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, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________________ to _____________________
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 (I.R.S. employer identification number)
of incorporation or organization)
2031 Quail Avenue
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, 2000).
Class A Common Stock, $.01 par value: 3,966,086 shares
Class B Common Stock, $.01 par value: 1,000,000 shares
Exhibit Index is on Page 14-15.
Page 1
<PAGE>
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
Item 1. Financial Statements............................................. 3-7
Condensed Consolidated Balance Sheets as of
December 31, 1999 and September 30, 2000 (unaudited).......... 3-4
Condensed Consolidated Statements of Earnings for the three
and nine months ended September 30, 1999 and 2000 (unaudited).. 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 2000 (unaudited)........... 6
Notes to Condensed Consolidated Financial Statements
(unaudited).................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8-12
Item 3. Quantitative and Qualitative Disclosures About Market Risks...... 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings................................................ 13
Item 2. Changes in Securities and Use of Proceeds........................ 13
Item 3. Defaults Upon Senior Securities.................................. 13
Item 4. Submission of Matters to a Vote of Security Holders.............. 13
Item 5. Other Information................................................ 13
Item 6. Exhibits and Reports on Form 8-K................................. 14-15
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements. Statements by the
Company in press releases, public filings, and stockholder reports, as well as
oral public statements by Company representatives, also may contain certain
forward-looking information. Forward-looking information 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 factors such as recessions, downturns in customers' business cycles,
surplus inventories, inflation, higher interest rates, and fuel price increases;
the resale value of the Company's used revenue equipment; the availability and
compensation of qualified drivers and owner-operators; competition from
trucking, rail, and intermodal competitors; and the availability of desirable
target companies and financing for acquisitions. Readers should review and
consider the various disclosures made by the Company in its press releases,
stockholder reports, and public filings, as well as the factors explained in
greater detail in the Company's annual report on Form 10-K.
Page 2
<PAGE>
PART I
FINANCIAL INFORMATION
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------------ ------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................$ 685 $ 595
Receivables:
Trade................................................................... 17,928 20,614
Other................................................................... 1,599 1,782
Recoverable income taxes................................................ 1,021 184
Inventories................................................................ 1,611 1,648
Deposits, primarily with insurers.......................................... 281 117
Prepaid expenses........................................................... 579 904
Deferred income taxes...................................................... 1,111 1,003
------------------ ------------------
Total current assets................................................. 24,815 26,847
------------------ ------------------
Property and equipment:
Land....................................................................... 1,081 1,462
Buildings and improvements................................................. 6,865 7,302
Tractors................................................................... 74,004 78,912
Trailers................................................................... 42,054 42,397
Other equipment............................................................ 6,765 7,248
------------------ ------------------
130,769 137,321
Less accumulated depreciation.............................................. 36,464 46,213
------------------ ------------------
Net property and equipment........................................... 94,305 91,108
------------------ ------------------
Intangible assets, net........................................................ 5,650 5,349
Other assets.................................................................. 244 256
------------------ ------------------
$ 125,014 $ 123,560
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3
<PAGE>
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------------ ------------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.......................................$ 8,530 $ 8,507
Accounts payable........................................................... 4,962 6,941
Accrued compensation....................................................... 2,436 2,247
Accrued loss reserves...................................................... 2,540 3,106
Other accrued expenses..................................................... 1,188 775
------------------ ------------------
Total current liabilities............................................ 19,656 21,576
Long-term debt, less current maturities....................................... 50,985 46,930
Deferred income taxes......................................................... 14,865 15,305
------------------ ------------------
Total liabilities.................................................... 85,506 83,811
------------------ ------------------
Stockholders' equity:
Preferred stock............................................................ - -
Common stock:
Class A................................................................. 40 40
Class B................................................................. 10 10
Additional paid-in capital................................................. 11,414 11,396
Retained earnings.......................................................... 28,044 28,310
Reacquired shares, at cost................................................. - (7)
------------------ ------------------
Total stockholders' equity........................................... 39,508 39,749
------------------ ------------------
$ 125,014 $ 123,560
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE>
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 2000 1999 2000
