SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
-----------------------------------------------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-20793
Smithway Motor Xpress Corp.
(Exact name of registrant as specified in its charter)
Nevada 42-1433844
(State or other jurisdiction of incorporation (I.R.S. employer identification
or organization) number)
Rural Route #5
Fort Dodge, Iowa 50501
(515) 576-7418
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
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 the filing
requirements for at least the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (October 31, 1996).
Class A Common Stock, $.01 par value: 3,999,293 shares
Class B Common Stock, $.01 par value: 1,000,000 shares
Exhibit Index is on Page15.
Page 1 of 16
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<TABLE>
<CAPTION>
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
<S> <C> <C>
Item 1 Financial Statements ........................................................ 4
Condensed Consolidated Balance Sheets as of December 31, 1995 and
September 30, 1996 (unaudited) ..................................... 4
Condensed Consolidated Statements of Earnings for the three and nine
months ended September 30, 1995 and 1996 (unaudited) ...................... 6
Condensed Consolidated Statements of Non-Redeemable Common Stockholders'
Equity for the year ended December 31, 1995 and the nine
months ended September 30, 1996 (unaudited) ........................................................ 7
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1996 (unaudited) ............................ 8
Notes to Condensed Consolidated Financial Statements (unaudited) ............ 10
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations ........................................................ 11
PART II
OTHER INFORMATION
Item 1 Legal Proceedings ............................................................. 15
Item 2 Changes in Securities ......................................................... 15
Item 3 Defaults Upon Senior Securities ............................................... 15
Item 4 Submission of Matters to a Vote of Security Holders ........................... 15
Item 5 Other Information ............................................................. 15
Item 6 Exhibits and Reports on Form 8-K .............................................. 15
</TABLE>
FORWARD LOOKING STATEMENTS
THIS DOCUMENT AND STATEMENTS BY THE COMPANY IN PRESS RELEASES, PUBLIC
FILINGS, AND STOCKHOLDER REPORTS, AS WELL AS ORAL PUBLIC STATEMENTS BY COMPANY
REPRESENTATIVES, MAY CONTAIN CERTAIN FORWARD LOOKING INFORMATION THAT IS SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED. WITHOUT LIMITATION, THESE RISKS AND
UNCERTAINTIES INCLUDE ECONOMIC RECESSIONS OR DOWNTURNS IN CUSTOMERS' BUSINESS
CYCLES, EXCESSIVE INCREASES IN CAPACITY WITHIN THE TRUCKLOAD MARKETS, DECREASED
DEMAND FOR TRANSPORTATION SERVICES OFFERED BY THE COMPANY, RAPID INFLATION AND
FUEL PRICE INCREASES, INCREASES IN INTEREST RATES, AND THE AVAILABILITY AND
COMPENSATION OF QUALIFIED DRIVERS AND OWNER-OPERATORS. READERS SHOULD REVIEW AND
CONSIDER THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS DOCUMENT AND SUCH
OTHER MEDIA.
