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, 1996
Commission file Number 0-14781
M.S. CARRIERS, INC.
(Exact name of Registrant as specified in its charter.)
Tennessee 62-1014070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3171 Director's Row, Memphis, TN 38131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 332-2500
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Outstanding common shares at March 31, 1996 - 12,350,300
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M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item I - Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995.... 3
Consolidated Statement of Income for the Three Months Ended
March 31, 1996 and 1995................................................. 5
Consolidated Statement of Stockholders' Equity for the Three
Months Ended March 31, 1996............................................. 6
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1995................................................. 7
Notes to Financial Statements............................................. 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 9
Part II - Other Information
Item 1 - Legal Proceedings... ............................................ 12
Item 2 - Changes in Securities............................................ 12
Item 3 - Defaults Upon Senior Securities.................................. 12
Item 4 - Submission of Matters to a Vote of Security Holders.............. 12
Item 5 - Other Information................................................ 12
Item 6 - Exhibits and Reports on Form 8-K................................. 12
Signatures................................................................ 14
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31 December 31
1996 1995
_________________________________________
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,169,892 $ 486,459
Accounts receivable:
Trade, net 29,883,494 27,643,708
Officers and employees 1,465,034 1,181,729
____________ ____________
31,348,528 28,825,437
Recoverable income taxes 3,904,894 4,277,297
Deferred income taxes 3,658,679 4,136,679
Prepaid expenses and other 6,703,938 5,125,254
____________ ____________
Total current assets 46,785,931 42,851,126
Property, plant and equipment:
Land and land improvements 5,607,583 5,568,043
Buildings 28,589,080 28,589,080
Revenue equipment 254,848,290 254,132,265
Service equipment and other 34,266,605 33,757,292
Construction in progress 3,742,491 3,218,800
____________ ____________
327,054,049 325,265,480
Accumulated depreciation and
amortization 96,483,530 91,407,638
____________ ____________
230,570,519 233,857,842
Other assets 3,349,899 3,225,277
____________ ____________
Total assets $280,706,349 $279,934,245
____________ ____________
____________ ____________
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
March 31 December 31
1996 1995
_________________________________________
(Unaudited)
Liabilities and stockholders'
equity
Current liabilities:
Trade accounts payable $ 6,484,206 $ 4,336,847
Accrued expenses 7,783,579 8,130,784
Claims payable 11,816,021 13,142,682
Current maturities of
long-term debt 16,319,327 16,666,155
__________ __________
Total current liabilities 42,403,133 42,276,468
Long-term debt, less current
maturities 50,015,364 47,376,558
Deferred income taxes 37,781,263 37,757,200
Stockholders' equity:
Common stock, $.01 par value, 123,503 124,644
Authorized shares - 20,000,000
Issued and outstanding shares -
12,350,300 at March 31, 1996 and
12,464,400 at December 31, 1995
Additional paid-in capital 61,534,113 62,076,687
Retained earnings 90,824,039 92,301,919
Equity adjustment from foreign
currency translation (1,975,066) (1,979,231)
____________ ____________
Total stockholders' equity 150,506,589 152,524,019
Total liabilities and stockholders'
equity $280,706,349 $279,934,245
____________ ____________
____________ ____________
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31
1996 1995
___________________________________________
Operating revenues $ 79,690,228 $ 81,701,370
Operating expenses:
Salaries, wages and benefits 31,272,571 31,391,759
Operations and maintenance 16,411,632 17,066,895
Taxes and licenses 2,394,767 2,472,076
Insurance and claims 4,297,390 3,625,582
Communications and utilities 1,357,231 1,480,057
Depreciation and amortization 9,459,154 9,345,133
Gain on disposal of revenue equipment (459,016)
Rent and purchased transportation 10,588,490 8,946,626
Other 489,458 645,445
____________ ____________
75,811,677 74,973,573
____________ ____________
Operating income 3,878,551 6,727,797
Other expense (income):
Interest expense 1,288,474 914,285
Other (155,620) (65,177)
____________ ____________
1,132,854 849,108
____________ ____________
Income before income taxes 2,745,697 5,878,689
Income taxes 1,020,626 2,115,000
____________ ____________
Net income $ 1,725,071 $ 3,763,689
____________ ____________
____________ ____________
Common shares and common stock
equivalents 12,456,183 13,102,634
____________ ____________
____________ ____________
Earnings per share $0.14 $0.29
____________ ____________
____________ ____________
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Three Months Ended March 31, 1996
Equity
Adjustment
From
Additional Foreign
Common Stock Paid-In Retained Currency
Shares Amount Capital Earnings Translation Total
__________________________________________________________________________
Balance at January
1, 1996 12,464,400 $124,644 $62,076,687 $92,301,919 $ (1,979,231) $152,524,019
Net Income 1,725,071 1,725,071
Repurchase of
Common Stock (220,100) (2,201) (1,096,098) (3,202,951) (4,301,250)
Issuance of Common
Stock upon Exercise
of Stock Options 106,000 1,060 553,524 554,584
Equity Adjustment
from Foreign