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Operating revenue:
Freight...........................................$ 49,922 $ 50,033 $ 148,016 $ 151,554
Other............................................. 121 173 439 494
--------------- ------------- ------------- --------------
Operating revenue............................. 50,043 50,206 148,455 152,048
--------------- ------------- ------------- --------------
Operating expenses:
Purchased transportation.......................... 20,475 19,712 60,019 59,961
Compensation and employee benefits................ 12,698 12,693 36,701 39,087
Fuel, supplies, and maintenance................... 5,966 7,983 17,634 22,592
Insurance and claims.............................. 1,327 648 3,332 2,550
Taxes and licenses................................ 1,021 1,016 2,988 2,964
General and administrative........................ 1,886 1,830 5,474 5,588
Communications and utilities...................... 499 483 1,643 1,549
Depreciation and amortization..................... 4,212 4,637 11,672 13,828
--------------- ------------- ------------- --------------
Total operating expenses...................... 48,084 49,002 139,463 148,119
--------------- ------------- ------------- --------------
Earnings from operations................. 1,959 1,204 8,992 3,929
Financial (expense) income
Interest expense.................................. (950) (1,056) (2,863) (3,133)
Interest income................................... 26 26 95 69
--------------- ------------- ------------- --------------
Earnings before income taxes............. 1,035 174 6,224 865
Income taxes.......................................... 425 153 2,588 599
--------------- ------------- ------------- --------------
Net earnings.............................$ 610 $ 21 $ 3,636 $ 266
=============== ============= ============= ==============
Basic and diluted earnings per common share...........$ 0.12 $ 0.00 $ 0.72 $ 0.05
=============== ============= ============= ==============
Basic weighted average common shares outstanding...... 5,035,876 5,034,072 5,029,288 5,024,814
Common stock options and awards................... 2,802 58,190 1,857 19,396
--------------- ------------- ------------- --------------
Diluted weighted average common shares 5,038,678 5,092,262 5,031,145 5,044,210
outstanding...........................................
=============== ============= ============= ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5
<PAGE>
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1999 2000
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.......................................................................$ 3,636 $ 266
-------------- ---------------
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization.................................................... 11,672 13,828
Deferred income taxes............................................................ 1,760 548
Stock bonuses.................................................................... 176 171
Changes in:
Receivables.................................................................... (4,486) (2,032)
Inventories.................................................................... (101) (37)
Deposits, primarily with insurers.............................................. 138 164
Prepaid expenses............................................................... (45) (325)
Accounts payable and other accrued liabilities................................. 7,461 1,943
-------------- ---------------
Total adjustments............................................................. 16,575 14,260
-------------- ---------------
Net cash provided by operating activities..................................... 20,211 14,526
-------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment................................................. (14,441) (3,062)
Proceeds from the sale of property and equipment................................... 2,193 999
Other ............................................................................. 115 (12)
-------------- ---------------
Net cash used in investing activities......................................... (12,133) (2,075)
-------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt....................................................... - 6,700
Principal payments on long-term debt............................................... (7,588) (19,045)
Payments for reacquired shares..................................................... - (196)
-------------- ---------------
Net cash used in financing activities......................................... (7,588) (12,541)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents.......................... 490 (90)
Cash and cash equivalents at beginning of period..................................... 1,276 685
-------------- ---------------
Cash and cash equivalents at end of period...........................................$ 1,766 $ 595
============== ===============
Supplemental disclosure of cash flow information: Cash paid (received) during
the period for:
Interest......................................................................$ 2,908 $ 3,176
Income taxes.................................................................. 514 (787)
============== ===============
Supplemental schedules of noncash investing and financing activities:
Notes payable issued for tractors and trailers................................$ 3,834 $ 8,267
Issuance of stock bonuses..................................................... 176 171
============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 6
<PAGE>
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements include the accounts of
Smithway Motor Xpress Corp., a Nevada holding company, and its four wholly
owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
The condensed consolidated financial statements have been prepared, without
audit, in accordance with generally accepted accounting principles, pursuant
to the published rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying condensed
consolidated 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. The December 31, 1999 Condensed Consolidated Balance Sheet
was derived from the audited balance sheet of the Company for the year then
ended. It is suggested that these condensed consolidated financial statements
and notes thereto be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1999. Results of operations in interim periods are not
necessarily indicative of results to be expected for a full year.
