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UNITED STATES
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 fiscal year ended December 31, 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
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 17, 1997 was approximately $29,907,639 based on the
closing price of such stock on such date of $11.375.
The number of shares outstanding of the registrant's common stock as of March
17, 1997 was 5,952,880.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 1997 annual meeting of
shareholders are incorporated by reference into Part III of this report. Such
definitive proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days subsequent to December 31, 1996.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
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Part I
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
Part II
Item 5. Market for Registrant's Common Stock and 11
Related Shareholder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on 16
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial 17
Owners and Management
Item 13. Certain Relationships and Related Transactions 17
Part IV
Item 14. Exhibits, Financial Statement Schedules and 18
Reports on Form 8-K
Signatures 19
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Landair Services, Inc. (the "Company") is a high-service level truckload
carrier and contractor to the air cargo industry providing time-definite service
in the United States and Canada. The Company was incorporated in Tennessee in
1981.
The Company provides scheduled trucking services to air freight forwarders,
fully integrated air cargo carriers and domestic and international airlines
through its Forward Air operations. The Company services its air freight
forwarder, air cargo and airline customers primarily through a hub and spoke
network of 62 terminals, located at or near major airports in the United States
and Canada, and linked through a central sorting facility in Columbus, Ohio.
Through its Truckload operations, the Company provides short- to
medium-haul delivery to the high-service segment of the general commodities
truckload market. The Truckload operations include a common carrier operation
that serves customers on an "on demand" basis and a dedicated fleet operation in
which trucks and drivers are dedicated to shippers with specific, high-service
requirements.
FORWARD AIR OPERATIONS
The Company's Forward Air operations serve the unique and growing deferred
air freight market. Unlike typical overnight letters and packages, deferred air
freight is comprised of freight and packages that will have time-definite
delivery in two to four days. Forward Air receives air freight from air freight
forwarders, air cargo and airline customers at 62 terminal facilities and
provides airport-to-airport transportation of the freight to the terminal
nearest to the freight's destination. The transportation requirements of Forward
Air are met through direct shuttles, some of which offer overnight service, and
through the Columbus central sorting facility.
The Company's freight forwarder customers vary in size from small
independent, single facility air freight forwarders to large, international
logistics companies. Since operations were commenced in November 1990, the
average weekly volume of freight carried through the Forward Air network has
grown from approximately 1.2 million pounds to approximately 10.5 million pounds
in 1996. Forward Air operations accounted for approximately 50% of the Company's
1996 operating revenue. The Company's strategy in its Forward Air operations is
to capitalize on the growing market for deferred air freight from both domestic
and international air cargo customers through its unique hub-and-spoke network.
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TRUCKLOAD OPERATIONS
Common Carrier Services. The Company's common carrier operations primarily
consist of short-to-medium haul shipments, typically between 250 and 700 miles.
Although serving the contiguous 48 states, the Company's Truckload operations
are primarily concentrated in the eastern half of the United States, allowing
the Company to focus on selected operating lanes. The Company's ability to stay
within these lanes allows it to maximize service for its customers while
minimizing such operating costs as empty miles and driver layovers. The common
carrier operations concentrate on providing high levels of consistent service
for customers whose shipping requirements fall into the service-sensitive
segment of the truckload market rather than that segment which uses price as its
primary consideration. For example, these operations provide common carrier
services to certain of the integrated air carriers and for just-in-time
manufacturers with narrow delivery windows. The customers of the common carrier
operations normally demand scheduled pick-up and delivery and often give short
notice for equipment needs. The common carrier operations have been successful
in meeting customer needs with on-time performance in excess of 98% in its
primary service area. The trend of shippers over the past several years has been
toward the use of a relatively small number of financially stable "core
carriers". The Company's strategy in its common carrier operations is to take
advantage of growth opportunities that exist as a result of this trend. In
addition, an important element in the Company's strategy for expanding its core
carrier operations lies in the cross-utilization of its revenue equipment to
satisfy peak demands in its Forward Air operations.
Dedicated Contract Carriage Services. The Company's dedicated contract
carriage services involve management for all or a significant part of a
customer's transportation operations. Under a dedicated carriage service
agreement, the Company typically provides drivers, equipment and maintenance,
and, in some instances, transportation management that replaces the customer's
in-house transportation department. This service allows a customer to reduce
overall transportation costs by minimizing both capital expenditures and
personnel costs. At current operating levels, the annual revenue from dedicated
contract carriage service agreements aggregates approximately $15.0 million.
Management believes the dedicated contract carriage services operations are
well positioned to capitalize on the increasing trend of many shippers to
outsource virtually all of their transportation requirements. The Company's
strategy in its dedicated contract carriage operations will be to continue to
focus on expansion of services in this area, including business with existing
common carrier customers, so that the Company's dedicated operations can
ultimately manage most or all of a customer's transportation needs on a
dedicated fleet basis.
Logistics Services. The Company also offers logistics services for some of
its customers by acting as an agent to arrange transportation of all loads
tendered, regardless of destination, available power or the type of trailing
equipment required.
Truckload operations accounted for approximately 50% of the Company's 1996
operating revenue.
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REVENUE EQUIPMENT
The Company purchases high quality tractors to help attract and retain
drivers, promote safe operations and minimize maintenance and repair costs. When
purchasing new revenue equipment, the Company typically acquires standardized
tractors and trailers manufactured to the Company's specifications.
Standardization enables the Company to simplify driver training, control the
cost of spare parts inventory and enhance its preventive maintenance program.
The Company has purchased most of its tractors from Freightliner
Corporation and its trailers from Great Dane Corporation. The majority of the
tractors purchased are equipped with Series 60 Detroit Diesel electronic engines
which have contributed significantly to increased fuel efficiency for the
Company. It is the Company's current practice to trade in its tractors after
three or four years and its trailers after seven years. The Company's purchase
and lease agreements for tractors generally provide for a repurchase option by
the manufacturer at predetermined prices.
As of December 31, 1996, the Company operated 518 Company-owned tractors
and leased 376 tractors from owner-operators. The average age of the
Company-operated tractor fleet was approximately 2.5 years at December 31, 1996.
As of December 31, 1996, the Company owned 1,922 van trailers, of which 1,758
are 53' long, 164 are 48' long, and 216 include specialized roller bed equipment
required to serve air cargo industry customers. By having a majority of the
Company's trailer fleet equipped with 53' trailers, the Company is able to
provide its customers with more economy and convenience and increased driver
productivity. The average age of the trailer fleet was approximately 2.8 years
at December 31, 1996.
The Company has installed Qualcomm two-way satellite communication systems
in the majority of its tractors. The Qualcomm system provides the Company with
continuous communications capability in the event a driver experiences a service
delay or disruption. The Qualcomm system also allows the Company to track the
exact location and route of any particular shipment and communicate instantly
with drivers to improve operating efficiencies.
EMPLOYEES AND OWNER-OPERATOR DRIVERS
As of December 31, 1996, the Company employed approximately 1,500 persons.
None of the Company's employees are covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
The Company recognizes that its professional driver workforce is one of its
most valuable assets. Drivers are selected by the Company in accordance with
guidelines relating to safety records, driving experience and personal
evaluations. Over the past several years, the Company has introduced several
driver retention programs including the creation of a pay package that more
fairly compensates drivers for the work associated with their job. The pay
package includes extra pay items in addition to the drivers' mileage-based pay.
The expense and cost of driver retention
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and recruitment has increased in recent years. Recruitment is difficult due to
Company standards and an industry shortage of qualified drivers. See "Safety".
The Company also recognizes that the selection process for owner-operators
is equally as important as for Company drivers. The use of owner-operators
provides the Company with marketing, operating, safety, driver recruiting,
retention and financial advantages. The Company focuses on the special needs of
owner-operators through programs designed to reduce their operating costs. The
Company plans to continue its emphasis on recruiting owner-operators.
