057 6,033
====== ====== ====== ======
Net income $ 887 $1,180 $2,617 $3,120
====== ====== ====== ======
Per share amount $ .15 $ .20 $ .43 $ .52
====== ====== ====== ======
Fully diluted:
Average shares outstanding 5,949 5,862 5,922 5,844
Net effect of dilutive stock options - based
on the treasury stock method using
the quarter-end market price if higher
than the average market price 108 178 141 189
------ ------ ------ ------
Totals 6,057 6,040 6,063 6,033
====== ====== ====== ======
Net income $ 887 $1,180 $2,617 $3,120
====== ====== ====== ======
Per share amount $ .15 $ .20 $ .43 $ .52
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANDAIR SERVICES, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 23,014
<ALLOWANCES> 199
<INVENTORY> 0
<CURRENT-ASSETS> 26,461
<PP&E> 95,163
<DEPRECIATION> 24,735
<TOTAL-ASSETS> 97,423
<CURRENT-LIABILITIES> 19,583
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 39,781
<TOTAL-LIABILITY-AND-EQUITY> 97,423
<SALES> 0
<TOTAL-REVENUES> 115,167
<CGS> 0
<TOTAL-COSTS> 108,672
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,288
<INCOME-PRETAX> 4,233
<INCOME-TAX> 1,616
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,617
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