Note 2. Effect of New Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137
and SFAS No. 138, will be effective for the Company for the year beginning
January 1, 2001. The Company expects to adopt the standards when required.
Because the Company does not currently hold any derivative instruments, there
is anticipated to be no impact to the financial statements when this standard
is adopted.
Page 7
<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 1999
and 2000 fiscal years.
The Company has expanded its operations substantially over the past
three years through a combination of internal growth and acquisitions. For the
three months ended September 30, 2000, operating revenue was $50.2 million,
compared to $50.0 million during the same quarter in 1999. Net earnings were
$21,000, or $0.00 per diluted share, compared with $610,000, or $0.12 per
diluted share, during the 1999 quarter. For the nine months ended September 30,
2000, operating revenue was $152.0 million, compared to $148.5 million in 1999.
Net earnings were $266,000, or $0.05 per diluted share, compared with $3.6
million, or $0.72 per diluted share, in 1999. The primary reasons for the
decline in the Company's profitability were lower miles per tractor, fewer
tractors in the Company's fleet, increases in the costs of fuel and driver
compensation, and a decline in the market for used tractors.
The Company operates a tractor-trailer fleet comprised of both
Company-owned vehicles and vehicles obtained under leases from independent
contractors and third-party finance companies. Fluctuations among expense
categories may occur as a result of changes in the relative percentage of the
fleet obtained through equipment that is owned versus equipment that is leased
from independent contractors or financing sources. Costs associated with revenue
equipment acquired under operating leases or through agreements with independent
contractors are expensed as "purchased transportation." For these categories of
equipment the Company does not incur costs such as interest and depreciation as
it might with owned equipment. In addition, independent contractor tractors,
driver compensation, fuel, communications, and certain other expenses are borne
by the independent contractors and are not incurred by the Company. Obtaining
equipment from independent contractors and under operating leases reduces
capital expenditures and on-balance sheet leverage and effectively shifts
expenses from interest to "above the line" operating expenses. The fleet profile
of acquired companies and the Company's relative recruiting and retention
success with Company-employed drivers and independent contractors will cause
fluctuations from time-to-time in the percentage of the Company's fleet that is
owned versus obtained from independent contractors and under operating leases.
Results of Operations
The following table sets forth the percentage relationship of certain
items to operating revenue for the three and nine months ended September 30,
1999 and 2000:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue.................................... 100.0% 100.0% 100.0% 100.0%
Operating expenses
Purchased transportation........................... 40.9 39.3 40.4 39.4
Compensation and employee benefits................. 25.4 25.3 24.7 25.7
Fuel, supplies, and maintenance.................... 11.9 15.9 11.9 14.9
Insurance and claims............................... 2.7 1.3 2.2 1.7
Taxes and licenses................................. 2.0 2.0 2.0 1.9
General and administrative......................... 3.8 3.6 3.7 3.7
Communications and utilities....................... 1.0 1.0 1.1 1.0
Depreciation and amortization...................... 8.4 9.2 7.9 9.1
-------------------------------------------------------------
Total operating expenses......................... 96.1 97.6 93.9 97.4
-------------------------------------------------------------
Earnings from operations............................. 3.9 2.4 6.1 2.6
Interest expense (net)............................... (1.8) (2.1) (1.9) (2.1)
-------------------------------------------------------------
Earnings before income taxes......................... 2.1 0.3 4.2 0.6
Income taxes......................................... 0.8 0.3 1.7 0.4
-------------------------------------------------------------
Net earnings......................................... 1.2% 0.0% 2.4% 0.2%
=============================================================
</TABLE>
Page 8
<PAGE>
Comparison of three months ended September 30, 2000 with three months ended
September 30, 1999
Operating revenue increased slightly to $50.2 million in the 2000
quarter compared to $50.0 million in the 1999 quarter. A substantial increase in
fuel surcharge revenue to $1.9 million in the 2000 quarter from $65,000 in the
1999 quarter helped to offset reductions in revenue caused by lower average
revenue per tractor per week and lower weighted average tractors. Approximately
$990,000 of the fuel surcharge revenue collected helped to offset Company fuel
costs and the remainder was passed through to independent contractors. Average
revenue per tractor per week (excluding revenue from brokerage operations)
decreased to $2,270 during the 2000 quarter from $2,328 during the 1999 quarter,
primarily due to a shortage of manned tractors in the fleet. Weighted average
tractors decreased to 1,506 during the 2000 quarter from 1,531 during the 1999
quarter, caused by a reduction in tractors provided by independent contractors.
