<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 March 31, 1997
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 May 9, 1997 was 5,952,880.
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TABLE OF CONTENTS
LANDAIR SERVICES, INC.
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Income - Three month
periods ended March 31, 1997
and March 31, 1996 4
Condensed Consolidated Statements of Cash Flows - Three month
periods ended March 31, 1997 and
March 31, 1996 5
Notes to Condensed Consolidated Financial Statements -
March 31, 1997 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 2. Changes in Securities 10
ITEM 3. Defaults Upon Senior Securities 10
ITEM 4. Submission of Matters to a Vote of Security Holders 10
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------------------------
(Unaudited) (Note)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 538 $ 28
Accounts receivable, less allowance of $560 in 1997 and $415 in 1996 23,367 23,671
Other current assets 4,904 4,505
------------------------------------
Total current assets 28,809 28,204
Property and equipment 102,196 97,445
Less accumulated depreciation and amortization 29,637 27,166
------------------------------------
72,559 70,279
Other assets 614 591
------------------------------------
Total assets $ 101,982 $ 99,074
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,280 $ 5,525
Accrued expenses 8,170 7,391
Current portion of long-term debt 8,693 7,701
Current portion of capital lease obligations 2,022 1,797
------------------------------------
Total current liabilities 23,165 22,414
Long-term debt, less current portion 20,502 18,346
Capital lease obligations, less current portion 7,678 8,748
Deferred income taxes 8,602 8,302
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value;
Authorized shares - 20,000,000
Issued and outstanding shares - 5,952,880 in 1997 and 1996 60 60
Additional paid-in capital 26,202 26,202
Retained earnings 15,773 15,002
------------------------------------
Total shareholders' equity 42,035 41,264
------------------------------------
Total liabilities and shareholders' equity $ 101,982 $ 99,074
====================================
</TABLE>
Note: The balance sheet at December 31, 1996 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
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LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three month periods ended
--------------------------------------------------------
March 31, 1997 March 31, 1996
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(In thousands, except per share data)
<S> <C> <C>
Operating revenue $ 41,005 $ 36,979
Operating expenses:
Purchased transportation 13,899 12,298
Salaries, wages, and employee benefits 11,669 10,375
Fuel and fuel taxes 2,583 2,765
Operating leases 1,481 1,298
Depreciation and amortization 2,559 2,612
Insurance and claims 2,512 1,797
Other operating expenses 4,380 4,168
--------------------------------------------------------
39,083 35,313
Income from operations 1,922 1,666
Other income (expense):
Interest expense (681) (806)
Other, net 30 10
--------------------------------------------------------
(651) (796)
Income before income taxes 1,271 870
Income taxes 500 339
--------------------------------------------------------
Net income $ 771 $ 531
========================================================
Net income per share:
Primary $ .13 $ .09
========================================================
Fully diluted $ .13 $ .09
========================================================
Dividends declared per share -- --
========================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
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LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three month periods ended
--------------------------------------------
March 31, March 31,
1997 1996
--------------- -----------------
(In thousands)
<S> <C> <C>
Cash from operations $ 3,091 $ 1,752
Investing activities:
Proceeds from disposal of property and equipment 106 520
Purchases of property and equipment (4,967) (1,705)
Other (23) (1)
--------------- -----------------
4,884 (1,186)
Financing activities:
Proceeds from long-term debt 4,990 1,479
Payments of long-term debt (1,842) (5,995)
Payments of capital lease obligations (845) (271)
Proceeds from exercise of stock options -- 413
--------------- -----------------
2,303 (4,374)
--------------- -----------------
Increase (decrease) in cash and cash equivalents $ 510 $ (3,808)
=============== =================
</TABLE>
See notes to condensed consolidated financial statements.
5
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LANDAIR SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
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 three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. 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, 1996.
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. See Note 6.
NOTE 3 - INCOME TAXES
For the three month periods ended March 31, 1997 and March 31, 1996, 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.
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
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NOTE 5 - CHANGE IN ACCOUNTING ESTIMATE
Effective July 1, 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 expenses of $140,000,
an increase in net earnings of $87,000 and an increase in earnings per share of
$0.01 for the three month period ended March 31, 1997.
NOTE 6 - ADOPTION OF NEW ACCOUNTING RULES
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for the first quarters ended
March 31, 1997 and March 31, 1996 is not expected to be material.