SAFETY
The Company has an active safety and loss prevention program and has
established a driver qualification policy. Drivers who exceed the maximum
acceptable number of accidents or traffic citations within a specified time
period are reviewed and monitored by the safety department. The driving and
employment records of drivers are verified.
During the past two years, the Company enhanced its safety program with a
series of safe driving campaigns, safety contests, quarterly driver terminal
safety meetings, and communication of safety data to drivers and management
personnel. The program is designed to heighten awareness of and focus attention
on safety related issues.
INSURANCE
Claims exposure in the trucking industry consists primarily of cargo loss
and damage, vehicle liability, property damage and workers' compensation. The
Company maintains a significant deductible for auto liability claims, for
physical damage claims and for cargo claims. The Company also is responsible for
workers' compensation claims in certain of the states in which it operates, and
is subject to state programs in certain states where employer participation in
state sponsored programs is mandated. The Company maintains insurance with
independent insurance carriers that provide certain coverage for claims in
excess of deductible amounts. Management believes that the Company's insurance
coverage is reasonable.
REGULATION
Prior to December 29, 1995, the Company's operations in interstate commerce
were regulated by the Interstate Commerce Commission ("ICC"). Effective December
29, 1995, President Clinton signed into law the Interstate Commerce Commission
Termination Act of 1995 which closed the ICC and transferred its remaining
responsibilities to a new Surface Transportation Board and the Federal Highway
Administration. In addition, interstate motor carrier operations are subject to
safety requirements prescribed by the Department of Transportation. Such matters
as weight and dimension of equipment are also subject to federal and state
regulations. The Company's Canadian operations are subject to similar
requirements imposed by the laws and regulations of the Dominion of Canada and
various provincial laws and
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regulations. The Company is subject to various federal, state and local
environmental laws and regulations. Management believes that the Company is in
substantial compliance with applicable regulatory requirements relating to its
operations. Failure of the Company to comply with the applicable regulations
could result in substantial fines or revocation of the Company's operating
permits.
The Company has aboveground fuel storage tanks at its Indianapolis, Indiana
facility and underground fuel storage tanks at its Columbus, Ohio facility. Such
storage tanks are subject to various federal and state environmental laws and
regulations. Management believes that the Company is in substantial compliance
with applicable environmental laws and regulations. No material increase for
expenditures for compliance with federal, state and local environmental laws and
regulations is anticipated in 1997.
COMPETITION AND INDUSTRY TRENDS
The Company competes with regional, inter-regional and national truckload
carriers and, to a lesser extent, with less-than-truckload carriers, railroads
and overnight delivery companies. Many of the Company's competitors have greater
financial resources, more equipment or larger freight capacity than the Company.
Service and price are the principal means of competition in the transportation
industry.
Management believes the market for its Forward Air operations will be less
affected by competition than will most other segments of the transportation
industry because of its unique network. The transportation of air freight
requires significant capital assets, including a fleet of dependable equipment,
a large centrally located sorting facility, an extensive communication system, a
skilled workforce and a large sales operation. In order to effectively compete,
any new entrant would have to be able to immediately develop a comparable
network which would require it to dedicate a full complement of equipment and
establish multiple terminals in order to demonstrate the ability to handle a
large number of shipments destined for many geographically diverse locations and
to meet critical delivery deadlines. Management also believes that in addition
to its established market presence, the Company's ability to access additional
revenue equipment, other support services and management from the Company's
Truckload operations gives it greater flexibility to meet peak demands within
its Forward Air operations without the attendant increase in capital
expenditures.
The Company's principal competitive strength is its ability to consistently
provide reliable service at a competitive price. Many of the Company's customers
are high volume shippers which require a flexible and dependable motor carrier
service tailored to their specific needs, including pick-up within specified
delivery times.
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ITEM 2. PROPERTIES
The Company's headquarters are located in Greeneville, Tennessee and are
leased from the Greeneville-Greene County Airport Authority under a lease
expiring in 2006. The headquarters lease is at a rate management believes is
favorable. The Company leases, under a capital lease agreement, a 100-door cross
dock hub facility constructed in 1994 in Columbus, Ohio from the Director of
Development of the State of Ohio. A substantial portion of the cost of
constructing the Columbus facility was funded by the State of Ohio through the
sale of $6.3 million of revenue bonds. The Company is responsible for all taxes,
assessments and other costs of ownership under the lease agreement. Certain
terms of the lease include restrictions on the payment of dividends and the
maintenance of certain levels of net worth and other financial ratios. Amounts
due under the lease agreement are guaranteed by Scott M. Niswonger, the
Company's Chairman, President and Chief Executive Officer. After the bonds are
paid in full, the Company will have an option to purchase the terminal for a
nominal payment.
In July 1996, the Company acquired a 68-door cross dock terminal facility
in Atlanta, Georgia. The facility houses both the Atlanta Truckload and Forward
Air operations. The Company leases a facility in Greeneville, Tennessee from
Greeneville Properties, Inc., a corporation previously owned by Mr. Niswonger.
The following table provides information regarding the Company's principal
terminal facilities:
<TABLE>
<CAPTION>
APPROXIMATE
GROSS SQUARE
TERMINAL LOCATION FEET (1)
----------------- ------------
<S> <C>
Atlanta, Georgia (2) 46,000
Columbus, Ohio (2) 83,800
Greeneville, Tennessee (3) 42,000
Indianapolis, Indiana (2) 15,200
Memphis, Tennessee (3) 19,875
</TABLE>
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(1) Includes both office and dock space.
(2) Shared facility by Forward Air and Truckload operations.
(3) The Company operates two separate locations in this city.
The Company leases 43 additional terminal facilities for its Forward Air
operations, which are typically leased on a short-term (three to five year)
basis. Management believes that replacement space comparable to these terminal
facilities is readily obtainable, if necessary. Management believes that its
facilities are adequate to support its current operations. The balance of the
Forward Air terminals are agent stations leased and operated by independent
agents who generally handle the Company's freight on a commission basis.
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ITEM 3. LEGAL PROCEEDINGS
LITIGATION
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 1996, no
matters were submitted to a vote of security holders through the solicitation of
proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3) to Form 10-K, the following information is included in Part I
of this Form 10-K.
The following table sets forth certain information concerning the executive
officers of the Company as of December 31, 1996:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Scott M. Niswonger 49 Chairman, President and Chief
Executive Officer
Bruce A. Campbell 45 Executive Vice President and
Chief Operating Officer
Edward W. Cook 38 Chief Financial Officer,
Senior Vice President
and Treasurer
Richard H. Roberts 42 Senior Vice President, General
Counsel and Secretary
Michael A. Roberts 52 Senior Vice President, FAF Sales
and Marketing
</TABLE>
There are no family relationships between any of the executive officers of
the Company. All officers hold office at the pleasure of the Board of Directors.
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The following background material is provided for each executive officer
employed by the registrant, including employment history for at least the last
five years:
Scott M. Niswonger is a co-founder of the Company and has served as a
director and as President of the Company since its founding in 1981, and as
Chairman of the Board and Chief Executive Officer since February 1988. Mr.
Niswonger also serves as a director of the Regional Advisory Board of First
Tennessee Bank National Association.
Bruce A. Campbell has been Executive Vice President and Chief Operating
Officer of the Company since April 1990 and a director of the Company since
April 1993. Prior to joining the Company in 1990, Mr. Campbell served as Vice
President of Ryder-Temperature Controlled Carriage in Nashville, Tennessee from
September 1985 until December 1989.
Edward W. Cook joined the Company as Chief Financial Officer, Senior Vice
President and director in September 1994. Since May 1995, he has also served as
Treasurer. Prior to joining the Company, Mr. Cook was employed by Ernst & Young
LLP for eleven years, most recently as a senior manager in the Nashville,
Tennessee office. During the period March 1986 through February 1988, Mr. Cook
served as Controller and Assistant Secretary of Ryder-Temperature Controlled
Carriage in Nashville, Tennessee.