Revenue per loaded mile, net of surcharges, remained constant at $1.33 in the
2000 and 1999 quarter as higher transportation costs to shippers attributable to
fuel surcharges made it difficult to get meaningful increases in freight rates.
Purchased transportation decreased $763,000 (3.7%) to $19.7 million in
the 2000 quarter from $20.5 million in the 1999 quarter and decreased as a
percentage of revenue to 39.3% of revenue in the 2000 quarter from 40.9% in the
1999 quarter. This reflects a decrease in the percentage of the Company's fleet
supplied by independent contractors which was partially offset by an increase in
the percentage of the revenue paid to the independent contractors for fuel
surcharges. Management believes the decline in independent contractor percentage
is attributable to high fuel costs, rising interest rates, and lower value of
used equipment which have diminished the pool of drivers interested in becoming
or remaining independent contractors.
Compensation and employee benefits remained constant at $12.7 million
in the 2000 and 1999 quarter and decreased as a percentage of revenue to 25.3%
of revenue in the 2000 quarter from 25.4% in the 1999 quarter. Increases
attributable to the increase in the per-mile wage paid to flatbed drivers which
occurred in the fourth quarter of 1999 were offset by lower workers compensation
claims paid and accrued.
Fuel, supplies, and maintenance increased $2.0 million (33.8%) to $8.0
million in the 2000 quarter from $6.0 million in the 1999 quarter. As a
percentage of revenue, fuel, supplies, and maintenance increased to 15.9% of
revenue for the 2000 quarter compared with 11.9% for the 1999 quarter. This was
the result of a 26% increase in the average price of fuel to $1.48 per gallon
during the 2000 quarter from $1.17 per gallon during the 1999 quarter.
Additionally, in the 2000 quarter there were no gains from fuel hedging
transactions compared to $327,000 in the 1999 quarter. The Company's fuel
hedging positions expired in June 2000, which increased and is expected to
continue to increase the Company's fuel cost going forward. The Company is
attempting to recover increases in fuel prices through fuel surcharges and
higher rates, however, fuel price increases will not be fully offset through
these measures.
Insurance and claims decreased $679,000 (51.2%) to $648,000 in the 2000
quarter from $1.3 million in the 1999 quarter. As a percentage of revenue,
insurance and claims decreased to 1.3% of revenue for the 2000 quarter compared
with 2.7% for the 1999 quarter. The decrease was attributable to a decrease in
liability and physical damage claims paid and reserved which were unusually high
in the 1999 quarter. The Company expects its insurance and claims expense will
increase as a percentage of revenue in the future as a result of rising
insurance costs impacting the entire trucking industry.
Taxes and licenses remained constant at $1.0 million in the 2000 and
1999 quarter. As a percentage of revenue, taxes and licenses remained constant
at 2.0% of revenue in the 2000 and 1999 quarter.
General and administrative expenses decreased $56,000 (3.0%) to $1.8
million in the 2000 quarter from $1.9 million in the 1999 quarter. As a
percentage of revenue, general and administrative expenses decreased to 3.6% of
revenue in the 2000 quarter compared with 3.8% in the 1999 quarter.
Communications and utilities decreased $16,000 (3.2%) to $483,000 in
the 2000 quarter from $499,000 in the 1999 quarter due to renegotiated long
distance telephone service contracts. As a percentage of revenue, communications
and utilities remained constant at 1.0% of revenue for both periods.