Page 2 of 16
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<TABLE>
<CAPTION>
PART I
FINANCIAL INFORMATION
SMITHWAY MOTOR XPRESS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, September 30,
1995 1996
------------------ ------------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents................................................... $ 2,976 $ 2,722
Short-term investment....................................................... 500 300
Receivables:
Trade..................................................................... 5,708 8,833
Other..................................................................... 399 699
Recoverable income taxes.................................................. 9 -
Inventories................................................................... 416 416
Deposits, primarily with insurers............................................. 854 956
Prepaid expenses.............................................................. 921 1,368
Deferred income taxes......................................................... 176 176
------------------ ------------------
Total current assets................................................. 11,959 15,470
------------------ ------------------
Property and equipment:
Land........................................................................ 481 531
Buildings and improvements.................................................. 3,626 3,980
Tractors.................................................................... 20,423 26,617
Trailers.................................................................... 13,852 16,715
Other equipment............................................................. 3,049 3,352
------------------ ------------------
41,431 51,195
Less accumulated depreciation and amortization.............................. 13,588 18,104
------------------ ------------------
Net property and equipment........................................... 27,843 33,091
------------------ ------------------
Other assets.................................................................. 900 464
------------------ ------------------
$ 40,702 $ 49,025
================== ==================
</TABLE>
Page 3 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SMITHWAY MOTOR XPRESS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, September 30,
1995 1996
------------------ ------------------
(unaudited)
LIABILITIES AND NON-REDEEMABLE COMMON STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Line of credit..............................................................$ - $ -
Current maturities of long-term debt........................................ 4,861 2,755
Accounts payable............................................................ 1,972 2,094
Accrued loss reserves....................................................... 1,370 1,570
Other accrued expenses...................................................... 1,240 1,222
Income taxes payable........................................................ - 1,171
Deferred income taxes....................................................... - -
------------------ ------------------
Total current liabilities............................................ 9,443 8,812
Long-term debt, less current maturities....................................... 18,358 12,503
Deferred income taxes......................................................... 3,618 4,464
------------------ ------------------
Total liabilities.................................................... 31,419 25,779
------------------ ------------------
Redeemable Class A common stock............................................... 1,412 -
------------------ ------------------
Non-redeemable common stockholders' equity:
Preferred stock............................................................. - -
Common stock:
Class A................................................................... 18 40
Class B................................................................... 10 10
Additional paid-in capital.................................................. - 11,108
Retained earnings........................................................... 8,138 12,166
Reacquired shares, at cost.................................................. (52) (78)
Equity reduction for Employee Stock Ownership Plan (ESOP) debt.............. (243) -
------------------ ------------------
Total non-redeemable common stockholders' equity..................... 7,871 23,246
================== ==================
Commitments...................................................................$ 40,702 $ 49,025
================== ==================
</TABLE>
Page 4 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SMITHWAY MOTOR XPRESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- -------------------------------------
1995 1996 1995 1996
----------------- ---------------- ------------------ -----------------
Operating revenue:
<S> <C> <C> <C> <C>
Freight.......................................$ 20,584 $ 24,816 $ 57,863 $ 67,864
Other......................................... 111 121 179 345
----------------- ---------------- ------------------ -----------------
Operating revenue......................... 20,695 24,937 58,042 68,209
----------------- ---------------- ------------------ -----------------
Operating expenses:
Purchased transportation...................... 8,563 10,066 23,527 27,264
Compensation and employee benefits............ 4,690 5,495 13,168 15,109
Fuel, supplies, and maintenance............... 2,624 3,211 7,291 8,880
Insurance and claims.......................... 387 452 1,387 1,223
Taxes and licenses............................ 412 415 1,155 1,210
General and administrative.................... 831 1,051 2,660 2,964
Communication and utilities................... 222 207 536 688
Depreciation and amortization................. 950 1,506 2,848 4,517
----------------- ---------------- ------------------ -----------------
Total operating expenses.................. 18,679 22,403 52,572 61,855
----------------- ---------------- ------------------ -----------------
Earnings from operations.................. 2,016 2,534 5,470 6,354
Interest expense (net)....................... (295) (240) (818) (1,206)
----------------- ---------------- ------------------ -----------------
Earnings before income taxes.............. 1,721 2,294 4,652 5,148
Income taxes.................................. (689) (964) (1,954) (2,150)
----------------- ---------------- ------------------ -----------------
Net earnings..............................$ 1,032 $ 1,330 $ 2,698 $ 2,998
================= ================ ================== =================
Net earnings per share..........................$ 0.29 $ 0.27 $ 0.76 $ 0.75
================= ================ ================== =================
Weighted average common shares 3,528,485 4,999,293 3,530,873 4,000,090
outstanding...................................
================= ================ ================== =================
</TABLE>
Page 5 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SMITHWAY MOTOR XPRESS CORP.