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
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March 31, 1997 March 31, 1996
-------------------------------------------
<S> <C> <C>
Operating revenue 100.0% 100.0%
Operating expenses:
Purchased transportation 33.9 33.2
Salaries, wages, and employee
benefits 28.5 28.1
Fuel and fuel taxes 6.3 7.5
Operating leases 3.6 3.5
Depreciation and amortization 6.2 7.1
Insurance and claims 6.1 4.9
Other operating expenses 10.7 11.2
-------------------------------------------
95.3 95.5
Income from operations 4.7 4.5
Other income (expense):
Interest expense (1.7) (2.2)
Other, net 0.1 --
-------------------------------------------
(1.6) (2.2)
-------------------------------------------
Income before income taxes 3.1 2.3
Income taxes 1.2 0.9
-------------------------------------------
Net income 1.9% 1.4%
===========================================
</TABLE>
Results of Operations
Operating revenue increased by $4.0 million, or 11%, to $41.0 million in the
first quarter of 1997 from $37.0 million in 1996. The increase in operating
revenue is primarily attributable to additional volume from the Company's
Forward Air operations, which increased 25% during the first quarter of 1997
compared to the prior-year period.
The operating ratio (operating expenses as a percent of operating revenue) for
the three month period ended March 31, 1997 was 95.3% compared to 95.5% for the
respective period in 1996. Except as explained below, operating expenses in the
aggregate generally reflect increases proportionate to the increased level of
operations.
8
<PAGE> 9
The components of operating expenses fluctuate between periods primarily because
of the ratio of owner-operators to Company-operated equipment.
Insurance and claims were 6.1% of operating revenue for the three month period
ended March 31, 1997, compared to 4.9% for the same period in 1996. The increase
in costs during 1997 is due primarily to an increase in the frequency and
severity of accidents coupled with increased estimated liability related to
claims incurred in prior years.
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.
Interest expense was $681,000 for the three month period ended March 31, 1997,
compared to $806,000 for the same period in 1996. The decrease in interest costs
during 1997 is due to lower average net borrowings in 1997.
The effective tax rate for the first quarter of 1997 was 39% compared to 38% for
the same period in 1996.
Liquidity and Sources of Capital
Cash flows from operations were $3.1 million for the first three months of 1997
compared with $1.8 million in the same period of 1996. The $1.3 million increase
in cash flows from operations was attributable to increased business volumes and
collection of accounts receivable 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 the Company's cash needs and anticipated
capital expenditures over the near term.
9
<PAGE> 10
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 March 31, 1997.
10
<PAGE> 11
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: May 14, 1997 By: /s/ Edward W. Cook
-----------------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
11
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
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<S> <C>
10.1 Second Amendment to Line of Credit Loan Agreement and to Amended and
Restated Security Agreement, dated as of January 28, 1997, among First
Tennessee Bank National Association, the registrant, Landair Transport,
Inc., Landair International Airlines, Inc., Transportation Properties, Inc.,
and Forward Air, Inc.
10.2 $15,000,000 Restated, Amended and Replacement Promissory Note (Line of
Credit), dated as of January 28, 1997, among the registrant, Landair
Transport, Inc., Landair International Airlines, Inc., Transportation
Properties, Inc., Forward Air, Inc. and First Tennessee Bank National
Association
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (Electronic Filing Only)
</TABLE>
12
<PAGE> 1
Exhibit 10.1
SECOND AMENDMENT TO LINE OF CREDIT LOAN AGREEMENT AND
TO AMENDED AND RESTATED SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LINE OF CREDIT LOAN AGREEMENT AND TO AMENDED
AND RESTATED SECURITY AGREEMENT is made and entered into as of the 28th day of
January, 1997, by and between FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a
national banking association ("Bank"), LANDAIR SERVICES, INC., a Tennessee
corporation ("Borrower"), LANDAIR TRANSPORT, INC., a Tennessee corporation which
is a wholly owned subsidiary of Borrower ("LTI"), LANDAIR INTERNATIONAL
AIRLINES, INC., a Tennessee corporation which is a wholly owned subsidiary of
Borrower ("LIA"), TRANSPORTATION PROPERTIES, INC., previously known as "Landair
Properties, Inc.," a Tennessee corporation which is a wholly owned subsidiary of
Borrower ("LPI"), and FORWARD AIR, INC., a Tennessee corporation which is a
wholly owned subsidiary of Borrower ("FAI").
RECITALS
A. Bank and Borrower, LTI, LIA, LPI AND FAI (Borrower, LTI, LIA, LPI
and FAI sometimes referred to herein collectively as the "Borrowing Entities")
have entered into that certain Line of Credit Loan Agreement dated as of October
17, 1994, providing for a loan in the amount of Five Million Five Hundred
Thousand Dollars ($5,500,000.00) (the "Original Loan"), to fund operating
expenses and to cover any advances under letters of credit issued for the
benefit of creditors of the Borrowing Entities, and relating to Inventory and
other property of the Borrowing Entities (the "Original Loan Agreement").
