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 June 30, 1997
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 August 1, 1997 - 12,009,633
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M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996............................................. 3
Consolidated Statements of Income for the Three Months Ended
June 30, 1997 and 1996 and the Six Months Ended
June 30, 1997 and 1996........................................ 5
Consolidated Statement of Stockholders' Equity for the Six
Months Ended June 30, 1997.................................... 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996.................................. 7
Notes to Consolidated Financial Statements...................... 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 9
Item 3 - Quantitative and Qualitative Disclosures
About Market Risks............................................. 12
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....................... 13
Signatures...................................................... 15
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PART I - Financial Information
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30 December 31
1997 1996
-----------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 301,968 $ 1,153,993
Accounts receivable:
Trade, net 42,352,163 33,018,388
Officers and employees 1,260,503 1,506,247
----------------------------------------
43,612,666 34,524,635
Recoverable income taxes 3,946,367 5,870,263
Deferred income taxes 4,388,000 3,755,000
Prepaid expenses and other 6,170,241 4,898,183
----------------------------------------
Total current assets 58,419,242 50,202,074
Property and equipment:
Land and land improvements 6,194,381 6,110,279
Buildings 30,128,055 30,128,055
Revenue equipment 276,486,450 260,026,924
Service equipment and other 37,368,106 37,014,110
Construction in progress 365,836 177,218
----------------------------------------
350,542,828 333,456,586
Accumulated depreciation and
amortization 95,922,847 96,240,862
----------------------------------------
254,619,981 237,215,724
Other assets 2,870,997 3,243,916
----------------------------------------
Total assets $315,910,220 $290,661,714
========================================
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
June 30 December 31
1997 1996
-------------------------------------
(Unaudited)
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 10,579,219 $7,288,149
Accrued expenses 14,790,287 9,733,798
Claims payable 13,245,739 11,694,210
Current maturities of
long-term debt 12,490,642 14,315,462
--------------------------------------
Total current liabilities 51,105,887 43,031,619
Long-term debt, less current
maturities 51,818,678 45,373,288
Deferred income taxes 50,872,423 48,045,423
Stockholders' equity:
Common stock, $.01 par value, 120,096 120,096
Authorized shares - 20,000,000
Issued and outstanding shares -
12,009,633 at June 30, 1997 and
at December 31, 1996
Additional paid-in capital 59,959,590 59,959,590
Retained earnings 104,037,200 96,135,352
Cumulative translation adjustments (2,003,654) (2,003,654)
--------------------------------------
Total stockholders' equity 162,113,232 154,211,384
--------------------------------------
Total liabilities and stockholders'
equity $315,910,220 $290,661,714
======================================
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
----------------------------------------------------------------
Operating revenues $101,511,950 $84,267,277 $194,211,940 $163,957,505
Operating expenses:
Salaries, wages and benefits 33,145,629 31,318,578 64,712,550 62,591,149
Operations and maintenance 16,231,237 16,273,653 33,951,297 32,685,285
Taxes and licenses 2,612,613 2,408,614 5,083,143 4,803,381
Insurance and claims 4,661,828 4,235,512 8,955,507 8,532,902
Communications and utilities 1,335,397 1,284,465 2,590,294 2,641,696
Depreciation and amortization 9,653,107 8,978,577 19,031,759 18,437,731
Loss (gain) on disposals of
revenue equipment 25,413 (774,582) (62,177) (1,233,598)
Rent and purchased transportation 24,305,286 12,311,371 43,991,656 22,899,861
Other 451,877 574,082 974,957 1,063,540
----------------------------------------------------------------
92,422,387 76,610,270 179,228,986 152,421,947
----------------------------------------------------------------
Operating income 9,089,563 7,657,007 14,982,954 11,535,558
Other expense (income):
Interest expense 1,399,031 1,224,552 2,603,004 2,513,026
Other (1,514) (124,828) 44,102 (280,448)
----------------------------------------------------------------
1,397,517 1,099,724 2,647,106 2,232,578
----------------------------------------------------------------
Income before income taxes 7,692,046 6,557,283 12,335,848 9,302,980
Income taxes 2,790,178 2,364,097 4,434,000 3,384,723
----------------------------------------------------------------
Net income $ 4,901,868 $ 4,193,186 $ 7,901,848 $ 5,918,257
================================================================
Common shares and common stock
equivalents 12,448,571 12,379,679 12,444,208 12,427,996