Depreciation and amortization increased $425,000 (10.1%) to $4.6
million in the 2000 quarter from $4.2 million in the 1999 quarter. As a
percentage of revenue, depreciation and amortization increased to 9.2% of
revenue in the 2000 quarter from 8.4% in the 1999 quarter reflecting lower gains
on sales of equipment, a larger fleet of Company-owned tractors and trailers,
which increased the cost of equipment being depreciated, and an increase in the
number of Company-owned tractors, trailers, and satellite communications units
financed with debt rather than operating leases.
Page 9
<PAGE>
Interest expense (net) increased $106,000 (11.5%) to $1.0 million in
the 2000 quarter from $924,000 in the 1999 quarter as a result of higher average
interest rates partially offset by slightly lower average outstanding debt. As a
percentage of revenue, interest expense (net) increased to 2.0% of revenue in
the 2000 quarter and 1.8% in the 1999 quarter.
As a result of the foregoing, the Company's pretax margin decreased to
0.3% in the 2000 quarter from 2.1% in the 1999 quarter.
The Company's effective tax rate was 87.9% for the 2000 quarter and
41.1% for the 1999 quarter. The effective tax rate is higher than the expected
combined tax rate for a company headquartered in Iowa because of the cost of
nondeductible driver per diem expense absorbed by the Company. The impact of the
Company's paying per diem travel expenses varies depending upon the ratio of
drivers to independent contractors and the Company's pretax earnings. At the
Company's low earnings level for the quarter, nondeductible per diem travel
expenses comprised a larger portion of pretax earnings, effectively increasing
the tax rate during the quarter.
As a result of the factors described above, net earnings decreased to
$21,000 (0.0% of revenue) in the 2000 quarter from $610,000 (1.2% of revenue) in
the 1999 quarter.
Comparison of nine months ended September 30, 2000 with nine months ended
September 30, 1999
Operating revenue increased $3.6 million (2.4%) to $152.0 million
during the 2000 period from $148.5 million during the 1999 period. A substantial
increase in fuel surcharge revenue to $4.8 million in the 2000 period from
$78,000 in the 1999 period was partially offset by slightly lower average
revenue per tractor per week and lower weighted average tractors. Approximately
$2.5 million of the fuel surcharge revenue collected helped to offset Company
fuel costs and the remainder was passed through to independent contractors.
Weighted average tractors decreased to 1,514 during the 2000 period from 1,533
during the 1999 period, caused by a reduction in tractors provided by
independent contractors. Average revenue per tractor per week (excluding revenue
from brokerage operations) decreased to $2,314 during the 2000 period from
$2,318 during the 1999 period. Revenue per loaded mile, net of surcharges,
increased to $1.33 in the 2000 period compared to $1.32 in the 1999 period.
Purchased transportation remained constant at $60.0 million in the 2000
and 1999 period. As a percentage of revenue, purchased transportation decreased
to 39.4% of revenue in the 2000 period from 40.4% in the 1999 period. The
decrease as a percentage of revenue reflects a decrease in the percentage of the
Company's fleet supplied by independent contractors. This was partially offset
by an increase in the percentage of revenue paid to the independent contractors
for fuel surcharges.
Compensation and employee benefits increased $2.4 million (6.5%) to
$39.1 million in the 2000 period from $36.7 million in the 1999 period. As a
percentage of revenue, compensation and employee benefits increased to 25.7% of
revenue in the 2000 period from 24.7% in the 1999 period. The increase was
primarily attributable to the increase in the per-mile wage paid to flatbed
drivers which occurred in the fourth quarter of 1999 and an increase in the
percentage of the Company's fleet represented by Company-owned equipment.
Fuel, supplies, and maintenance increased $5.0 million (28.1%) to $22.6
million in the 2000 period from $17.6 million in the 1999 period. As a
percentage of revenue, fuel, supplies, and maintenance increased to 14.9% of
revenue for the 2000 period compared with 11.9% for the 1999 period. This was
the result of a 33% increase in the average price of fuel to $1.42 per gallon
during the 2000 period from $1.07 per gallon during the 1999 period. The
increase in fuel prices was partially offset by gains from fuel hedging
transactions of $667,000 for the 2000 period compared with $203,000 for the 1999
period. The Company's fuel hedging positions expired in June 2000, which
increased and is expected to continue to increase the Company's fuel cost going
forward. The Company is attempting to recover increases in fuel prices through
fuel surcharges and higher rates, however, fuel price increases will not be
fully offset through these measures.