B. Bank made the Original Loan to Borrower pursuant to various loan
documents, among them a promissory note dated as of October 17, 1994, in the
original principal amount of Five Million Five Hundred Thousand Dollars
($5,500,000.00) (the "Master Draw Note"), an amended and restated security
agreement securing the obligations of the Borrowing Entities with respect to the
Original Loan dated as of October 17, 1994, under which a security interest was
and is granted in the Collateral (the "Original Security Agreement"), and the
Original Loan Agreement.
C. Bank and the Borrowing Entities extended the maturity date set forth
in the Master Draw Note, increased the principal indebtedness which was able to
be drawn with respect to the aforesaid line of credit facility, and modified
other terms and provisions set forth in the Master Draw Note, in the Original
Loan Agreement and in the Original Security Agreement, by instruments dated as
of May 31, 1995. Such modifications to the Master Draw Note and the outstanding
indebtedness evidenced thereby were, as of May 31, 1995, set forth in and
evidenced by that certain Restated, Amended and Replacement Promissory Note (the
"Initial Replacement Note") dated as of May 31, 1995, executed by Borrower,
payable to the order of Bank, and in the original principal amount of Fifteen
Million Dollars ($15,000,000.00) (the "Amended Loan"). Such modifications to the
Original Loan Agreement and to the Original Security Agreement were set forth in
that certain First Amendment to Line of Credit Loan Agreement and to Amended and
Restated Security Agreement (the "First Amendment") dated as of May 31, 1995,
executed by the Borrowing Entities and Bank.
D. Bank and the Borrowing Entities have agreed to extend the maturity
date set forth in the Initial Replacement Note and to modify other terms and
provisions set forth in the Initial Replacement Note and in the Original Loan
Agreement and the Original Security Agreement, as amended by the First
Amendment. Such modifications to the Initial Replacement Note are set forth in
and evidenced by that certain Restated, Amended and Replacement Promissory Note
(the "Second Replacement Note") of even date herewith executed by the Borrowing
Entities, payable to the order
<PAGE> 2
of Bank, and in the original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "New Loan").
E. Bank and the Borrowing Entities desire (i) that the prompt and
punctual payment of the Initial Replacement Note, as amended, restated and
replaced by the Second Replacement Note, be secured by the Original Loan
Agreement and the Original Security Agreement, as amended by the First
Amendment, in accordance with the terms thereof and hereof, and (ii) to modify
certain other provisions of the Original Loan Agreement and of the Original
Security Agreement, as amended by the First Amendment, as set forth herein.
F. The Initial Replacement Note, as amended, restated and replaced by
the Second Replacement Note, the Original Loan Agreement and the Original
Security Agreement, as amended by the First Amendment, the First Amendment, this
instrument, the Guaranties and all other instruments executed in connection with
the Original Loan, the Amended Loan and the New Loan are herein sometimes
referred to collectively as the "Loan Documents."
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing and of the agreements
set out in this instrument, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows.
1. The foregoing RECITALS are agreed to by the parties and
incorporated by reference herein.
2. The Borrowing Entities have made and delivered the Second
Replacement Note to Bank, and Bank has accepted the same in accordance with the
provisions hereof and of the other Loan Documents.
3. The Loan Documents are hereby amended to include the
following:
(a) The "Commitment Fee" as described and defined in the first
sentence in the third full paragraph on page 1 of the Original Loan Agreement,
as amended by the First Amendment, shall continue to refer to the commitment fee
outlined in the commitment letter for the Amended Loan dated May 25, 1995, with
respect to future advances under the Second Replacement Note.
(b) The "Committed Line Amount" as described and defined on
page 1 of the Original Loan Agreement, as amended by the First Amendment, shall
now refer to the New Loan amount.
(c) The "Draw Certificates" form attached as Exhibit D to the
Original Loan Agreement, as amended by the First Amendment, is replaced with the
form attached hereto as Exhibit A.
(d) The "Equipment Note" and the "Master Draw Note" as
described and defined in Sections 1.15 and 1.26 of the Original Loan Agreement,
as amended by the First Amendment, shall continue to refer to the promissory
note of Borrower dated May 31, 1995, a copy of which is attached hereto as
Exhibit B. Similarly, the term "Committed Equipment Loan Amount" in Section 1.26
of the Original Loan Agreement, as amended by the First Amendment, shall
continue to refer to the principal amount of Fifteen Million Dollars
($15,000,000.00).
(e) The "Guaranties" as described and defined in Section 1.18
of the Original Loan Agreement and in Recital V of the Original Security
Agreement, as amended by the First Amendment, shall continue to refer to those
guaranty agreements dated May 31, 1995, copies of which were attached as
collective Exhibit C to the First Amendment, which shall remain in full force
and effect, it being understood and agreed, however, that the primary
obligations
2
<PAGE> 3
of the guarantors under said Exhibit C agreements with respect to the New Loan
are as makers of the Second Replacement Note. All obligations of each Borrowing
Entity as a "guarantor" under any Guaranty shall include all obligations of each
and every Borrowing Entity under the Equipment Note, the Line Note and all
documents relating thereto (including this Amendment).