Richard H. Roberts has served as Senior Vice President and General Counsel
of the Company since July 1994, and as Secretary and director since May 1995.
Prior to joining the Company, Mr. Roberts was a partner with the Baker,
Worthington, Crossley & Stansberry law firm from January 1991, and an associate
of the firm from June 1985. Mr. Roberts has also served as a director of Miller
Industries, Inc. since April 1994.
Michael A. Roberts has been Senior Vice President, FAF Sales and Marketing
of the Company since April 1990 and was Vice President of Marketing of the
Company from November 1987. Mr. Roberts served as a consultant to the Company
from 1982 to 1987.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock is publicly traded on the Nasdaq National Market
tier of The Nasdaq Stock Market under the symbol LAND. The following table sets
forth the high and low sales prices for the Company's common stock as reported
by The Nasdaq Stock Market for each full quarterly period of fiscal 1995 and
1996.
<TABLE>
<CAPTION>
1996 High Low
---- ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . $16.50 $12.50
Second Quarter. . . . . . . . . . . . . . . . $16.25 $13.25
Third Quarter . . . . . . . . . . . . . . . . $16.50 $10.00
Fourth Quarter. . . . . . . . . . . . . . . . $11.75 $ 6.50
</TABLE>
<TABLE>
<CAPTION>
1995 High Low
---- ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . $17.00 $11.75
Second Quarter. . . . . . . . . . . . . . . . $16.00 $11.625
Third Quarter . . . . . . . . . . . . . . . . $17.50 $11.75
Fourth Quarter. . . . . . . . . . . . . . . . $15.00 $11.25
</TABLE>
There were approximately 1,200 shareholders of record (including brokerage
firms and other nominees) of the Company's common stock as of March 17, 1997.
The Company has not paid cash dividends on its common stock in the two
preceding fiscal years, and it is the current intention of management to retain
earnings to finance the growth of the Company's business. Future payment of
dividends will depend upon the financial condition, results of operations,
contractual restrictions and capital requirements of the Company as well as
other factors deemed relevant by the Board of Directors.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company. The
selected financial data should be read in conjunction with the Company's
financial statements and notes thereto, included elsewhere in this report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 25, DECEMBER 26,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA: (1) (2)
Operating revenue $157,098 $148,083 $135,032 $95,281 $66,264
Income from operations 9,341 10,501 8,164 4,309 2,543
Operating ratio (3) 94.1% 92.9% 94.0% 95.5% 96.2%
Net income 3,979 4,517 4,017 1,963 1,234
Net income per share - primary 0.66 0.75 0.66 0.46 0.30
Net income per share - fully diluted 0.66 0.75 0.66 0.45 0.30
Cash dividends declared per
common share -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets $ 99,074 $ 98,279 $ 78,044 $49,027 $19,275
Long-term obligations, net of
current portion 27,094 35,855 28,305 12,024 7,489
Shareholders' equity 41,264 36,644 31,778 27,295 3,518
</TABLE>
(1) Results for 1994, 1993, and 1992 lack comparability to other periods
because (i) 1993 and 1992 included special management bonuses of $1.7
million and $610,000, respectively, and (ii) 1994 included a charge
relating to the sale and winding down of its refrigerated trucking
operations of $805,000. In addition, 1994 results consist of 53 weeks of
operations while 1996, 1995, 1993 and 1992 results consist of approximately
52 weeks of operations.
(2) Net income and net income per share for 1993 and 1992 reflect pro forma
income tax provisions as if the Company, previously an S Corporation prior
to its initial public offering of common stock in November 1993, had been
subject to income taxes for all of 1993 and 1992. Historical net income for
1993 and 1992 was $2.2 million and $2.0 million, respectively.
(3) Operating expenses as a percentage of operating revenue.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth the percentage relationship of revenue and
expense items to operating revenue for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0%
Operating expenses:
Purchased transportation 32.8 36.1 38.1
Salaries, wages and employee benefits 27.6 25.4 24.2
Fuel and fuel taxes 6.9 6.0 6.0
Operating leases 3.8 4.0 4.8
Depreciation and amortization 6.7 5.9 4.7
Insurance and claims 5.3 4.8 4.2
Loss on sale and winding down of
refrigerated operations -- -- 0.6
Other operating expenses 11.0 10.7 11.4
------------------------------------------------------
Total operating expenses 94.1 92.9 94.0
------------------------------------------------------
Income from operations 5.9 7.1 6.0
Interest expense (1.8) (2.0) (1.1)
Other income, net -- 0.2 0.3
------------------------------------------------------
Income before income taxes 4.1 5.3 5.2
Income taxes 1.6 2.2 2.2
------------------------------------------------------
Net income 2.5% 3.1% 3.0%
======================================================
</TABLE>
RESULTS OF OPERATIONS
The Company continued its growth in 1996 as operating revenues increased to
a record $157.1 million compared to $148.1 million in 1995 and $135.0 million in
1994. The percentage increases in operating revenue for 1996, 1995 and 1994 were
6.1%, 9.7% and 41.7%, respectively. Excluding the Company's refrigerated
operations, which were sold effective January 11, 1995 (see Note 6 of the Notes
to Consolidated Financial Statements), the Company's operating revenue increased
16.8% during 1995.
Operating revenue in the Company's Forward Air operations increased by
$17.2 million (27%), $5.7 million (9%) and $27.1 million (74%) in 1996, 1995 and
1994, respectively, and represented approximately 50%, 43% and 43% of the
Company's total operating revenue for these periods. Operating revenue increases
in the Forward Air operations resulted from increasing the number of operating
terminals, enhancements to the Forward Air network and greater volume from
domestic and international air cargo customers. Operating revenue in the
Company's Truckload operations, including intercompany revenue and excluding the
sale of the Company's refrigerated operations, increased (decreased) by $(6.0)
million, $14.8 million and $17.0 million in 1996, 1995 and 1994, respectively.
Operating revenue increases (decreases) in the Truckload operations resulted
primarily from the addition/reduction of revenue equipment levels utilized in
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both the Company's common carrier and dedicated fleet operations coupled with
fluctuations in equipment utilization.
Purchased transportation was 32.8% of operating revenue in 1996 compared to
36.1% in 1995 and 38.1% in 1994. The decrease in purchased transportation
between these years was primarily attributable to more efficient utilization of
owner-operators in the Forward Air operations during 1996 and 1995 and a
decrease in the ratio of owner-operators to Company drivers during 1996.
Salaries, wages and benefits were 27.6% of operating revenue compared to
25.4% in 1995 and 24.2% in 1994. The increases in 1996 and 1995 were due
primarily to increased cargo handling wages and terminal managers' salaries
required to operate additional terminals and increased operating volumes in the
Company's Forward Air operations in 1996 and 1995 coupled with an increase in
the ratio of Company drivers to owner-operators during 1996.
Fuel and fuel taxes were 6.9% of operating revenue in 1996 compared to 6.0%
in 1995 and 6.0% in 1994. The increase in fuel and fuel taxes during 1996 was
primarily attributed to an increase in fuel prices during 1996 which increased
approximately 13%, increasing fuel and fuel taxes by approximately $1.3 million.
Approximately 60% of the increase in fuel prices was passed on to customers in
the form of a fuel surcharge during 1996.
Operating leases were 3.8%, 4.0% and 4.8% of operating revenue during 1996,
1995 and 1994, respectively, while depreciation and amortization were 6.7%,
5.9% and 4.7% during the same periods. These changes resulted from increased
ownership, rather than leasing, of revenue equipment. The increase in
depreciation and amortization during 1996 is also attributable to an increase
in the ratio of Company drivers to owner-operators during 1996. In addition,
see the Property and Equipment section of Note 1 of the Notes to Consolidated
Financial Statements.
Insurance and claims were 5.3% of operating revenue in 1996 compared to
4.8% in 1995 and 4.2% in 1994. The increase in costs during 1996 and 1995 is due
primarily to an increase in the frequency and severity of accidents coupled with
adjustments to reflect increased liability related to claims incurred in prior
periods.