CONSOLIDATED STATEMENTS OF NON-REDEEMABLE
COMMON STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Additional Retained Equity Total Non-
Non- paid-in earnings reduction redeemable
redeemable capital for common
common Reacquired ESOP stockholders'
stock shares debt equity
----------- ----------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.......................$ 28 $ - $ 5,167 $ (58)$ (348)$ 4,789
Net earnings....................................... - - 3,091 - - 3,091
Net contributions (distributions)................. - 127 - - - 127
Net undistributed earnings of "S"
corporation and sole proprietorship at date
of termination................................... - 47 (47) - - -
Cancellation of reacquired common shares........... - (58) - 58 - -
Reduction of ESOP debt............................. - - - - 105 105
Change in price of common shares
repurchased which was provided for in
1994............................................. - 203 - - - 203
Acquisition of common shares....................... - - - (52) - (52)
Change in value and number of redeemable
common shares.................................... - (319) (73) - - (392)
----------- ----------- --------- ------------ ---------- -------------
Balance at December 31, 1995....................... 28 - 8,138 (52) (243) 7,871
Net earnings....................................... - - 2,998 - - 2,998
Reduction of ESOP debt............................. - - - - 243 243
Acquisition of common shares....................... - - - (26) - (26)
Shares sold for cash, net of cost of issuance 15 10,732 - - - 10,747
Change in value and number of redeemable
common shares.................................... 7 376 1,030 - - 2,349
----------- ----------- --------- ------------ ---------- -------------
Balance at September 30, 1996......................$ 50 $ 11,108 $12,166 $ (78) $ - $ 23,246
=========== =========== ========= ============ ========== =============
</TABLE>
Page 6 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SMITHWAY MOTOR XPRESS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
-----------------------------
1995 1996
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net earnings................................................................................$ 2,698 $ 2,998
-------------- --------------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization............................................................. 2,848 4,517
Deferred income taxes..................................................................... 783 846
Changes in:
Trade receivables....................................................................... (1,801) (3,125)
Other receivables....................................................................... (154) (204)
Inventories............................................................................. - -
Deposits primarily with insurers........................................................ (85) (102)
Prepaid expenses........................................................................ (199) (447)
Accounts payable........................................................................ 334 122
Accrued loss reserves................................................................... 135 200
Other accrued expenses.................................................................. (442) (18)
Income taxes............................................................................ (843) 1,180
Total adjustments................................................................. 576 2,969
-------------- --------------
Net cash provided by operating activities............................................ 3,274 5,967
Cash flows from investing activities:
Purchase of property and equipment.......................................................... (1,040) (2,569)
Other assets................................................................................ - (150)
Purchase of short-term investments.......................................................... (500) (300)
Proceeds from short-term investments........................................................ 500 500
-------------- --------------
Net cash used in investing activities................................................ (1,040) (2,519)
Cash flows from financing activities:
Principal payments on long-term debt........................................................ (2,968) (14,914)
Borrowings on line of credit agreement...................................................... 57,861 65,092
Payments on line of credit agreement........................................................ (57,859) (65,092)
Payments for reacquired shares.............................................................. - (26)
Proceeds from issuance of common stock...................................................... - 11,858
Other assets (455) (620)
Contributions............................................................................... 182 -
Distributions............................................................................... (55) -
-------------- --------------
Net cash used in financing activities................................................ (3,294) (3,702)
-------------- --------------
Net decrease in cash and cash equivalents............................................ (1,060) (254)
Cash and cash equivalents at beginning of year................................................ 1,175 2,976
-------------- --------------
Cash and cash equivalents at end of year...................................................... 115 2,722
============== ==============
</TABLE>
Page 7 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
(Dollars in thousands)
Nine months ended
September 30,
--------------------------------
1995 1996
--------------- --------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
<S> <C> <C>
Interest......................................................................... $ 937 $ 1,331
Income taxes..................................................................... 2,149 1,866
============ ==============
Supplemental schedules of noncash investing and financing activities:
Notes payable:
Tractors and trailers.............................................................. $ 6,474 $ 7,196
Tires on above:
Prepaid at end of period......................................................... 33 24
Expensed......................................................................... 100 307
Principal payments made by ESOP........................................................ 78 243
============ ==============
</TABLE>
Page 8 of 16
See accompanying notes to consolidated financial
statements.
<PAGE>
SMITHWAY MOTOR XPRESS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of
Smithway Motor Xpress Corp., a Nevada holding company, its
wholly owned subsidiaries, Smithway Motor Xpress, Inc.,
Smithway Transportation Brokerage, Inc., and Wilmar Truck
Leasing, Inc., and Smith Leasing (a sole proprietorship, the
net assets of which were acquired by Smithway Motor Xpress
Corp.) (together, the "Company"). All significant intercompany
balances and transactions have been eliminated in
consolidation.