(f) The "Line Note" as described and defined in Section 1.23
of the Original Loan Agreement and which is described and defined as the "Note
in Recital II of the Original Security Agreement, as amended by the First
Amendment, shall now refer to the promissory note of the Borrowing Entities of
even date herewith attached hereto as Exhibit C, which evidences the New Loan.
(g) The "Loan Agreement" as described and defined in Section
1.25 of the Original Loan Agreement and in Recital I of the Original Security
Agreement, as amended by the First Amendment, shall now refer to the Original
Loan Agreement, as amended by the First Amendment and as further amended by this
instrument.
(h) The "Loan" as described and defined in Recital I of the
Original Security Agreement, as amended by the First Amendment, shall now refer
to the New Loan.
(i) The "Security Agreement" as described and defined in
Section 1.35 of the Original Loan Agreement, as amended by the First Amendment,
shall now refer to the Original Security Agreement, as amended by the First
Amendment and as further amended by this instrument.
(j) The "Stated Interest Rate" as described and defined in
Section 2.3(a) of the Original Loan Agreement, as amended by the First
Amendment, shall continue to refer to the lesser of the (1) Maximum Rate, or (2)
a rate equal to (i) one percent (1.0%) per annum, less than (ii) the Base Rate
established from time to time by the Bank, to be applicable to interest charges
for the period of time commencing on May 11, 1995, until the Termination Date.
(k) The "Termination Date" as described and defined in Section
1.36 of the Original Loan Agreement, as amended by the First Amendment, shall
now refer to May 31, 1998, unless such date is extended pursuant to the
provisions of Section 9.12 of the Original Loan Agreement, as amended by the
First Amendment, in which event such extended date shall be the Termination
Date.
(l) The date "December 25, 1993" found in Sections 5.3(a) and
5.3(b) of the Original Loan Agreement, as amended by the First Amendment, is
hereby changed to "December 31, 1996," and Borrower, LTI, LIA, LPI and FAI
hereby confirm and ratify the truth and accuracy of the representations and
warranties made by them in said Sections 5.3(a) and 5.3(b), as amended by the
First Amendment, with such change.
(m) The list of actions, suits and proceedings described in
Section 5.5 of the Original Loan Agreement and listed on Exhibit J to the
Original Loan Agreement, as amended by the First Amendment, is hereby
supplemented and replaced by Exhibit D attached hereto, and Borrower, LTI, LIA,
LPI and FAI hereby confirm and ratify the representations and warranties made by
them in said Section 5.5, as amended by the First Amendment, with such change.
(n) The amount "Twenty-Nine Million Dollars ($29,000,000.00)"
found in Section 6.8 of the Original Loan Agreement, as amended to "Thirty-One
Million Dollars ($31,000,000.00)" in the First Amendment, is hereby changed to
"Forty Million Dollars ($40,000,000.00) until fiscal year end 1997 for the
Borrower," and to a potentially higher (but not lower) number equal to "Forty
Million Dollars ($40,000,000.00) plus seventy-five percent (75%) of after-tax
profit in each fiscal year of Borrower thereafter until payment in full of the
principal of and interest on the Borrower Loans," and Borrower, LTI, LIA, LPI
3
<PAGE> 4
and FAI hereby confirm and ratify the truth and accuracy of the representations
and warranties made by them in said Section 6.8 with such changes.
(o) The amount "Five Hundred Thousand Dollars ($500,000.00)"
found in Section 6.9 of the Original Loan Agreement is hereby changed to "Two
Million Five Hundred Thousand Dollars ($2,500,000.00)," and Borrower, LTI, LIA,
LPI and FAI hereby confirm and ratify the truth and accuracy of the
representations and warranties made by them in said Section 6.9 with such
change.
(p) Section 6.10 of the Original Loan Agreement, as amended by
the First Amendment, remains as is, and Borrower, LTI, LIA, LPI and FAI hereby
covenant and agree that each of them will, from the date hereof until payment in
full of the principal of and interest on the Borrower Loans, maintain the
debt-to-equity ratio set forth in the First Amendment and otherwise satisfy
their covenants as set forth on Exhibit F to the First Amendment.
(q) Section 6.11 of the Original Loan Agreement remains as is,
and Borrower, LTI, LIA, LPI and FAI hereby covenant and agree that each of them
will, from the date hereof until payment in full of the principal of and
interest on the Borrower Loans, maintain the cash flow coverage ratio set forth
in said Section 6.11 of the Original Loan Agreement.