Other operating expenses were 11.0% in 1996 compared to 10.7% in 1995 and
11.4% in 1994. Gains on the sale of revenue equipment (which are netted against
other operating expenses) were $413,000, $503,000 and $88,000 during 1996, 1995
and 1994, respectively.
For information concerning the loss on sale and winding down of
refrigerated operations in 1994 see Note 6 of the Notes to Consolidated
Financial Statements.
Interest expense was $3.0 million in 1996 and 1995 compared to $1.5 million
in 1994. The increase in interest expense during 1995 is due to higher average
net borrowing in 1995 primarily for revenue equipment purchases which were
required to finance the continued growth of the Company.
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The combined federal and state effective tax rates for 1996, 1995 and 1994
were 38.2%, 42.0% and 43.1%, respectively. For information concerning the
provision for income taxes, as well as information regarding differences between
effective tax rates and statutory rates, see Note 5 of the Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The continued growth of the Company's business, and the nature of its
operations, have required significant investment in new equipment. The Company
has historically financed revenue equipment purchases with cash flows from
operations, through borrowing under credit agreements with financial
institutions and from proceeds of the initial public offering in November 1993.
Working capital needs have generally been met with cash flows from operations
and borrowing under the Company's line of credit. Net cash provided by operating
activities totaled approximately $12.5, $15.8 and $9.2 in 1996, 1995 and 1994,
respectively.
Net cash used in investment activities was approximately $6.0, $21.5 and
$31.8 million in 1996, 1995 and 1994, respectively. Investing activities
consisted primarily of the acquisition of additional revenue equipment during
1996, 1995 and 1994, the acquisition of a terminal facility in 1996, enhanced
management information systems in 1996 and 1995, and the construction of a new
sorting hub facility in Columbus, Ohio during 1994.
Net cash provided by (used in) financing activities was approximately
$(10.3), $8.6 and $19.3 million in 1996, 1995 and 1994, respectively. These
financing activities included the Company's continued financing of additional
revenue equipment, based upon capital expenditure requirements, coupled with
repayment of long-term debt and capital leases with cash generated from
operations. In addition, 1994 included the financing of $6.3 million for a new
hub facility in Columbus, Ohio.
The Company expects net capital expenditures in 1997 for revenue equipment
and management information systems, excluding acquisitions, to be less than $10
million. The Company expects to fund these expenditures through cash provided by
operating activities. See Note 2 of the Notes to the Consolidated Financial
Statements for more information concerning credit arrangements. At December 31,
1996, the Company had a line of credit with a bank in the amount of $15.0
million, which expires in May 1998. At December 31, 1996, approximately $9.0
million was available for borrowing under the credit line. At December 31, 1996,
the Company also had equipment loan agreements which permit the Company to
borrow up to $31.5 million for the purchase of revenue equipment. At December
31, 1996, approximately $20.0 million was available for borrowing under the
equipment loan agreements. Management believes that available borrowings under
the line of credit agreement, equipment loan agreements, future borrowings under
installment notes for revenue equipment, and cash generated by operations will
be sufficient to fund its cash needs and anticipated capital expenditures
through at least 1997.
15
<PAGE> 16
IMPACT OF SEASONALITY
In the trucking industry, revenue and operating results generally reflect a
seasonal pattern as customers reduce shipments during and after the winter
holiday season and during the summer months due to temporary plant closings for
vacations. Additionally, the volume of shipments is often affected by weather
variations. The Company's operating expenses also have historically been higher
in the winter months, due primarily to decreased fuel efficiency and increased
maintenance costs of revenue equipment in colder weather.
IMPACT OF INFLATION
Inflation can be expected to have an impact on the Company's operating
costs. With the exception of fuel price increases in 1996, inflation has had a
minimal effect upon the Company's profitability over the past three years.
CAUTIONARY STATEMENT REGULATING FORWARD-LOOKING STATEMENTS
The Company, or its executive officers and directors on behalf of the
Company, may from time to time make written or oral "forward-looking
statements". Written forward-looking statements may appear in documents filed
with the Securities and Exchange Commission, in press releases, and in reports
to shareholders. Oral forward-looking statements may be made by the Company's
executive officers and directors on behalf of the Company to the press,
potential investors, securities analysts and others. The Private Securities
Litigation Reform Act of 1995 contains a safe harbor for forward-looking
statements. The Company relies on this safe harbor in making such disclosures.
In connection with this "safe harbor" provision, the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in any forward-looking statement made by or on
behalf of the Company. Factors that might cause such a difference include, but
are not limited to, economic recessions or downturns in customers' business
cycles, competition, rapid fluctuations in fuel prices or availability,
fluctuations in the frequency and severity of accidents, increases in interest
rates, and the availability of qualified drivers.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company is incorporated herein by reference to the Company's definitive proxy
statement for its 1997 Annual Meeting of Shareholders (the "1997 Proxy
Statement"). The 1997 Proxy Statement will be filed with the Securities and
Exchange Commission (the "Commission") not later than 120 days subsequent to
December 31, 1996.
Pursuant to Item 401(b) of Regulation S-K, the information required by this
item with respect to executive officers of the Company is set forth in Part I of
this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the 1997 Proxy Statement, which will be filed with the Commission not later
than 120 days subsequent to December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the 1997 Proxy Statement, which will be filed with the Commission not later
than 120 days subsequent to December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the 1997 Proxy Statement, which will be filed with the Commission not later
than 120 days subsequent to December 31, 1996.
17
<PAGE> 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) List of Financial Statements and Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a
separate section of this report.
(a)(3) List of Exhibits.
The response to this portion of Item 14 is submitted as a
separate section of this report.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the
fourth quarter of the fiscal year ended December 31, 1996.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a
separate section of this report.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Landair Services, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LANDAIR SERVICES, INC.
By: /s/ Scott M. Niswonger
---------------------------------------
Scott M. Niswonger, Chairman, President
and Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
<S> <C> <C>
/s/ Scott M. Niswonger Chairman, President and March 26, 1997
- ------------------------------------- Chief Executive Officer
Scott M. Niswonger (Principal Executive Officer)
/s/ Edward W. Cook Chief Financial Officer, March 26, 1997
- ------------------------------------- Senior Vice President, Treasurer
Edward W. Cook and Director (Principal Financial
and Accounting Officer)
/s/ Bruce A. Campbell Executive Vice President, March 26, 1997
- ------------------------------------- Chief Operating Officer
Bruce A. Campbell and Director
/s/ Richard H. Roberts Senior Vice President, General March 26, 1997
- ------------------------------------- Counsel, Secretary and Director
Richard H. Roberts
/s/ James A. Cronin, III Director March 26, 1997
- -------------------------------------
James A. Cronin, III
/s/ Robert K. Gray Director March 26, 1997
- -------------------------------------
Hon. Robert K. Gray
</TABLE>
19
<PAGE> 20
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedule
Financial Statements and Supplementary Data
Certain Exhibits
Financial Statement Schedule
Year Ended December 31, 1996
Landair Services, Inc.
Greeneville, Tennessee
F-1
<PAGE> 21
Landair Services, Inc.
Form 10-K -- Item 8 and Item 14(a)(1) and (2)
Index to Financial Statements and Financial Statement Schedule
The following consolidated financial statements of Landair Services, Inc. are
included as a separate section of this report:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.................................F-3
Consolidated Balance Sheets - December 31, 1996 and December 31, 1995.............F-4
Consolidated Statements of Income - Fiscal Years Ended December 31, 1996,
December 31, 1995 and December 31, 1994........................................F-6
Consolidated Statements of Shareholders' Equity - Fiscal Years Ended
December 31, 1996, December 31, 1995 and December 31, 1994.....................F-7
Consolidated Statements of Cash Flows - Fiscal Years Ended December 31, 1996,
December 31, 1995 and December 31, 1994........................................F-8
Notes to Consolidated Financial Statements - December 31, 1996....................F-9
</TABLE>
The following financial statement schedule of Landair Services, Inc. is included
as a separate section of this report.