Earnings per share $0.39 $0.34 $0.63 $0.48
===============================================================
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1997
Cumulative
Common Stock Paid-In Retained Translation
Shares Amount Capital Earnings Adjustments Total
--------------------------------------------------------------------------------
Balance at January
1, 1997 $12,009,633 $120,096 $59,959,590 $96,135,352 $(2,003,654) $154,211,384
Net Income 7,901,848 7,901,848
--------------------------------------------------------------------------------
Balance at June
30, 1997 12,009,633 $120,096 $59,959,590 $104,037,200 $(2,003,654) $162,113,232
================================================================================
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30
1997 1996
-------------------------------------
Operating activities
Net income $ 7,901,848 $5,918,257
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 19,031,759 18,437,731
Gain on disposals of revenue
equipment (62,177) (1,233,598)
Other 205,694
Provision for deferred income taxes 2,194,000 1,681,461
Changes in operating assets and
liabilities:
Accounts receivable (9,088,031) (3,091,980)
Current and other assets 1,024,757 4,158,275
Trade accounts payable 3,291,070 (75,693)
Other current liabilities 6,608,018 (817,889)
-------------------------------------
22,999,396 19,264,001
Net cash provided by operating
activities 30,901,244 25,182,258
Investing activities
Purchases of property and
equipment (48,827,357) (12,624,767)
Proceeds from disposals of property
and equipment 12,453,518 6,368,469
-------------------------------------
Net cash used in investing
activities (36,373,839) (6,256,298)
Financing activities
Proceeds from revolving line of
credit and long-term debt 82,712,000 50,189,787
Proceeds from exercise of stock options 554,584
Decrease in equity due to repurchase
of Common Stock (8,981,500)
Principal payments on revolving
line of credit and long-term debt (78,091,430) (60,817,033)
-------------------------------------
Net cash provided by (used in)
financing activities 4,620,570 (19,054,162)
-------------------------------------
Increase (decrease) in cash and cash
equivalents (852,025) (128,202)
Cash and cash equivalents at
beginning of period 1,153,993 486,459
-------------------------------------
Cash and cash equivalents at end
of period $ 301,968 $ 358,257
=====================================
See accompanying notes.
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M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1997
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 six
month period ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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,
1996.
2. Net Income Per Common Share
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
---------------------------------------------------
Average common shares
outstanding 12,009,633 12,205,487 12,009,633 12,251,504
Common stock equivalents 438,938 174,192 434,575 176,492
---------------------------------------------------
Average common shares and
common stock equivalents 12,448,571 12,379,679 12,444,208 12,427,996
==================================================
Net income $4,901,868 $4,193,186 $7,901,848 $5,918,257
==================================================
Net income per common
and equivalent share $ 0.39 $ 0.34 $0.63 $0.48
==================================================
-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 Six Months
Ended June 30 Ended June 30
1997 1996 1997 1996
--------------------------------------
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 32.7% 37.2% 33.3% 38.2%
Operations and maintenance 16.0% 19.3% 17.5% 19.9%
Taxes and licenses 2.6% 2.9% 2.6% 2.9%
Insurance and claims 4.6% 5.0% 4.6% 5.2%
Communications and utilities 1.3% 1.5% 1.3% 1.6%
Depreciation and amortization 9.5% 10.6% 9.8% 11.2%
Gain on disposals of revenue equipment - (.9%) - (.7%)
Rent and purchased transportation 23.9% 14.6% 22.7% 14.0%
Other .5% .7% .5% .7%
--------------------------------------
Total operating expenses 91.1% 90.9% 92.3% 93.0%
--------------------------------------
Operating income 8.9% 9.1% 7.7% 7.0%
Interest expense 1.4% 1.4% 1.3% 1.5%
Other expense (income) - (.1%) - (.2%)
--------------------------------------
Income before income taxes 7.5% 7.8% 6.4% 5.7%
Income taxes 2.7% 2.8% 2.3% 2.1%
--------------------------------------
Net income 4.8% 5.0% 4.1% 3.6%
======================================
-9-
Results of Operations
Operating revenues for the first six months of 1997 increased $30.2 million,
or 18.4%, to $194.2 million compared with $164.0 million for the same period
in the prior year. For the quarter ended June 30, 1997, operating revenues
increased $17.2 million, or 20.4%, to $101.5 million compared with $84.3
million for the same quarter of 1996. The Company's increase in revenues
was due primarily to increased demand from customers, expansion of the
Company's fleet and increased logistics revenues. The Company's fleet
increased to 2,615 tractors at June 30, 1997 from 2,285 at June 30, 1996, an
increase of 330 tractors.