4. The Borrowing Entities each represent and warrant to Bank that the
RECITALS set forth above are true and correct in all material respects and all
representations and warranties to Bank given by any of them in any one or more
of the Loan Documents are true and correct as of the date hereof. Similarly,
Borrower, LTI, LIA, LPI and FAI hereby covenant and agree to fulfill all of
their obligations and agreements made in the Loan Documents. Each Borrowing
Entity agrees to pay directly, or reimburse Bank for, all reasonable expenses,
including the reasonable fees and expenses of legal counsel, incurred in
connection with the enforcement of any one or more of the Loan Documents and the
collection of any amounts owing by any of the Borrowing Entities with respect
thereto.
5. Notwithstanding any provisions of the Loan Documents or any prior
understanding or agreement of or by any one or more of the Borrowing Entities
with Bank, as of the date of execution hereof, (a) the obligations of any one or
more of the Borrowing Entities under any one or more of the Loan Documents,
including the Guaranties, are intended to be secured by all the assets of each
of the Borrowing Entities now or hereafter owned by any one or more of the
Borrowing Entities and which assets are subject to the granting of a security
interest under the laws of the State of Tennessee or any other state where any
of the assets of any one or more of the Borrowing Entities may from time to time
be located and the federal laws of the United States of America (the "Pledged
Assets"), and in furtherance of the foregoing, each of the Borrowing Entities
hereby pledges and grants a security interest in all right, title and interest
of each of the Borrowing Entities in the Pledged Assets to and in favor of Bank,
and (b) each of the Borrowing Entities hereby jointly and severally, agrees to
pay and perform each and every obligation of payment and/or performance of any
other Borrowing Entity under any one or more of the Loan Documents.
6. The parties acknowledge that the six (6) year statute of limitations
provided by Tennessee Code Annotated Section 28-3-109, the ten (10) year statute
of limitations provided by Tennessee Code Annotated Section 28-2-111, or any
other applicable statute of limitations shall now run from May 31, 1998, and not
from any previous maturity date of the Original Loan or of the Amended Loan.
7. Except as specifically modified hereby, the Loan Documents shall
remain in full force and effect, and the same are hereby ratified and confirmed
by the Borrowing Entities in all respects. In the events of any conflict between
any provisions of any one or more of the Loan Documents, the provisions most
4
<PAGE> 5
favorable to Bank shall apply. This instrument is not intended to, and will not,
effect a novation of the indebtedness evidenced by the Initial Replacement Note
outstanding as of the date the Initial Replacement Note was amended, restated
and replaced by the Second Replacement Note, nor are the liens of the security
interests granted under the Original Security Agreement, as amended by the First
Amendment, intended to be released, altered, or changed in any manner except as
specifically stated herein. All capitalized terms not otherwise defined herein
shall have the same meanings as set forth in the Original Loan Agreement, as
amended by the First Amendment.
8. As an inducement to Bank to make the New Loan, (a) the Borrowing
Entities shall deliver, or cause to be delivered, to Bank the following: (i)
certified resolutions of the board of directors of each of the Borrowing
Entities authorizing this Amendment and the other New Loan documents; (ii) an
opinion of counsel and such other documentation, if any, as may be reasonably
requested by Bank to satisfy Bank that this Amendment and the other New Loan
documents have been duly authorized, executed and delivered on behalf of each
Borrowing Entity, and constitutes the valid and binding obligation of each of
the Borrowing Entities; (iii) appropriate UCC-1 or UCC-3 Financing Statements as
necessary to accomplish the purposes of this Amendment; and (iv) UCC-11 lien
searches as may be required by Bank evidencing no liens or encumbrances on any
of the Pledged Assets of any of the Borrowing Entities except liens granted
pursuant to the Borrower Loans, and liens or encumbrances, if any, approved by
Bank; (b) the Borrowing Entities shall pay directly or reimburse Bank for all
fees and expenses, including, but not limited to, any and all filing fees,
recording fees, and reasonable expenses and fees of legal counsel, incurred in
connection with the preparation and enforcement of this Amendment and other New
Loan documents; and (c) each Borrowing Entity shall execute and deliver to Bank
all further documents and perform all other acts which Bank reasonably shall
deem necessary or appropriate to perfect or protect the lien and security
interests granted pursuant to the Borrower Loans.
[Signatures on Next Page]
5
<PAGE> 6
IN WITNESS WHEREOF, this Second Amendment to Line of Credit Loan
Agreement and to Amended and Restated Security Agreement has been entered into
by the parties hereto as of the day and year first above written.
"BANK" "BORROWER"
FIRST TENNESSEE BANK NATIONAL LANDAIR SERVICES, INC.
ASSOCIATION
By: /s/ Larry Estepp By: /s/ Scott M. Niswonger
------------------------ --------------------------
Larry Estepp, Scott M. Niswonger,
Regional President President
"LTI"
LANDAIR TRANSPORT, INC.
By: /s/ Bruce A. Campbell
--------------------------
Bruce A. Campbell,
President
"LIA"
LANDAIR INTERNATIONAL
AIRLINES, INC.