<TABLE>
<S> <C>
Schedule II - Valuation and Qualifying Accounts...................................S-1
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
F-2
<PAGE> 22
Report of Independent Auditors
The Board of Directors and Shareholders
Landair Services, Inc.
We have audited the accompanying consolidated balance sheets of Landair
Services, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
fiscal years in the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Landair Services,
Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three fiscal years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Nashville, Tennessee
January 28, 1997
F-3
<PAGE> 23
Landair Services, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28 $ 3,834
Accounts receivable, less allowance of
$415 in 1996 and $292 in 1995 23,671 17,788
Inventories 552 360
Prepaid expenses 2,868 2,717
Income taxes receivable -- 707
Deferred income taxes 1,085 352
-----------------------------------
Total current assets 28,204 25,758
Property and equipment:
Land 3,199 2,611
Buildings 6,298 4,817
Revenue equipment 75,578 72,742
Other equipment 11,480 8,907
Leasehold improvements 890 622
-----------------------------------
97,445 89,699
Accumulated depreciation and amortization 27,166 17,577
-----------------------------------
70,279 72,122
Other assets 591 399
-----------------------------------
Total assets $ 99,074 $ 98,279
===================================
</TABLE>
F-4
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------------------------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,525 $ 5,074
Accrued payroll and related items 1,677 1,313
Insurance and claims accruals 4,435 3,445
Income taxes payable 168 --
Other accrued expenses 1,111 879
Current portion of long-term debt 7,701 8,158
Current portion of capital lease obligations 1,797 1,089
------------------------------------
Total current liabilities 22,414 19,958
Long-term debt, less current portion 18,346 27,030
Capital lease obligations, less current portion 8,748 8,825
Deferred income taxes 8,302 5,822
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000
No shares issued -- --
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 5,952,880
in 1996 and 5,864,200 in 1995 60 59
Additional paid-in capital 26,202 25,562
Retained earnings 15,002 11,023
------------------------------------
Total shareholders' equity 41,264 36,644
------------------------------------
Total liabilities and shareholders' equity $ 99,074 $ 98,279
====================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 25
Landair Services, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Operating revenue $157,098 $148,083 $135,032
Operating expenses:
Purchased transportation 51,393 53,488 51,448
Salaries, wages and employee benefits 43,355 37,774 32,724
Fuel and fuel taxes 10,837 8,941 8,065
Operating leases 5,950 5,859 6,537
Depreciation and amortization 10,523 8,687 6,384
Insurance and claims 8,381 7,040 5,709
Loss on sale and winding down of
refrigerated operations -- -- 805
Other operating expenses 17,318 15,793 15,196
---------------------------------------------------------
147,757 137,582 126,868
---------------------------------------------------------
Income from operations 9,341 10,501 8,164
Other income (expense):
Interest expense (2,964) (3,020) (1,481)
Other, net 61 309 378
---------------------------------------------------------
(2,903) (2,711) (1,103)
---------------------------------------------------------
Income before income taxes 6,438 7,790 7,061
Income taxes 2,459 3,273 3,044
---------------------------------------------------------
Net income $ 3,979 $ 4,517 $ 4,017
=========================================================
Net income per share:
Primary $ 0.66 $ 0.75 $ 0.66
Fully diluted $ 0.66 $ 0.75 $ 0.66
Weighted average shares outstanding:
Primary 6,052 6,031 6,115
Fully diluted 6,057 6,032 6,123
</TABLE>
See accompanying notes.
F-6
<PAGE> 26
Landair Services, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Balance at December 25, 1993 5,730 $ 57 $ 24,749 $ 2,489 $ 27,295
Net income for fiscal 1994 -- -- -- 4,017 4,017
Exercise of stock options 81 1 465 -- 466
--------------------------------------------------------------------------------
Balance at December 31, 1994 5,811 58 25,214 6,506 31,778
Net income for fiscal 1995 -- -- -- 4,517 4,517
Exercise of stock options 53 1 348 -- 349
--------------------------------------------------------------------------------
Balance at December 31, 1995 5,864 59 25,562 11,023 36,644
Net income for fiscal 1996 -- -- -- 3,979 3,979
Exercise of stock options 83 1 580 -- 581
Common stock issued under
stock purchase plan 6 -- 60 -- 60
--------------------------------------------------------------------------------
Balance at December 31, 1996 5,953 $ 60 $ 26,202 $ 15,002 $ 41,264
================================================================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 27
Landair Services, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
-----------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,979 $ 4,517 $ 4,017
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,523 8,687 6,384
Gain on sale of property and equipment (413) (503) (88)
Provision for losses on receivables 540 445 290
Deferred income taxes 1,747 2,800 1,835
Changes in operating assets and liabilities:
Accounts receivable (6,423) (86) (5,813)
Inventories (192) (29) (96)
Prepaid expenses (151) (1,483) (280)
Accounts payable and accrued expenses 2,037 1,843 3,571
Income taxes 875 (425) (624)
-----------------------------------------------------------
Net cash provided by operating activities 12,522 15,766 9,196
INVESTING ACTIVITIES
Purchases of property and equipment (8,763) (24,670) (36,508)
Proceeds from disposal of property and
equipment 2,913 3,062 470
Other (192) 75 4,255
-----------------------------------------------------------
Net cash used in investing activities (6,042) (21,533) (31,783)
FINANCING ACTIVITIES
Proceeds from long-term debt 2,734 16,940 24,402
Payments of long-term debt (11,875) (7,546) (2,300)
Net decrease in short-term borrowings -- -- (1,822)
Payments of capital lease obligations (1,786) (1,109) (1,403)
Proceeds from exercise of stock options 581 349 466
Proceeds from common stock issued under
stock purchase plan 60 -- --
-----------------------------------------------------------
Net cash provided by (used in) financing
activities (10,286) 8,634 19,343
-----------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (3,806) 2,867 (3,244)
Cash and cash equivalents at beginning of year 3,834 967 4,211
-----------------------------------------------------------
Cash and cash equivalents at end of year $ 28 $ 3,834 $ 967
===========================================================
</TABLE>
See accompanying notes.
F-8
<PAGE> 28
Landair Services, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
1. ACCOUNTING POLICIES
ORGANIZATION
Landair Services, Inc. (the "Company") is a high-service level truckload carrier
and contractor to the air cargo industry providing time-definite service in the
United States and Canada. Approximately 50% of revenue is derived from both the
Company's Truckload operations (common carrier and contract carrier) and Forward
Air operations (deferred air freight).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. Significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
OWNERSHIP
The Company was wholly owned by Scott M. Niswonger until November 16, 1993, at
which time the initial public offering of the Company's common stock was
completed. As of December 31, 1996, Mr. Niswonger continues to be the majority
owner of the Company's common stock.
FISCAL YEAR
During fiscal 1994, the Company changed from a 52-53 week year for accounting
purposes, with each fiscal year ending on the last Saturday in December, to a
fiscal year ending as of the last day of the calendar year. The 1994 fiscal year
consisted of 53 weeks.
F-9
<PAGE> 29
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
OPERATING REVENUE
Operating revenue and related costs are recognized as of the date shipments are
completed. No single customer accounted for more than 10% of operating revenue
in 1996, 1995 or 1994.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories of tires, replacement parts, supplies, and fuel for revenue
equipment are stated at the lower of cost or market utilizing the FIFO
(first-in, first-out) method of determining cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated based upon the cost of the asset, reduced by its
estimated salvage value, using the straight-line method over the estimated
useful lives as follows:
Buildings 30-40 years
Revenue equipment 3-7 years
Other equipment 3-10 years
Leasehold improvements 1-15 years
During 1996 and 1995, the Company changed the estimated salvage value and the
estimated tire life of certain of its revenue equipment. The changes resulted in
a net decrease in depreciation and other operating expenses of $405,000 and
$664,000, an increase in net earnings of $251,000 and $385,000 and an increase
in earnings per share of $0.04 and $0.06 during fiscal 1996 and 1995,
respectively.