Currency 4,165 4,165
_______________________________________________________________________________________________
Balance at March
31, 1996 12,350,300 $123,503 $61,534,113 $90,824,039 $ (1,975,066) $150,506,589
_______________________________________________________________________________________________
_______________________________________________________________________________________________
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31
1996 1995
___________________________________________
Operating activities
Net income $ 1,725,071 $ 3,763,689
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 9,000,138 9,345,133
Other 79,249 56,028
Provision for deferred income taxes 502,063 1,280,000
Changes in operating assets and
liabilities:
Accounts receivable (2,523,091) 2,686,886
Current and other assets (1,405,987) (2,969,274)
Accounts payable 2,147,359 (4,584,468)
Other current liabilities (1,673,866) (29,059)
_____________ ____________
6,125,865 5,785,246
Net cash provided by operating
activities 7,850,936 9,548,935
Investing activities
Purchases of property, plant and
equipment (7,606,375) (18,987,825)
Proceeds from disposals of property
and equipment 1,893,560 2,228,965
_____________ ____________
Net cash used in investing
activities (5,712,815) (16,758,860)
Financing activities
Proceeds from revolving line of
credit and long-term debt 29,375,769 0
Proceeds from exercise of stock options 554,584 0
Decrease in equity due to repurchase
of Common Stock (4,301,250) 0
Principal payments on revolving
line of credit and long-term debt (27,083,791) (4,110,246)
_____________ _____________
Net cash used in
financing activities (1,454,688) (4,110,246)
Increase (decrease) in cash and cash
equivalents 683,433 (11,320,171)
Cash and cash equivalents at
beginning of period 486,459 30,806,731
_____________ _____________
Cash and cash equivalents at end
of period $ 1,169,892 $ 19,486,560
_____________ _____________
_____________ _____________
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
March 31, 1996
1. Basis of Presentation
The accompanying unaudited 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, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996.
For further information and a listing of the Company's significant accounting
policies, refer to the financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
2. Net Income Per Common Share
Three Months Ended
March 31
1996 1995
_______________________________________
Average common shares outstanding 12,295,149 12,878,300
Common stock equivalents 161,034 224,334
_______________________________________
Average common shares and
common stock equivalents 12,456,183 13,102,634
_______________________________________
_______________________________________
Net income $ 1,725,071 $3,763,689
_______________________________________
_______________________________________
Net income per common and
equivalent share $ 0.14 $ 0.29
_______________________________________
_______________________________________
3. Change of Accounting Estimate
Effective February 1, 1996, the Company changed the estimated salvage value
of substantially all of its trailers to more accurately reflect market
conditions. This change in accounting estimate resulted in a decrease
in depreciation expense of $640,000 and an increase in net income of
$402,000 or $.03 per share in the first quarter of 1996.
- 8 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues
Three Months Ended March 31
1996 1995
___________________________________
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 39.2% 38.4%
Operations and maintenance 20.6% 20.9%
Taxes and licenses 3.0% 3.1%
Insurance and claims 5.4% 4.4%
Communications and utilities 1.7% 1.8%
Depreciation and amortization 11.9% 11.4%
Gain on disposal of revenue equipment (0.6%)
Rent and purchased transportation 13.3% 11.0%
Other 0.6% 0.8%
__________________________________
Total operating expenses 95.1% 91.8%
__________________________________
Operating income 4.9% 8.2%
Interest expense 1.6% 1.1%
Other expense (income) (0.2%) (0.1%)
__________________________________
Income before income taxes 3.5% 7.2%
Income Taxes 1.3% 2.6%
__________________________________
Net income 2.2% 4.6%
__________________________________
__________________________________
- 9 -
Results of Operations
Operating revenues for the first three months of 1996
decreased 2.5% compared with the same period in the prior year. The
Company's decline in revenues was due primarily from over capacity
of equipment, continued soft market conditions, and the
effect of adverse weather throughout the Company's service area.
The sources of the Company's revenues were as follows:
Three Months Ended
March 31
1996 1995
___________________________________
(in thousands)
Domestic Linehaul $ 40,037 $ 38,260
Interline Service - Mexico 7,657 7,094
Dedicated 6,324 4,031
Regional 21,341 28,330
Logistics 4,331 3,986
________ ________
Total $ 79,690 $ 81,701
________ ________
________ ________
The decrease in revenues from regional operations was attributable to
continued soft demand and over capacity of equipment in these markets.
The Company transferred some of the tractors and trailers which had been
utilized in the regional markets into its domestic linehaul and dedicated
operations which resulted in increased revenues from those operations.
The operating ratio (operating expenses as a percentage of
revenues) for the first three months of 1996 was 95.1% compared
to 91.8% for the same period of 1995.
Salaries, wages and benefits increased to 39.2% of operating
revenues for the three month period ending March 31, 1996 from
38.4% for the same period in 1995, due primarily to a slight
decrease in revenue per mile which causes the expense ratios to
increase.