Insurance and claims decreased $782,000 (23.5%) to $2.6 million in the
2000 period from $3.3 million in the 1999 period. As a percentage of revenue,
insurance and claims decreased to 1.7% of revenue for the 2000 period compared
with 2.2% for the 1999 period. The decrease was attributable to a decrease in
liability and physical damage claims paid and reserved. The Company expects its
insurance and claims expense will increase as a percentage of revenue in the
future as a result of rising insurance costs impacting the entire trucking
industry.
Page 10
<PAGE>
Taxes and licenses remained constant at $3.0 million in the 2000 and
1999 period. As a percentage of revenue, taxes and licenses remained essentially
constant at 1.9% of revenue for the 2000 period compared with 2.0% for the 1999
period.
General and administrative expenses increased $114,000 (2.1%) to $5.6
million in the 2000 period from $5.5 million in the 1999 period. As a percentage
of revenue, general and administrative expenses remained constant at 3.7% of
revenue in the 2000 and 1999 period.
Communications and utilities decreased $94,000 (5.7%) to $1.5 million
in the 2000 period from $1.6 million in the 1999 period due to renegotiated long
distance telephone service contracts. As a percentage of revenue, communications
and utilities decreased slightly to 1.0% of revenue for the 2000 period compared
with 1.1% for the 1999 period.
Depreciation and amortization increased $2.2 million (18.5%) to $13.8
million in the 2000 period from $11.7 million in the 1999 period. As a
percentage of revenue, depreciation and amortization increased to 9.1% of
revenue in the 2000 period from 7.9% in the 1999 period reflecting lower gains
on sales of equipment, a larger fleet of Company-owned tractors and trailers,
which increased the cost of equipment being depreciated, and an increase in the
number of Company-owned tractors, trailers, and satellite communications units
financed with debt rather than operating leases.
Interest expense (net) increased $296,000 (10.7%) to $3.1 million in
the 2000 period from $2.8 million in the 1999 period as a result of higher
average interest rates partially offset by slightly lower average outstanding
debt. As a percentage of revenue, interest expense (net) increased to 2.1% of
revenue in the 2000 period from 1.8% in the 1999 period.
As a result of the foregoing, the Company's pretax margin decreased to
0.6% in the 2000 period from 4.2% in the 1999 period.
The Company's effective tax rate was 69.2% for the 2000 period and
41.6% for the 1999 period. The effective tax rate is higher than the expected
combined tax rate for a company headquartered in Iowa because of the cost of
nondeductible driver per diem expense absorbed by the Company. The impact of the
Company's paying per diem travel expenses varies depending upon the ratio of
drivers to independent contractors and the Company's pretax earnings. At the
Company's low earnings level for the period, nondeductible per diem travel
expenses comprised a larger portion of pretax earnings, effectively increasing
the tax rate during the period.
As a result of the factors described above, net earnings decreased to
$266,000 (0.2% of revenue) in the 2000 period from $3.6 million (2.4% of
revenue) in the 1999 period.
Liquidity and Capital Resources
The growth of the Company's business has required significant
investments in new revenue equipment that the Company has financed in recent
years with borrowings under installment notes payable to commercial lending
institutions and equipment manufacturers, borrowings under lines of credit, cash
flow from operations, and equipment leases from third-party lessors. The Company
also has obtained a portion of its revenue equipment fleet from independent
contractors who own and operate the equipment, which reduces overall capital
expenditure requirements compared with providing a fleet of entirely
Company-owned equipment. The Company's primary sources of liquidity currently
are funds provided by operations and borrowings under credit agreements with
financial institutions and equipment manufacturers. Management believes that its
sources of liquidity are adequate to meet its currently anticipated working
capital requirements, capital expenditures, and other needs at least through
2000.