The financial statements have been prepared, without audit, in
accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the
accompanying financial statements include all adjustments
which are necessary for a fair presentation of the results for
the interim periods presented, such adjustments being of a
normal recurring nature. Certain information and footnote
disclosures have been condensed or omitted pursuant to such
rules and regulations. Results of operations in interim
periods are not necessarily indicative of results to be
expected for a full year.
Note 2. Initial Public Offering
On July 2, 1996, the Company sold 1,500,000 shares of its
Class A common stock in an initial public offering (the
"IPO"). The shares were sold at $8.50 per share for a total
consideration of $12,750,000, before underwriting discounts
and offering expenses. In addition, certain shareholders sold
650,000 shares in the IPO.
The proceeds of approximately $11.3 million, net of
underwriting discounts and offering expenses not previously
paid, were used to repay the Company's line of credit and
reduce long-term debt.
Note 3. Acquisition
In October 1996, the Company purchased certain assets and
assumed the freight operations of Marquardt Transportation,
Inc. of Yankton, South Dakota. The purchase price, which
included cash and assumption of certain liabilities,
amounted to approximately $1.5 million. Marquardt
Transportation, Inc. had revenues of approximately $15
million.
Page 9 of 16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's fiscal year ends on December 31 of each year. Thus, this
report discusses the third quarter and first nine months of the Company's 1995
and 1996 fiscal years, respectively.
The Company closed its initial public offering of 2,150,000 shares of
Class A Common Stock on July 2, 1996. The approximately $11.3 million in net
proceeds to the Company are being used to repay the Company's line of credit and
other secured debt, along with prepayment penalties.
Results of Operations
The following table sets forth the percentage relationship of certain
items to operating revenue for the periods indicated:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1995 1996 1995 1996
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C>
Operating revenue............................................. 100.0% 100.0% 100.0% 100.0%
Purchased transportation.................................... 41.4 40.4 40.5 40.0
Compensation and employee benefits.......................... 22.7 22.0 22.7 22.2
Fuel, supplies, and maintenance............................. 12.7 12.9 12.6 13.0
Insurance and claims........................................ 1.9 1.8 2.4 1.8
Taxes and licenses.......................................... 2.0 1.7 2.0 1.8
General and administrative.................................. 4.0 4.2 4.6 4.4
Communications and utilities................................ 1.0 0.8 0.9 1.0
Depreciation and amortization............................... 4.6 6.0 4.9 6.6
------------ ------------- ------------- -----------
Total operating expenses.................................. 90.3 89.8 90.6 90.7
------------ ------------- ------------- -----------
Earnings from operations...................................... 9.7 10.2 9.4 9.3
Interest expense (net)........................................ (1.4) (1.0) (1.4) (1.8)
------------ ------------- ------------- -----------
Earnings before income taxes.................................. 8.3 9.2 8.0 7.5
Income taxes.................................................. (3.3) (3.9) (3.4) (3.1)
------------ ------------- ------------- -----------
Net earnings.................................................. 5.0% 5.3% 4.6% 4.4%
============ ============= ============= ===========
</TABLE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996, WITH THREE MONTHS ENDED
SEPTEMBER 30, 1995
Operating revenue increased 20.5%, to $24.9 million during the 1996
quarter from $20.7 million during the 1995 quarter. The increase was
attributable to (i) a 21.0% increase in weighted average tractors, to 756 during
the 1996 quarter from 625 during the 1995 quarter; (ii) a $7,000 (.4%) increase
in revenue from freight brokerage operations, (iii) $24,000 in revenue from fuel
surcharges during the 1996 quarter, and (iv) a decrease in empty miles to 14.9%
in the 1996 quarter from 15.1% during the 1995 quarter. These factors were
offset by lower miles per tractor in the 1996 quarter. Revenue per tractor
(excluding revenue from brokerage operations) decreased .7%, to $2,308 in the
1996 quarter from $2,325 in the 1995 quarter.