Operations and maintenance expenses decreased to 20.6% of operating
revenues for the three month period ending March 31, 1996 from
20.9% for the same period in 1995. This decrease resulted from the
increased use of owner-operators by the Company. This decrease would
have been larger except for a rise in fuel costs experienced
by the Company during the first quarter of 1996.
Insurance and claims increased to 5.4% of operating revenues
for the three month period ending March 31, 1996 from 4.4% for
the same period of 1995 due primarily to adjustments to reflect
increased liability related to claims incurred in prior periods.
- 10 -
Depreciation and amortization was 11.9% and 11.4% of operating revenues
for the first three months of 1996 and 1995, respectively. The increase
resulted primarily from the shorter trade-in cycle of tractors
implemented by the Company during 1995. The effect of the shorter
trade-in cycle was partially offset by an increased use of owner-operators,
a change in accounting estimate to increase the estimated salvage
value of substantially all of the Company's trailers to more accurately
reflect market conditions and the Company's election to recognize
gain from the disposal of revenue equipment rather than to reduce basis
of new additions of revenue equipment.
Rent and purchased transportation increased to 13.3% of operating revenues in
the first three months of 1996 compared to 11.0% for the same
period in 1995 primarily as a result of the increased use of owner-operators
by the Company and increased expense relating to logistic operations.
Interest expense was $1,288,474 for the first quarter of 1996 compared to
$914,285 for the same period in 1995. The increase in interest expense
was due to an increase in average outstanding debt.
Liquidity and Capital Resources
The Company's business has required significant investment in new equipment
and office and terminal facilities, historically financed through cash from
operations, secured borrowings, unsecured credit facilities and capital
markets. During the three month period ending March 31, 1996, the Company
expended (net of trade-ins and equipment sales) in excess of $5.7 million
for purchases of property, plant and equipment.
From time to time, the Company has and may continue to repurchase shares
of its common stock. The timing and amount of such repurchases depend
on the market conditions and other factors. During the first three months
of 1996, the Company repurchased 220,100 of its shares at an aggregate cost
of $4.3 million.
The Company funded these purchases of property, plant and equipment and
the repurchase of its common shares through cash from operations and the
Company's bank line of credit. The Company has a bank line of credit
providing for borrowings of up to $30,000,000, with interest at the
lower of the bank's corporate prime rate or the 30-day LIBOR rate plus
.45%. At March 31, 1996 there was $19.4 million outstanding under this
line of credit. Management expects to maintain this line of
credit for an indefinite period.
The Company expects to finance its normal operating
requirements and future revenue equipment purchases through cash
from operations and the Company's bank line of credit.
- 11 -
PART II - Other Information
Item 1. Legal Proceedings
The Company is involved in certain ordinary routine litigation incidental
to its business. The Company does not expect that the outcome of any of
these proceedings will have a material adverse effect upon the Company's
operations or its financial position.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
first quarter of 1996.
Item 5. Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) The exhibits filed as a part of this report are listed below:
Exhibit Page Number or Incorporation
Number Description By Reference
3(i).1 Restated Charter of M.S. Carriers, Incorporated by reference from
Inc. exhibits to the registrant's
Registration Statement on Form
S-1 (Registration Number
33-12070).
3(i).2 Articles of Amendment to Charter Incorporated by reference from
of M.S. Carriers, Inc. exhibits to the registrant's
Registration Statement on Form
S-3 (Registration Number
33-63280).
3(ii) Amended and Restated By-Laws of M.S. Incorporated by reference from
Carriers, Inc. exhibits to the registrant's
Registration Statement on
Form S-3 (Registration Number
33-63280).
10.1 Incentive Stock Option Plan Incorporated by reference from
exhibits to the registrant's
Registration Statement on
Form S-1 (Registration Number
33-12070).
- 12 -
10.2 Amendment to Incentive Stock Option Incorporated by reference from
Plan exhibits to the registrant's
Registration Statement on
Form S-1 (Registration Number
33-12070).
10.3 1993 Stock Option Plan Incorporated by reference from
exhibits to the registrant's
Registration Statement on
Form S-3 (Registration Number
33-63280).
10.4 Non-Employee Directors Stock Option Incorporated by reference
Plan from registrant's Proxy
Statement dated March 31, 1995.
10.5 Employment Agreements with James W. Incorporated by reference
Welch, M.J. Barrow and Robert P. from exhibits to the
Hurt registrant's Statement on
Form S-1 (Registration
Number 33-12070).
10.6 Employment Agreement with Michael S. Incorporated by reference
Starnes from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.7 Employment Agreement with Carl J. Incorporated by reference
Mungenast from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
10.8 1993 Incentive Plan for Designated Incorporated by reference
Key Employees from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
11 Statement regarding computation of 9
per share earnings
27 Financial Data Schedule NOT INCLUDED WITH PAPER FILING
(b) The Company did not file any reports on Form 8-K during the three months
ended March 31, 1996.
- 13 -
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.
M.S. Carriers, Inc.
(Registrant)
May 15, 1996 s/ Dwight M. Bassett
Date
Dwight M. Bassett, Controller
(Chief Accounting Officer of the
Company)
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