By: /s/ Bruce A. Campbell
--------------------------
Bruce A. Campbell,
President
"LPI"
TRANSPORTATION PROPERTIES,
INC. previously known as
Landair Properties, Inc.
By: /s/ Bruce A. Campbell
-------------------------
Bruce A. Campbell,
President
"FAI"
FORWARD AIR, INC.
By: /s/ Bruce A. Campbell
-------------------------
Bruce A. Campbell,
President
6
<PAGE> 1
Exhibit 10.2
RESTATED, AMENDED AND REPLACEMENT
PROMISSORY NOTE
(LINE OF CREDIT)
$15,000,000.00 Greeneville, Tennessee
As of January 28, 1997
FOR VALUE RECEIVED, the undersigned, each a Tennessee corporation, jointly and
severally promise to pay to the order of FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, a national banking association having offices for the conduct of
business in Greene County, Tennessee (the "Bank") at its place of business in
Greeneville, Tennessee, with the mailing address of "206 North Main Street,
Greeneville, TN 37745, ATTN: Larry Estepp," or at such other place as the holder
hereof may designate in writing, in current local funds, the sum of Fifteen
Million Dollars ($15,000,000.00), or so much thereof as may be advanced by the
Bank in accordance with the terms and provisions of the Credit Agreement, plus
interest thereon or on so much as shall remain outstanding from time to time, as
set out below. This Note is referred to as the "Line Note" in the Credit
Agreement.
This Note is made in replacement of a Fifteen Million Dollar ($15,000,000.00)
restated, amended and replacement promissory note made as of May 31, 1995, by
the undersigned Landair Services, Inc. and guarantied by the other undersigned
makers, payable to the order of the Bank, the outstanding principal amount of
which is Eight Million Eight Hundred Forty-Two Thousand One Hundred Fifty-Five
Dollars and Eighty-One Cents ($8,842,155.81) as of this day (the "Original
Principal"). Accordingly, the amount of principal available to be drawn or
further reserved under this Note in accordance with the provisions of the Credit
Agreement is Six Million One Hundred Fifty-Seven Thousand Eight Hundred
Forty-Four Dollars and Nineteen Cents ($6,157,844.19) as of this day. The
Original Principal includes the face amount of irrevocable letters of credit
issued by the Bank for the account and benefit of the undersigned in the
aggregate amount of Four Million Five Hundred Forty-Five Thousand One Hundred
Ninety Dollars ($4,545,190.00).
INTEREST ACCRUAL: Except during any period during which a default interest
rate shall be applicable as described below, interest shall accrue at
the variable rate per annum ("Variable Rate") equal to the base
commercial rate of interest established from time to time by the Bank
("Base Rate") minus one percent (1.0%) per annum with respect to the
Original Principal and with respect to all other principal
indebtedness advanced by the Bank hereunder. Each change in the
Variable Rate that results from a change in the Base Rate shall become
effective without notice to the undersigned on the same date that the
Base Rate changes. Interest shall be calculated based upon (i) a three
hundred sixty-five (365) or three hundred sixty-six (366) day year (as
is appropriate) daily interest, times (ii) the actual number of
calendar days elapsed.
INTEREST AND PRINCIPAL PAYMENTS: The undersigned shall make payments of
principal and interest as follows: one single principal payment of the
balance due on or before May 31, 1998, plus interest payable beginning
February 10, 1997, and continuing on the same day of each successive
monthly calendar period, except that the final interest installment
shall be payable on the date the principal is due. All unpaid
principal and interest evidenced hereby
<PAGE> 2
shall be due and payable on the maturity date hereof, which shall be
May 31, 1998.
SECURITY: This Note is secured by a lien on accounts receivable and certain
other property described in an Amended and Restated Security Agreement
dated October 17, 1994, as amended by instruments dated May 31, 1995,
and of even date herewith (collectively, the "Security Agreement")
among the Bank and the undersigned, corresponding UCC Financing
Statements, and guaranty agreements of certain of the undersigned.
OTHER TERMS AND CONDITIONS: Unless otherwise provided herein, all payments shall
be applied first to pay the accrued interest to date on the unpaid balance and
next to the unpaid principal of the indebtedness.
All capitalized terms not otherwise defined herein shall have the same meanings
as set forth in the Credit Agreement.
Any payment not made when due hereunder (whether by acceleration or otherwise)
shall bear interest at the "default rate" which is herein calculated as the
lesser of the Bank's Base Rate plus four percent (4.0%) per annum or the maximum
effective contract rate of interest which the Bank may lawfully charge on the
date such payment became due.
If this Note is placed in the hands of an attorney for collection, by suit or
otherwise, or to protect any security given for its payment, or to enforce its
collection, the undersigned will pay all the costs of collection and litigation,
together with a reasonable attorney's fee, all of which shall be secured by any
collateral pledged as security hereof.