Purchased transportation decreased to 40.4% of revenue during the 1996
quarter from 41.4% in the 1995 quarter, as the Company operated fewer tractors
under operating leases. Additionally, tractors provided by independent
contractors declined slightly as a percentage of the Company's tractor fleet.
Page 10 of 16
<PAGE>
Compensation and employee benefits decreased to 22.0% of revenue during the 1996
quarter from 22.7% during the 1995 quarter as a result of lower worker's
compensation costs and a smaller contribution to the Company's Employee Stock
Ownership Plan and Trust.
Fuel, supplies, and maintenance increased to 12.9% of revenue during
the 1996 quarter from 12.7% during the 1995 quarter, principally as a result of
an 10.3% increase in the price per gallon of fuel and an increase in the
percentage of the Company's fleet being comprised of Company-owned tractors and
trailers.
Insurance and claims decreased to 1.8% of revenue during the 1996
quarter from 1.9% during the 1995 quarter, primarily as a result of a reduction
in liability insurance claims.
Taxes and licenses decreased slightly to 1.7% of revenue in the 1996
quarter compared with 2.0% in the 1995 quarter, as a result of fewer loads
requiring over-dimension special permits.
General and administrative expenses increased to 4.2% of revenue during
the 1996 quarter from 4.0% during the 1995 quarter, principally as a result of
increased amounts for office and administrative expense.
Communications and utilities decreased to .8% of revenue during the
1996 quarter from 1.0% during the 1995 quarter, as the Company equipped its
tractors with satellite-based tracking and communication units during the 1995
quarter and had completed installation in 100% of Company-owned tractors by the
beginning of the 1996 quarter.
Depreciation and amortization increased to 6.0% of revenue during the
1996 quarter from 4.6% during the 1995 quarter. The increase was attributable to
a combination of (i) a newer tractor fleet and the installation of
satellite-based tracking and communication units, which increased the cost of
equipment being depreciated, (ii) an increase in the percentage of the Company's
fleet being comprised of Companyowned equipment, and (iii) a .7% decrease in
revenue per tractor.
As a result of the foregoing, the Company's operating ratio decreased
to 89.8% during the 1996 quarter from 90.3% during the 1995 quarter.
Interest expense decreased to 1.0% of revenue during the 1996 quarter
from 1.4% during the 1995 quarter, due to lower average debt balances ($15.3
million in the 1996 quarter compared with $17.8 million in the 1995 quarter).
The Company's effective tax rates were 42.0% during the 1996 quarter
(3.9% of revenue) and 40.0% during the 1995 quarter (3.3% of revenue).
As a result of the factors described above, net earnings increased to
$1.3 million during the 1996 quarter (5.3% of revenue) from $1.0 million during
the 1995 quarter (5.0% of revenue).
Page 11 of 16
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996, WITH NINE MONTHS ENDED
SEPTEMBER 30, 1995
Operating revenue increased 17.5%, to $68.2 million during the 1996
period from $58.0 million during the 1995 period. The increase was attributable
to (i) a 20.4% increase in weighted average tractors, to 715 during the 1996
period from 594 during the 1995 period; (ii) a $19,520 (.4%) increase in revenue
from brokerage operations; and (iii) $164,568 in revenue from fuel surcharges
during the 1996 period. These factors were offset by a decrease in revenue per
loaded mile to $1.37 from $1.38 and lower miles per tractor. Revenue per tractor
per week (excluding revenue from brokerage operations) decreased 3.3% to $2,261
in the 1996 period from $2,339 in the 1995 period.
Purchased transportation decreased to 40.0% of revenue during the 1996
period from 40.5% in the 1995 period, as the Company operated fewer tractors
under operating leases. Additionally, tractors provided by independent
contractors declined slightly as a percentage of the Company's tractor fleet.
Compensation and employee benefits decreased to 22.2% of revenue during the 1996
period from 22.7% during the 1995 period as a result of lower worker's
compensation costs and a smaller contribution to the Company's Employee Stock
Ownership Plan and Trust.