The Company capitalized net interest costs of $-0- in 1996, $-0- in 1995 and
$328,000 in 1994. Interest payments during 1996, 1995 and 1994 were $3,011,000,
$2,981,000 and $1,730,000, respectively. During 1996, 1995 and 1994, the
Company added to revenue and other equipment $2,417,000, $2,682,000 and $-0- of
capital leases, respectively.
F-10
<PAGE> 30
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
INSURANCE AND CLAIMS ACCRUALS
The primary claims in the Company's business are workers' compensation, property
damage and auto liability, and medical benefits. Most of the Company's insurance
coverage provides for self-insurance levels with primary and excess coverage
which management believes is sufficient to adequately protect the Company from
catastrophic claims. The Company self-insures the per occurrence deductible for
workers' compensation, property damage and auto liability, and medical benefits.
In the opinion of management, adequate provision has been made for all incurred
claims up to the self-insured limits.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
the provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes.
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.
STOCK OPTIONS
The Company grants options for a fixed number of shares to employees and outside
directors with an exercise price equal to the fair value of the shares at the
grant date. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
2. CREDIT ARRANGEMENTS
The Company has a $15 million line of credit agreement with a Tennessee bank
which expires in May 1998. Advances outstanding under the line bear interest
at the bank's base rate less 1.0% (7.25% and 7.5% at December 31, 1996 and 1995,
respectively) and are collateralized primarily by accounts receivable. The
agreement contains, among other things, restrictions that do not allow the
payment of dividends, and requires the maintenance of certain levels of net
worth and other financial ratios. At December 31, 1996, the Company had
$1,508,000 outstanding under the line and had utilized $4,485,000 of
availability for outstanding letters of credit.
F-11
<PAGE> 31
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
2. CREDIT ARRANGEMENTS (CONTINUED)
The Company has equipment loan agreements (the "Equipment Loan Agreements") with
two Tennessee banks which permit the Company to borrow up to $31.5 million for
the purchase of revenue equipment. Advances outstanding under the Equipment Loan
Agreements bear interest at the 30-day LIBOR rate plus 1.45% to 1.6% (6.80% to
6.95% and 7.10% to 7.30% at December 31, 1996 and 1995, respectively). The
advances are collateralized by revenue equipment purchased with the proceeds
from the Equipment Loan Agreements, and contain restrictions and covenants
similar to the line of credit agreement described above. At December 31, 1996,
the Company had additional borrowing capacity available of $20,028,000 under the
Equipment Loan Agreements (see Note 3).
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------------------------------
(In thousands)
<S> <C> <C>
Line of credit -- Note 2 $ 1,508 $ 611
Installment Equipment Loan Agreements -- Note 2 11,387 12,856
Installment notes payable with a finance company
through 1999, including interest at the 30-day
commercial paper rate plus 1.80% (7.75% and 7.7% at
December 31, 1996 and 1995, respectively) and
interest ranging from 6.7% to 7.3%, collateralized
by revenue equipment 12,025 15,136
Installment notes payable with a bank through 1999,
including interest at the bank's base rate less 1.00%
(7.25% and 7.5% at December 31, 1996 and 1995,
respectively), collateralized by revenue equipment 459 5,892
Other notes payable, including interest ranging from 5.4%
to 6.9% 668 693
------------------------------------
26,047 35,188
Less current portion 7,701 8,158
------------------------------------
$ 18,346 $ 27,030
====================================
</TABLE>
F-12
<PAGE> 32
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
Revenue equipment collateralizing these agreements has a carrying value of
approximately $27,221,000 and $35,370,000 at December 31, 1996 and December 31,
1995, respectively.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 7,701
1998 10,664
1999 5,333
2000 1,621
2001 728
Thereafter --
-------
$26,047
=======
</TABLE>
4. SHAREHOLDERS' EQUITY AND STOCK OPTIONS
Preferred Stock -- The Board of Directors is authorized to issue, at its
discretion, up to 5,000,000 shares of preferred stock, par value $.01. The terms
and conditions of the preferred shares are to be determined by the Board of
Directors. No shares have been issued to date.
Employee Stock Option and Incentive Plan -- The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation, requires use of option valuation models that were not developed
for use in valuing employee stock options. Under Opinion No. 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
At December 31, 1996, 1995 and 1994, the Company had reserved 1,000,000,
1,000,000 and 600,000 shares of common stock under a Stock Option and Incentive
Plan. Options issued under the Plan have eight to ten year terms and vest over a
four to five year period.
Pro forma information regarding net income and earnings per share is required by
Statement No. 123, which also requires that the information be determined as if
the Company has accounted for its employee and non-employee director stock
options granted subsequent to December 31, 1994 under the fair value method of
that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average
F-13
<PAGE> 33
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
assumptions for 1996 and 1995, respectively: risk-free interest rates of 6.4%
and 5.5%; dividend ratio of zero; volatility factors of the expected market
price of the Company's common stock of .4; and a weighted-average expected life
of the option of seven years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee and non-employee director stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
and non-employee director stock options.
For purposes of pro forma disclosures, the estimated fair value of the employee
and non-employee director options is amortized to expense over the options'
vesting period. The Company's pro forma information follows (in thousands,
except for earnings per share information):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Pro forma net income $3,506 $4,464
Pro forma earnings per share:
Primary $ 0.59 $ 0.74
Fully diluted $ 0.59 $ 0.74
</TABLE>
Because Statement No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
A summary of the Company's employee stock option activity and related
information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
------- ---------------- -------------------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning
of year 421 $ 9 507 $ 9 550 $ 7
Granted 285 14 -- -- 60 18
Exercised (83) 7 (53) 7 (81) 6
Forfeited (48) 11 (33) 10 (22) 8
--- --- ---
Outstanding - end of year 575 $12 421 $ 9 507 $ 9
=== === === === === ===
Exercisable at end of year 199 $10 185 $ 9 84 $ 9
=== === === === === ===
Options available for
grant 209 445 12
=== === ===
Weighted-average fair
value of options
granted during the
year $ 6 $ --
=== ====
</TABLE>
Exercise prices for options outstanding, as of December 31, 1996, ranged from
$5.00 to $18.50.
F-14
<PAGE> 34
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
Non-Employee Director Options -- In May 1996, May 1995 and September 1993,
options to purchase 22,500, 30,000 and 60,000 shares of common stock,
respectively, were granted to the non-employee directors of the Company at
option prices of $15.00, $13.625 and $14.00 per share, respectively. The options
are exercisable in installments which vest over two-year periods from the date
of grant. At December 31, 1996, 60,000 options are outstanding and will expire
on September 1, 1998 through May 1, 2006, unless a non-employee director resigns
or is not reelected, in which event the options expire 90 days after the option
holder is no longer a non-employee director.
Employee Stock Purchase Plan -- The Company implemented an employee stock
purchase plan effective January 1, 1996 at which time participating employees
became entitled to purchase common stock through payroll deduction of up to 10%
of the employee's annual compensation. The issue price of the common stock is
equal to the lesser of (1) 85% of market price on the first trading day of the
semi-annual enrollment period or (2) 85% of market price on the last trading day
of the semi-annual enrollment period. The Company has reserved 300,000 shares of
common stock for issuance pursuant to the plan. At December 31, 1996, 6,127
shares had been issued under the Plan.
5. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 536 $ 275 $ 1,078
State 176 198 131
-------------------------------------------
712 473 1,209
Deferred:
Federal 1,538 2,451 1,418
State 209 349 417
-------------------------------------------
1,747 2,800 1,835
-------------------------------------------
$ 2,459 $ 3,273 $ 3,044
===========================================
</TABLE>
F-15
<PAGE> 35
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
The historical income tax expense differs from the amounts computed by applying
the federal statutory rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
(In thousands)
<S> <C> <C> <C>
Tax expense at the statutory rate $ 2,189 $ 2,649 $ 2,401
State income taxes, net of federal benefit 177 230 326
Meals and entertainment 93 316 309
Other -- 78 8
------------------------------------------
$ 2,459 $ 3,273 $ 3,044
==========================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 10,820 $ 8,242
Prepaid expenses deductible when paid 1,048 994
Other 349 236
----------------------------------------
Total deferred tax liabilities 12,217 9,472
Deferred tax assets:
Accrued expenses 1,981 1,423
Alternative minimum tax 1,708 1,109
Net operating loss carryforward 1,134 1,388
Allowance for doubtful accounts 152 82
Other 25 --
----------------------------------------
Total deferred tax assets 5,000 4,002
----------------------------------------
Net deferred tax liabilities $ 7,217 $ 5,470
========================================
</TABLE>
Management believes that the deferred tax assets will ultimately be realized.
Management's conclusion is based on future taxable income that will result from
the reversal of the existing temporary differences. Additionally, management
expects future taxable income from operations, exclusive of the reversal of
temporary differences.
F-16
<PAGE> 36
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
The balance sheet classification of deferred income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
----------------------------------------
(In thousands)
<S> <C> <C>
Current assets $ (1,085) $ (352)
Noncurrent liabilities 8,302 5,822
----------------------------------------
$ 7,217 $ 5,470
========================================
</TABLE>
Total income tax payments, net of refunds, during fiscal 1996, 1995 and 1994
were $(162,000), $898,000 and $1,833,000, respectively. At December 31, 1996,
the Company had net operating loss carryforwards of $3,094,000 for income tax
purposes that expire in 2011.
6. LOSS ON SALE AND WINDING DOWN OF REFRIGERATED OPERATIONS
On October 11, 1994, the Company committed itself to a plan to dispose of its
refrigerated trucking operations. On January 11, 1995, the Company completed the
disposal to US 1 Industries, Inc. ("US 1 Industries") for consideration of
$250,000. The Company has accounted for the disposal of the refrigerated
trucking operations in accordance with AICPA Interpretation 1 of APB Opinion No.
30, Illustration of the Application of APB Opinion No. 30. (Interpretation 1 was
subsequently superseded on a prospective basis on November 17, 1994 by consensus
of the Emerging Issues Task Force.) The pre-tax operating losses of the
refrigerated operations subsequent to October 11, 1994, plus related costs to
dispose of the operations, less the net proceeds from the sale, totaled $805,000
and have been presented in the accompanying statement of income as loss on sale
and winding down of refrigerated operations. The operating revenue of the
refrigerated operations totaled $8,203,000 for the period from December 26, 1993
through October 11, 1994.
7. LEASES
During October 1993, the Company entered into a capital lease agreement (with a
bargain purchase option) with the Director of Development of the State of Ohio
for the construction of a terminal facility located in Columbus, Ohio. To fund
the construction of the new facility, the State of Ohio sold revenue bonds in
the amount of $6,280,000. The amounts due under the lease have been included in
capital lease obligations. The Company is responsible for all taxes,
assessments, and other costs of ownership under the lease agreement. The lease
also requires, among other things, restrictions on the payment of dividends and
the maintenance of certain levels
F-17
<PAGE> 37
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
of net worth and other financial ratios. Amounts due under the lease agreement
are guaranteed by the Company's majority shareholder.
The Company leases certain revenue and other equipment under capital leases.
These leases expire in various years through 1999. Certain of the revenue
equipment leases contain guarantees of residual values which have been included
in minimum lease payments.
Property and equipment include the following amounts for leases that have been
capitalized:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
----------------------------------------
(In thousands)
<S> <C> <C>
Land $ 2,605 $ 2,605
Building 3,675 3,675
Revenue equipment 5,465 5,459
Other equipment 2,417 --
---------------------------------------
14,162 11,739
Less accumulated amortization 2,561 1,598
---------------------------------------
$ 11,601 $ 10,141
=======================================
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense.
The Company also leases certain facilities and revenue equipment under
noncancelable operating leases that expire in various years through 2006.
Certain of these leases may be renewed for periods varying from one to ten
years.
Included in operating leases is one terminal facility leased from a company
wholly-owned by the Company's majority shareholder which expires in January
1998, and two terminal facilities leased from the Company's majority shareholder
under operating leases which expired in August 1994 and January 1995,
respectively. Also included in operating leases is an aircraft leased, under a
dry lease agreement, from the Company's majority shareholder which expires in
July 1997 and may be renewed for an additional one year period. The total net
amount of rent expense for these leases was $180,000, $84,000 and $267,000 in
1996, 1995 and 1994, respectively.
F-18
<PAGE> 38
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
Future minimum rental payments under capital leases and noncancelable operating
leases with initial terms of one year or more consisted of the following at
December 31:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------------------
FISCAL YEAR (In thousands)
-----------
<S> <C> <C>
1997 $ 2,480 $ 5,519
1998 4,481 3,864
1999 845 2,365
2000 699 935
2001 700 429
Thereafter 4,608 311
-------- -------
Total minimum lease payments 13,813 $13,423
=======
Amounts representing interest (3,268)
--------
Present value of net minimum lease payments
(including current portion of $1,797) $ 10,545
========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involves 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.
9. EMPLOYEE BENEFIT PLAN
Effective July 1, 1994, the Company adopted a retirement savings plan (the
"401(k) Plan"). The 401(k) Plan is a defined contribution plan whereby employees
who have completed one year of service, a minimum of 1,000 hours of service, and
are age 21 or older are eligible to participate. The 401(k) Plan allows eligible
employees to make contributions of 2% to 10% of their annual compensation.
Employer contributions are made at 25% of the employee's contribution up to a
maximum of 4% of total annual compensation. Employer contributions vest 20%
after two years of service and continue vesting 20% per year until fully vested.
The Company's matching contribution for fiscal 1996, 1995 and 1994 was
approximately $131,000, $119,000 and $65,000, respectively.
F-19
<PAGE> 39
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
10. FINANCIAL INSTRUMENTS
Off Balance Sheet Risk
At December 31, 1996, the Company had letters of credit outstanding totaling
$4,485,000, all of which guarantee obligations carried on the balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and trade
accounts receivable. The Company does not generally require collateral from its
customers. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising the
Company's customer base and their dispersion across many different industries.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts reported
in the balance sheet for accounts receivable and accounts payable
approximate their fair value.
Long-and short-term debt: The carrying amounts of the Company's
borrowings under its revolving credit arrangement approximates fair
value. The fair value of the Company's long-term debt and capital lease
obligations is estimated using discounted cash flow analyses, based on
the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
F-20
<PAGE> 40
Landair Services, Inc.
Notes to Consolidated Financial Statements (continued)
10. FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- -----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------- -----------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 28 $ 28 $ 3,834 $ 3,834
Accounts receivable 23,671 23,671 17,788 17,788
Accounts payable 5,525 5,525 5,074 5,074
Long-term debt and capital lease
obligations 36,592 36,592 45,102 45,102
</TABLE>
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Operating revenue $36,979 $38,893 $39,295 $41,931
Income from operations 1,666 2,703 2,126 2,846
Net income 531 1,199 887 1,362
Net income per common share:
Primary .09 .20 .15 .23
Fully diluted .09 .20 .15 .23
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $35,744 $36,445 $37,451 $38,443
Income from operations 1,841 2,771 2,813 3,076
Net income 676 1,264 1,180 1,397
Net income per common share:
Primary .11 .21 .20 .23
Fully diluted .11 .21 .20 .23
</TABLE>
F-21
<PAGE> 41
Landair Services, Inc.