Net cash provided by operating activities was $14.5 million for the
nine months ended September 30, 2000. The primary sources of cash from
operations were net earnings of $266,000 increased by $13.8 million in
depreciation and amortization, and a $1.9 million increase in accounts payable
and other accrued liabilities. The Company's principal uses of cash from
operations are to service debt and internally finance accounts receivable
growth. Customer accounts receivable increased $2.0 million for the nine months
ended September 30, 2000. The average age of the Company's accounts receivable
was approximately 36.6 days for the 2000 period versus 34.2 days for the 1999
period.
Page 11
<PAGE>
Net cash used in investing activities of $2.1 million for the nine
months ended September 30, 2000 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 $3.1 million during the remaining three
months of 2000. Such projected capital expenditures will be funded with a
combination of cash flow from operations, borrowings, and operating leases.
Net cash used in financing activities of $12.5 million for the nine
months ended September 30, 2000, consisted primarily of principal payments, net
of borrowings, made under the Company's long-term debt obligations.
At September 30, 2000, the Company had outstanding long-term debt
(including current maturities) of approximately $55.4 million, most of which was
comprised of obligations for the purchase of revenue equipment. Approximately
$35.4 million consisted of borrowings from financial institutions and equipment
manufacturers, $20.0 million represented the amount drawn under the Company's
revolving credit facility, and $59,000 represented future payments for purchases
of intangible assets. Interest rates on this debt range from 5.81% to 8.12% with
maturities through 2005.
At September 30, 2000, the revolving credit facility provided for
borrowings of up to $40.0 million, based upon certain accounts receivable and
revenue equipment values. Based upon the borrowing levels at September 30, 2000,
the Company had $15.1 million of remaining borrowing capacity under this credit
facility. The interest rate under the credit facility is currently 1.5% plus the
LIBOR rate for the corresponding period. The credit facility is secured and
contains covenants that impose certain minimum financial ratios and limit
additional liens, the size of certain mergers and acquisitions, dividends, and
other matters. The Company was in compliance with the terms of the credit
facility at September 30, 2000.
On June 23, 2000, the Company's Board of Directors approved a
resolution authorizing the Company to repurchase up to 500,000 shares of its
Class A common stock. No shares were repurchased under the resolution during the
quarter, however, subsequent to the end of the quarter, 68,200 shares were
repurchased.
Quantitative and Qualitative Disclosures About Market Risks
The Company is exposed to market risks from changes in (i) certain
interest rates on its debt and (ii) certain commodity prices.
Interest Rate Risk
The revolving credit facility, provided there has been no default,
carries a maximum variable interest rate of LIBOR for the corresponding period
plus 1.5%. This variable interest exposes the Company to the risk that interest
rates may rise. Most of the Company's other debt carries fixed interest rates
and exposes the Company to the risk that interest rates may fall. At September
30, 2000, approximately 56% of the Company's debt carries a variable interest
rate and the remainder is fixed.
Commodity Price Risk
The Company in the past has used derivative instruments, including
heating oil price swap agreements, to reduce a portion of its exposure to fuel
price fluctuations. There are no currently outstanding derivative instruments
and all of the Company's fuel hedging agreements expired by June 30, 2000.
Page 12
<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 and Use of Proceeds.
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.
Page 13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Description
Number
2.1 ++++ Asset Purchase Agreement dated September 23, 1998, by and
among Smithway Motor Xpress, Inc., JHT, Inc., JHT LOGISTICS,
INC., Bass Brook Truck Service, Inc., and JERDON TERMINAL
HOLDINGS, LLC.
2.2 ++++ First Amendment to Asset Purchase Agreement dated October 29,
1998, by and among Smithway Motor Xpress, Inc., JHT, Inc.,
JHT LOGISTICS, INC., Bass Brook Truck Service, Inc., and
JERDON TERMINAL HOLDINGS, LLC.
2.3 * Second Amendment to Asset Purchase Agreement dated October
30, 1998, by and among Smithway Motor Xpress, Inc., JHT,
Inc., JHT LOGISTICS, INC., Bass Brook Truck Service, Inc.,
and JERDON TERMINAL HOLDINGS, LLC.
3.1 + Articles of Incorporation.
3.2 + Bylaws.
4.1 + Articles of Incorporation.
4.2 + Bylaws.
10.1 + Outside Director Stock Plan dated March 1, 1995.