The makers and any endorsers or guarantors hereof waive protest, demand,
presentment, and notice of dishonor, and agree that this Note may be extended,
in whole or in part, without limit as to the number of such extensions, or the
period or periods thereof, and without notice to or further assent from them or
any other party liable hereon, all of whom will remain bound upon this Note
notwithstanding any such extension(s); and further agree that all or any
collateral given, now or hereafter, as security herefor may be released (with or
without substitution) without notice and without affecting their liability
hereon; and that additional makers, endorsers, guarantors, or sureties may
become parties hereto and that any present or future party may be released from
liability hereunder, without notice, and without affecting the liability of any
other maker, endorser, or guarantor.
This Note is issued and executed pursuant to and in connection with a Line of
Credit Loan Agreement dated October 17, 1994, as amended by instruments dated
May 31, 1995, and of even date herewith among the Bank and the undersigned
(collectively, the "Credit Agreement"), and the holder hereof is entitled to the
benefits of such Credit Agreement and may disburse loan proceeds and may
exercise the remedies and rights provided therein, all in accordance with the
terms of the Credit Agreement. In connection with the immediately preceding
sentence, this Note evidences a revolving credit loan and, provided that no
event of default hereunder as described in the next paragraph hereof exists, the
undersigned may borrow, repay and reborrow at any time, and from time to time,
as provided in the Credit Agreement.
In the event of any default in the prompt and punctual payment, when due, of
this Note (or any installment hereof, whether of principal, interest, or
principal and interest), which default continues for ten (10) days after the due
date of such payment (provided that no more than two [2] payments in any
twelve (12)
2
<PAGE> 3
month period shall be thus in default for ten [10] days), or if any of the
makers or any guarantor hereof should become insolvent (as defined in the
Uniform Commercial Code), or if a petition in bankruptcy be filed by or against
any of the makers or any guarantor, or if a receiver be appointed for any part
of the property or assets of any of the makers or any guarantor, or if any
assignment for the benefit of creditors be made by any of the makers or any
guarantor, or if a judgment be entered against any of the makers or any
guarantor, or upon the issuance of any writ, levy, or process, valid or invalid,
which purports to restrict any of the makers or any guarantor with respect to
any of its or their funds or property on deposit with or in the possession or
custody or under the control of the Bank, or upon the dissolution, either
voluntary or involuntary, of any of the makers or any guarantor, or in the event
of any default in the prompt and punctual payment when due, of any other
indebtedness or obligation to the Bank owed, now or hereafter, by any of the
makers or any guarantor (including, but not limited to, the Master Draw Note),
or upon any default in any security agreement, assignment or other security
document given, now or hereafter, to secure the indebtedness evidenced hereby,
or if any representation or warranty made by any of the undersigned, by any
guarantor or any of their officers or shareholders pertaining to this credit
shall prove to be false, untrue, or materially misleading, or upon any other
default under or described in the Security Agreement, the Credit Agreement or
any other document executed in connection herewith or therewith, then and in any
of such events, the entire principal and interest of this Note shall, without
notice or demand for payment (the same being expressly waived), be and become
immediately due and payable for all purposes, at the option of the Bank. Any
conflict between the provisions of this paragraph and the provisions of the
Credit Agreement concerning notice and cure periods shall be resolved in favor
of the provisions of the Credit Agreement.
Upon the occurrence of a default hereunder (as described in the immediately
preceding paragraph or otherwise) for which the holder hereof does not
accelerate the indebtedness evidenced hereby pursuant to the provisions of the
immediately preceding paragraph and for which the applicable default rate(s) of
interest set forth above is not being charged, including the failure of the
undersigned or any guarantor to provide the financial statements as required
under the Credit Agreement, the applicable interest rate set forth herein, for a
period beginning three (3) days after written notice of such event of default is
provided by the holder hereof to the undersigned and ending upon the curing of
said noticed event of default, shall increase one percent (1.0%) for the first
thirty (30) days of said event of default and increase an additional one percent
(1.0%) during each thirty (30) day period thereafter during which the noticed
event of default continues. Such default interest rates (in the immediately
preceding sentence) shall apply to the outstanding principal balance of this
Note; provided, however, that such interest rate shall not exceed the "default
rate" as such phrase is defined on page 2 of this Note. Upon the curing of the
noticed event of default, the interest rate hereunder shall revert to the
initially agreed upon interest rate, effective on the date on which the event of
default is cured.