Fuel, supplies, and maintenance increased to 13.0% of revenue during
the 1996 period from 12.6% during the 1995 period, principally as a result of a
9.8% increase in the price per gallon of fuel and an increase in the percentage
of the Company's fleet being comprised of Company-owned tractors and trailers.
Insurance and claims decreased to 1.8% of revenue during the 1996
period from 2.4% during the 1995 period, primarily as a result of management's
negotiation of a reduction in insurance premiums.
Taxes and licenses decreased slightly to 1.8% of revenue in the 1996
period compared with 2.0% in the 1995 period. The decrease is attributable to
fewer loads requiring special permits for over-dimension loads.
General and administrative expenses decreased to 4.4% of revenue during
the 1996 period from 4.6% during the 1995 period, principally as a result of a
larger percentage of shipments being dispatched by Company employees, resulting
in lower commissions to independent agents in the current period.
Communications and utilities were 1.0% of revenue during the 1996
period and .9% during the 1995 period.
Depreciation and amortization increased to 6.6% of revenue during the
1996 period from 4.9% during the 1995 period. The increase was attributable to a
combination of (i) a newer tractor fleet, which increased the cost of equipment
being depreciated, (ii) an increase in the percentage of the Company's fleet
being comprised of Company-owned equipment, and (iii) a 3.3% decrease in revenue
per tractor.
As a result of the foregoing, the Company's operating ratio increased
to 90.7% during the 1996 period from 90.6% during the 1995 period.
Interest expense increased to 1.8% of revenue during the 1996 period
from 1.4% during the 1995 period, as higher average debt balances ($23.0 million
in the 1996 period compared with $15.5 million in the 1995 period) more than
offset lower average interest rates (7.4% in the 1996 period compared with 8.0%
in the 1995 period).
The Company's effective tax rates were 41.8% during the 1996 period
(3.1% of revenue) and 42.0% during the 1995 period (3.4% of revenue).
Page 12 of 16
<PAGE>
As a result of the factors described above, net earnings were
approximately $3.0 million during the 1996 period (4.4% of revenue), and
approximately $2.7 million during the 1995 period (4.6% of revenue).
Liquidity and Capital Resources
The growth of the Company's business has required significant
investment in new revenue equipment that the Company historically has financed
with borrowings under installment notes payable to commercial lending
institutions and equipment manufacturers, borrowings under a $5.75 million line
of credit, cash flow from operations, equipment leases from third-party lessors,
proceeds of the Company's initial public offering, and through the use of
independent contractors. The Company's primary sources of liquidity currently
are funds provided by operations and borrowings under credit agreements with
financial institutions and equipment manufacturers.
The Company's primary source of cash flow from operations is net income
increased by depreciation and deferred income taxes. Net cash provided by
operating activities was $5.9 million in the 1996 period. The primary use of
funds from operations was to internally finance the increase in accounts
receivable of $2.5 million attributable to the growth of the business. The
average age of the Company's accounts receivable was approximately 31.8 days for
the nine months ended September 30, 1996.
Net cash (used in) investing activities was ($2.5 million) in the 1996
period related primarily to purchases, sales, and trades of revenue equipment.
The Company expects capital expenditures (primarily for revenue equipment and
satellite communications units), net of revenue equipment trade-ins, to be
approximately $2.4 million in the remaining three months of 1996 (excluding the
costs associated with the October 25, 1996, acquisition of Marquardt
Transportation, Inc.). See Note 3 to consolidated financial statements. Such
projected capital expenditures will be funded with cash flow from operations,
borrowings, or operating leases. In prior periods, substantially all revenue
equipment additions were financed through borrowing or leasing transactions and
proceeds of the Company's initial public offering.
Net cash (used in) financing activities of ($3.7 million) for the nine
months ended September 30, 1996, consisted primarily of net payments of $14.9
million of principal under the Company's long-term debt agreements and net
borrowings of $65 million under the Company's line of credit.
The maximum amount available under the Company's primary line of credit
at September 30, 1996, was $5.75 million, on which the Company had no
outstanding balance. The interest rate on the line of credit is .5% above the
bank's prime rate. The line of credit is collateralized by accounts receivable
and inventory. At September 30, 1996, the Company had outstanding long-term debt
(including current maturities) consisting of approximately $15.1 million, most
of which was comprised of obligations for the purchase of revenue equipment.