The sources of the Company's revenues were as follows:
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
---------------------------------------------
(in thousands) (in thousands)
Domestic Linehaul $ 46,154 $ 41,914 $90,830 $81,951
Interline Service - Mexico 8,799 7,635 16,315 15,292
Dedicated 6,850 6,873 13,454 13,197
Regional 31,376 22,869 58,705 44,210
Logistics 8,333 4,976 14,908 9,308
---------------------------------------------
Total $101,512 $ 84,267 $194,212 $163,958
=============================================
The operating ratio (operating expenses as a percentage of revenues) for
the first six months of 1997 was 92.3% compared to 93.0% for the same
period of 1996 and was 91.1% for the second quarter of 1997 compared to
90.9% for the same quarter in 1996.
Salaries, wages and benefits decreased to 33.3% and 32.7% of operating
revenues for the six-month and three-month periods ending June 30, 1997,
from 38.2% and 37.2% for the same periods in 1996. These decrease were due
primarily to the increased use of owner-operators. The Company had 586
owner-operators at June 30, 1997 compared to 279 at June 30, 1996.
Operations and maintenance expenses decreased to 17.5% and 16.0% of
operating revenues for the six-month and three-month periods ending June 30,
1997 from 19.9% and 19.3% for the same periods in 1996 due primarily to
the increased use of owner-operators by the Company.
Insurance and claims decreased to 4.6% of operating revenues for the six-
month and three-month periods ended June 30, 1997 from 5.2% and 5.0% for the
same periods ended June 30, 1996. These decreases were due primarily to
increased logistics revenues in 1997 and adjustments made during 1996 to reflect
increased liability related to claims incurred in prior periods.
-10-
Depreciation and amortization was 9.8% of operating revenues for the first
six months of 1997 compared to 11.2% for the same period in 1996 and 9.5% of
operating revenues for the quarter ended June 30, 1997, compared to 10.6%
for the same quarter of 1996. These decreases resulted primarily from the
increased use of owner-operators and increased logistics revenues.
The Company reported gains equal to .7% and .9% of operating revenues from
the disposal of revenue equipment during the six-month and three-month
periods ended June 30, 1996, compared to minimal reported gains during the same
periods of 1997.
Rent and purchased transportation increased to 22.7% of operating revenues
in the first six months of 1997 compared to 14.0% for the same period of
1996 primarily as a result of the increased use of owner-operators by the
Company and increased expenses relating to logistics operations. Rent and
purchased transportation increased to 23.9% of operating revenues for the
quarter ended June 30, 1997, from 14.6% for the same quarter in 1996 for the
same reasons.
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 six month period ending June 30, 1997, the Company had
expenditures, net of equipment sales, of $36.4 million for purchases of
property and equipment. The Company funded these purchases of property and
equipment through cash on hand, cash from operations and the Company's bank
lines of credit. Net cash provided by operating activities was $30.9 million
and net cash provided by financing activities was $4.6 million.
The Company has bank lines of credit providing for borrowings of up to $50
million, with interest at the lower of the bank's corporate prime rate or
the 30-day LIBOR rate plus .45%. At June 30, 1997 there was $45.6 million
outstanding under these lines of credit. Management expects to maintain
these lines of credit for an indefinite period.
The Company expects to finance its normal operating requirements and planned
revenue equipment purchases through cash from operations, the Company's bank
lines of credit and secured borrowings. In the future, the Company will
continue to have significant capital requirements, which may require the
Company to seek additional borrowings or to access capital markets. The
availability of debt financing or equity capital will depend upon the
Company's financial condition and results of operations as well as
prevailing market conditions and other factors over which the Company has
little or no control.
-11-
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Not Applicable
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
At the Company's annual meeting of shareholders on May 2, 1997, Michael S.
Starnes, James W. Welch, M.J. Barrow, Morris H. Fair, Jack H. Morris, III,
and Carl J. Mungenast were re-elected as directors upon the following vote:
For Against Abstaining
Michael S. Starnes 8,548,546 0 0
James W. Welch 8,545,199 3,358 0
M.J. Barrow 8,545,199 3,358 0
Morris H. Fair 8,548,546 0 0
Jack H. Morris, III 8,548,546 0 0
Carl J. Mungenast 8,547,409 1,138 0
No other matters were submitted to a vote of security holders during the
second quarter of 1997.
Item 5. Other Information
None
-12-
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).
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.
-13-
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 1993 Incentive Plan for Designated Incorporated by reference
Key Employees from registrant's Proxy
Statement dated April 4,
1996
10.8 1996 Stock Option Plan Incorporated by reference
from registrant's Proxy
Statement dated April 4, 1996.
11 Statement regarding computation of 8
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 June 30, 1997.
-14-
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)
August 14, 1997
Date s/Dwight M. Bassett
Dwight M. Bassett,
Director of Accounting
(Chief Accounting Officer of the
Company)
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