Schedule II -- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
(1) (2)
CHARGED CHARGED
BALANCE AT TO COSTS TO OTHER BALANCE AT
BEGINNING AND ACCOUNT- DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Fiscal year ended December 31, 1996:
Allowance for doubtful accounts $ 292 $ 540 $ -- $ 417(1) $ 415
Fiscal year ended December 31, 1995:
Allowance for doubtful accounts 394 445 -- 547(1) 292
Fiscal year ended December 31, 1994:
Allowance for doubtful accounts 144 290 -- 40(1) 394
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
S-1
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. in
Exhibit No. Under Document Where
Item 601 of Incorporated by
Regulation S-K Reference
----------------- ---------------
<S> <C> <C> <C>
a 3.1 - Restated Charter of the registrant 3.1
a 3.2 - Bylaws of the registrant, as amended 3.2
a 4 - Specimen of Stock Certificate 4.1
e 10.1 - Registrant's Restated Employee Stock
Purchase Plan 10
d 10.2 - Registrant's Amended and Restated
Stock Option and Incentive Plan 10.1
a,g 10.3 - Form of registrant's Director Stock Option 10.3
Agreement
a 10.4 - Lease Agreement, dated July 27, 1981, 10.18
between the Greeneville-Greene County
Airport Authority and General Aviation
of Tennessee, Inc., as assumed by the
registrant by agreement, dated May 10,
1988
a 10.5 - Assignment, Assumption and Release 10.19
Agreement, dated May 10, 1988,
between Greeneville-Greene County
Airport, General Aviation, Inc., and
the registrant
a 10.6 - Air Carrier Certificate, effective 10.21
September 9, 1993
b 10.7 - Lease between the Director of 10.24
Development of the State of Ohio and
the registrant dated as of October 1,
1993
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
c 10.8 - $5,062,250 Term Loan and Security 10.25
Agreement, dated as of July 13, 1994,
among Third National Bank in
Nashville, the registrant and Landair
Transport, Inc.
c 10.9 - $5,062,250 Term Promissory Note, 10.26
dated July 13, 1994, among Third
National Bank in Nashville, the
registrant and Landair Transport, Inc.
c 10.10 - $5,500,000 Line of Credit Loan 10.27
Agreement, dated as of October 17,
1994, among First Tennessee Bank
National Association, the registrant,
and each of its subsidiaries
c 10.11 - $11,152,000 Equipment Loan 10.30
Agreement, dated as of October 17,
1994, among First Tennessee Bank
National Association, the registrant,
Landair Transport, Inc. and Landair
International Airlines, Inc.
c 10.12 - First Amendment to Loan and Security 10.33
Agreements, dated as of October
20, 1994, among First Tennessee Bank
National Association, the registrant,
Landair Transport, Inc. and Landair
International Airlines, Inc.
c 10.13 - Second Amendment to Loan and 10.35
Security Agreements, dated as of
December 23, 1994, among First
Tennessee Bank National Association,
the registrant, Landair Transport, Inc.
and Landair International Airlines, Inc.
d,g 10.14 - Registrant's Non-Employee Director 10.2
Stock Option Plan
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
d 10.15 - Third Amendment to Loan and Security 10.3
Agreements, dated as of May 24, 1995,
among First Tennessee Bank National
Association, the registrant, Landair
Transport, Inc. and Landair
International Airlines, Inc.
d 10.16 - First Amendment to Line of Credit 10.4
Loan Agreement and to Amended and
Restated Security Agreement, dated as of
May 31, 1995, among First
Tennessee Bank National Association,
the registrant, and each of its Tennessee
subsidiaries
d 10.17 - $15,000,000 Restated, Amended and 10.5
Replacement Promissory Note (Line
of Credit), dated as of May 31, 1995,
between the registrant and First
Tennessee Bank
National Association
d 10.18 - $15,000,000 Restated, Amended and 10.6
Replacement Promissory Note,
(Equipment Loan) dated as
of May 31, 1995, between the
registrant and First Tennessee Bank
National Association
d 10.19 - Fourth Amendment to Loan and 10.7
Security Agreements, dated as of May
31, 1995, among First Tennessee
Bank National Association, the
registrant, Landair Transport, Inc. and
Landair International Airlines, Inc.
d 10.20 - Term Loan and Security Agreement, 10.8
dated as of June 16, 1995, between
Third National Bank in Nashville,
the registrant and Landair Transport,
Inc.
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
d 10.21 - $4,118,700 Promissory Note, dated 10.9
July 3, 1995, between the registrant,
Landair Transport, Inc. and Third
National Bank in Nashville
d 10.22 - First Amendment to Term Loan and 10.10
Security Agreement, dated as of June
16, 1995, among Third National Bank
in Nashville, the registrant and Landair
Transport, Inc.
f 11 - Computation of per share earnings
f 21 - Subsidiaries of the registrant
f 23 - Consent of Ernst & Young LLP
f 27 - Financial Data Schedule (Electronic Filing Only)
</TABLE>
aFiled as an exhibit to the registrant's Registration Statement of
Form S-1, filed with the Commission on September 27, 1993.
bFiled as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 25, 1993, filed with the
Commission on March 25, 1994.
cFiled as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, filed with the
Commission on March 31, 1995.
dFiled as an exhibit to the registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1995, filed with the
Commission on August 14, 1995.
eFiled as an exhibit to the registrant's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995, filed
with the Commission on November 14, 1995.
fFiled herewith.
gManagement contract or compensatory plan.
<PAGE> 1
Exhibit 11
Landair Services, Inc.
Computation of Per Share Earnings
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
-----------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 5,928 5,850 5,767
Net effect of dilutive stock options - based on
the treasury stock method using average market
price 124 181 348
------------------------------------------------------
Totals 6,052 6,031 6,115
======================================================
Net income $ 3,979 $ 4,517 $ 4,017
======================================================
Net income per share $ 0.66 $ 0.75 $ 0.66
======================================================
FULLY DILUTED
Average shares outstanding 5,928 5,850 5,767
Net effect of dilutive stock options - based on the
treasury stock method using the year-end
market price if higher than the average market
price 129 182 356
------------------------------------------------------
Totals 6,057 6,032 6,123
======================================================
Net income $ 3,979 $ 4,517 $ 4,017
======================================================
Net income per share $ 0.66 $ 0.75 $ 0.66
======================================================
</TABLE>
<PAGE> 1
Exhibit 21
LANDAIR SERVICES, INC. SUBSIDIARIES
Landair Transport, Inc.
Forward Air, Inc.
Landair International Airlines, Inc.
Transportation Properties, Inc.
Transportation Properties (Texas), Inc.
Landair Royalty Company
Landair Licensing Company
Volunteer Adjustment, Inc.
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in: (1) the Registration Statement
on Form S-8 (No. 33-77944) pertaining to the Landair Services, Inc. Stock
Option and Incentive Plan and the Employee Stock Purchase Plan, (2) the
Registration Statement on Form S-8 (No. 333-03891) pertaining to the Landair
Services, Inc. Amended and Restated Stock Option and Incentive Plan, and (3)
the Registration Statement on Form S-8 (No. 333-03893) pertaining to the
Landair Services, Inc. Non-Employee Director Stock Option Award and
Non-Employee Director Stock Option Plan, of our report dated January 28, 1997,
with respect to the consolidated financial statements and schedule of Landair
Services, Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1996.
ERNST & YOUNG LLP
Nashville, Tennessee
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANDAIR SERVICES, INC. FOR THE YEAR ENDED DECEMBER 31,
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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 24,086
<ALLOWANCES> 415
<INVENTORY> 552
<CURRENT-ASSETS> 28,204
<PP&E> 97,445
<DEPRECIATION> 27,166
<TOTAL-ASSETS> 99,074
<CURRENT-LIABILITIES> 22,414
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 41,204
<TOTAL-LIABILITY-AND-EQUITY> 99,074
<SALES> 0
<TOTAL-REVENUES> 157,098
<CGS> 0
<TOTAL-COSTS> 147,757
<OTHER-EXPENSES> (61)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,964
<INCOME-PRETAX> 6,438
<INCOME-TAX> 2,459
<INCOME-CONTINUING> 3,979
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,979
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