Interest rates on this debt range from 5.3% to 10.3%, and the principal amounts
mature at various dates through December 2006.
Page 13 of 16
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No reportable events or material changes occurred during the
quarter for which this report is filed.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT INDEX
NUMBER DESCRIPTION
3.1* Articles of Incorporation.
3.2* Bylaws.
4.1* Articles of Incorporation.
4.2* Bylaws.
10.1* OmniTRACS(TM) Contract dated January 5, 1995, between Qualcomm,
Incorporated and Smithway Motor Xpress, Inc., an Iowa corporation,
for communications equipment and services.
10.2* Outside Director Stock Option Plan dated March 1, 1995.
10.3* Incentive Stock Plan, adopted March 1, 1995.
10.4* 401(k) Plan, adopted August 14, 1992, as amended.
10.5* Employee Stock Ownership Plan and Trust adopted January 1, 1986, as
amended.
Page 14 of 16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
NUMBER DESCRIPTION
<C> <C>
10.6* Letter Agreement dated November 29, 1994, between Christenberry Collet & Co. and Smithway
Motor Xpress, Inc., an Iowa corporation, for communications equipments and services.
10.7* Memorandum of arrangement between Ray Steward and Smithway Motor
Xpress, Inc., an Iowa corporation, concerning Spectrum software.
10.8* Voting Trust Agreement dated March 1, 1995, among William G. and Marlys L. Smith and
Melissa Sue Osterberg, as Trustee.
10.9* Exchange Agreement dated March 1, 1995, among William G. and Marlys L. Smith, William
G. Smith d/b/a Smith Leasing, G. Larry Owens, Smithway Motor Xpress, Inc. Employee Stock
Ownership Plan and Trust, and Smithway Motor Xpress Corp., a Nevada corporation.
10.10* Form of Agency Agreement between Smithway Motor Xpress, Inc. and its independent
commission agents.
10.11* Memorandum of officer incentive compensation policy.
10.12* Form of Independent Contractor Agreement between Smithway Motor Xpress, Inc. and its
independent contractor providers of tractors.
10.13* Amendment No. 1 to Exchange Agreement dated as of June 29, 1995, among William G. and
Marlys L. Smith, William G. Smith d/b/a Smith Leasing, G. Larry Owens, Smithway Motor
Xpress, Inc. Employee Stock Ownership Plan and Trust, and Smithway Motor Xpress Corp.,
a Nevada corporation.
10.14* Acquisition Agreement dated May 31, 1995, among Smithway Motor
Xpress, Inc., Van Tassel, Inc., Teresa Van Tassel, and Douglas Van
Tassel.
10.15* Acquisition Agreement dated January 10, 1996, among Smithway Motor
Xpress Inc., an Iowa Corporation, Smith Trucking Company, a Kansas
corporation, and Delmar Smith.
27 Financial Data Schedule
</TABLE>
- ------------------------------------
* Incorporated by reference from the Company's Registration Statement on
Form S-1, Registration No. 33-90356, effective June 27, 1996.
(b) Reports on Form 8-K.
None.
Page 15 of 16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SMITHWAY MOTOR XPRESS CORP.,
a Nevada corporation
Date: November 12, 1996 By:/S/ G. LARRY OWENS
------------------
G. Larry Owens,
Executive Vice President
and Chief Financial Officer
Page 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2722
<SECURITIES> 300
<RECEIVABLES> 9532
<ALLOWANCES> 0
<INVENTORY> 416
<CURRENT-ASSETS> 15470
<PP&E> 51195
<DEPRECIATION> 18104
<TOTAL-ASSETS> 49025
<CURRENT-LIABILITIES> 8812
<BONDS> 12503
0
0
<COMMON> 50
<OTHER-SE> 23196
<TOTAL-LIABILITY-AND-EQUITY> 49025
<SALES> 0
<TOTAL-REVENUES> 68209
<CGS> 0
<TOTAL-COSTS> 61855
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1206)
<INCOME-PRETAX> 5148
<INCOME-TAX> (2150)
<INCOME-CONTINUING> 2998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2998
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