Any money or other property at any time in the possession of the Bank belonging
to any of the makers or any guarantor and any deposits or other sums at any time
credited by or due from the Bank to any party liable hereon, may at all times,
at the option of the Bank, be held and treated as collateral security for the
payment of this Note or any other liability of any of the makers or any
guarantor, whether due or not due. The Bank may, at any time upon the occurrence
of an event of default hereunder and/or under the Security Agreement, the Credit
Agreement or any other document executed in connection herewith or therewith
(which continues beyond applicable grace, notice and cure periods), at its
option,
3
<PAGE> 4
and without further notice, set off the amount due or to become due hereon
against the claim of any of the makers against the Bank.
Regardless of any provisions contained herein, or in any other document executed
in connection herewith, the holder hereof shall never be entitled to receive,
collect, or apply as interest hereon, any amount in excess of the maximum
contract rate which may be lawfully charged by the holder hereof under
applicable law, and in the event the holder hereof ever receives, collects, or
applies as interest, any such excess, such amount which would be excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and, if the principal hereof is paid in full, any remaining excess
shall forthwith be paid to the undersigned. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the maximum
lawful contract rate, the undersigned and the holder hereof shall, to the
maximum extent permitted by applicable law, (a) characterize any non-principal
payment as a reasonable loan charge, rather than as interest; (b) exclude
voluntary prepayments and the effects thereof; and (c) amortize, prorate,
allocate, and spread, in equal parts, the total amount of interest throughout
the entire contemplated term hereof, so that the interest accrued or to accrue
throughout the entire term contemplated hereby shall at no time exceed the
maximum lawful contract rate.
This Note may be prepaid, in whole or in part, without premium or penalty. Any
such prepayment shall be applied first to interest accrued on the outstanding
principal balance and currently due and payable, and the remainder, if any,
shall be applied to reduce the outstanding principal balance of this Note. Any
such partial prepayment shall not have the effect of suspending or deferring the
payments herein provided for, but the same shall continue to be due and payable
on each due date subsequent to such prepayment.
THE UNDERSIGNED HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING HEREUNDER OR UNDER THE CREDIT
AGREEMENT, THE SECURITY AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS NOTE, THE CREDIT AGREEMENT, THE SECURITY AGREEMENT, OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING; AND THE UNDERSIGNED HEREBY AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THE CREDIT AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
This Note is to be governed by and interpreted in accordance with the laws of
the State of Tennessee, except to the extent that greater rights and/or
privileges are granted to the holder hereof under federal law, in which case
federal laws shall control.
[Signatures on Next Page]
4
<PAGE> 5
LANDAIR SERVICES, INC.
By: /s/ Scott M. Niswonger
-------------------------------
Scott M. Niswonger,
President
ATTEST:
/s/ Valera L. Doherty
LANDAIR TRANSPORT, INC.
By: /s/ Bruce A. Campbell
-------------------------------
Bruce A. Campbell,
President
ATTEST:
/s/ Valera L. Doherty
LANDAIR INTERNATIONAL AIRLINES,
INC.
By: /s/ Bruce A. Campbell
-------------------------------
Bruce A. Campbell,
President
ATTEST:
/s/ Valera L. Doherty
TRANSPORTATION PROPERTIES, INC.
previously known as "Landair
Properties, Inc.
By: /s/ Bruce A. Campbell
-------------------------------
Bruce A. Campbell,
President
ATTEST:
/s/ Valera L. Doherty
FORWARD AIR, INC.
By: /s/ Bruce A. Campbell
-------------------------------
Bruce A. Campbell,
President
ATTEST:
/s/ Valera L. Doherty
5
<PAGE> 1
Exhibit 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three month periods ended
-------------------------------------------
March 31, 1997 March 31, 1996
-------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Primary:
Average outstanding shares 5,953 5,880
Net effect of dilutive stock options - based
on the treasury stock method using
the average market price 102 157
-------------------------------------------
Totals 6,055 6,037
===========================================
Net income $ 771 $ 531
===========================================
Per share amount $ .13 $ .09
===========================================
Fully diluted:
Average shares outstanding 5,953 5,880
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 112 163
-------------------------------------------
Totals 6,065 6,043
===========================================
Net income $ 771 $ 531
===========================================
Per share amount $ .13 $ .09
===========================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANDAIR SERVICES, INC. FOR THE THREE MONTHS ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 538
<SECURITIES> 0
<RECEIVABLES> 23,927
<ALLOWANCES> 560
<INVENTORY> 620
<CURRENT-ASSETS> 28,809
<PP&E> 102,196
<DEPRECIATION> 29,637
<TOTAL-ASSETS> 101,982
<CURRENT-LIABILITIES> 23,165
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 41,975
<TOTAL-LIABILITY-AND-EQUITY> 101,982
<SALES> 0
<TOTAL-REVENUES> 41,005
<CGS> 0
<TOTAL-COSTS> 39,083
<OTHER-EXPENSES> (30)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 681
<INCOME-PRETAX> 1,271
<INCOME-TAX> 500
<INCOME-CONTINUING> 771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 771
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