10.2 + Incentive Stock Plan adopted March 1, 1995.
10.3 + 401(k) Plan adopted August 14, 1992, as amended.
10.4 + Form of Agency Agreement between Smithway Motor Xpress, Inc.
and its independent commission agents.
10.5 + Memorandum of officer incentive compensation policy.
10.6 + Form of Independent Contractor Agreement between Smithway
Motor Xpress, Inc. and its independent contractor providers
of tractors.
10.7 ++ Credit Agreement dated September 3, 1997, between
Smithway Motor Xpress Corp., as Guarantor, Smithway Motor
Xpress, Inc., as Borrower, and LaSalle National Bank.
10.8 +++ First Amendment to Credit Agreement dated March 1, 1998,
between Smithway Motor Xpress Corp., as Guarantor, Smithway
Motor Xpress, Inc., as Borrower, and LaSalle National Bank.
10.9 +++ Second Amendment to Credit Agreement dated March 15, 1998,
between Smithway Motor Xpress Corp., as Guarantor, Smithway
Motor Xpress, Inc., as Borrower, and LaSalle National Bank.
10.10 ++++ Asset Purchase Agreement dated September 23, 1998, by and
among Smithway Motor Xpress, Inc., JHT, Inc., JHT LOGISTICS,
INC., Bass Brook Truck Service, Inc., and JERDON TERMINAL
HOLDINGS, LLC.
10.11 ++++ First Amendment to Asset Purchase Agreement dated October 29,
1998, by and among Smithway Motor Xpress, Inc., JHT, Inc.,
JHT LOGISTICS, INC., Bass Brook Truck Service, Inc., and
JERDON TERMINAL HOLDINGS, LLC.
Page 14
<PAGE>
10.12 * Second Amendment to Asset Purchase Agreement dated October
30, 1998, by and among Smithway Motor Xpress, Inc., JHT,
Inc., JHT LOGISTICS, INC., Bass Brook Truck Service, Inc.,
and JERDON TERMINAL HOLDINGS, LLC.
10.13 * Third Amendment to Credit Agreement dated October 30, 1998,
between Smithway Motor Xpress Corp., as Guarantor, Smithway
Motor Xpress, Inc., as Borrower, and LaSalle National Bank,
as Lender.
10.14 ** Amendment No. 2 to Smithway Motor Xpress Corp. Incentive
Stock Plan, adopted May 7, 1999.
10.15 *** Fourth Amendment to Credit Agreement dated August 20, 1999,
between Smithway Motor Xpress Corp., as Guarantor, Smithway
Motor Xpress, Inc., as Borrower, and LaSalle National Bank.
10.16 **** Fifth Amendment to Credit Agreement dated December 17, 1999,
between Smithway Motor Xpress Corp., as Guarantor, Smithway
Motor Xpress, Inc., as Borrower, and LaSalle National Bank.
10.17 ***** 1997 Profit Incentive Plan, adopted May 8, 1997.
10.18 # Form of Outside Director Stock Option Agreement dated July
27, 2000, between Smithway Motor Xpress Corp. and each of its
non-employee directors.
27 # Financial Data Schedule.
----------------
+ Incorporated by reference from the Company's Registration Statement on
Form S-1, Registration No. 33- 90356, effective June 27, 1996.
++ Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1997. Commission File No.
000-20793, dated November 12, 1997.
+++ Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1998. Commission File No.
000-20793, dated May 14, 1998.
++++ Incorporated by reference from the Company's Form 8-K. Commission File
No. 000-20793, dated November 12, 1998.
* Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998. Commission File No.
000-20793, dated March 18, 1999.
** Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1999. Commission File No. 000-20793,
dated August 13, 1999.
*** Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1999. Commission File No.
000-20793, dated November 10, 1999.
**** Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999. Commission File No.
000-20793, dated March 29, 2000.
***** Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended March 31, 2000. Commission File No.
000-20793, dated May 5, 2000.
# Filed herewith.
(b) Reports on Form 8-K.
None.
Page 15
<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 3, 2000 By: /s/ Douglas C. Sandvig
---------------------- ---------------------------------
Douglas C. Sandvig
Controller and Chief Accounting Officer
