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 September 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 Directors 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 November 1, 1997 - 12,183,101
- 1 -
M.S. Carriers, Inc.
Index to Form 10-Q
Contents
Part I - Financial Information
Item I - Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996. . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income for the Three
Months Ended September 30, 1997 and 1996 and
the Nine Months Ended September 30, 1997 and 1996 . . . . . . . . 5
Consolidated Statement of Stockholders' Equity for
the Nine Months Ended September 30, 1997. . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the Nine
Months Ended September 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 . . . . . . . . . . . . . . . . . . . . . 11
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
- 2 -
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30 December 31
1997 1996
(Unaudited)
___________________________________
Assets
Current assets:
Cash and cash equivalents $ 1,164,620 $ 1,153,993
Accounts receivable:
Trade, net 42,372,136 33,018,388
Officers and employees 1,291,041 1,506,247
___________________________________
43,663,177 34,524,635
Recoverable income taxes 2,495,164 5,870,263
Deferred income taxes 4,843,000 3,755,000
Prepaid expenses and other 6,516,806 4,898,183
___________________________________
Total current assets 58,682,767 50,202,074
Property and equipment:
Land and land improvements 6,221,032 6,110,279
Buildings 30,128,055 30,128,055
Revenue equipment 308,581,049 260,026,924
Service equipment and other 37,691,568 37,014,110
Construction in progress 1,539,297 177,218
___________________________________
384,161,001 333,456,586
Accumulated depreciation and
amortization 101,950,940 96,240,862
___________________________________
282,210,061 237,215,724
Other assets 3,944,630 3,243,916
___________________________________
Total assets $344,837,458 $290,661,714
___________________________________
___________________________________
See accompanying notes.
- 3 -
TABLE
M.S. Carriers, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
September 30 December 31
1997 1996
______________________________________
(Unaudited)
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 14,531,307 $ 7,288,149
Accrued expenses 16,557,369 9,733,798
Claims payable 14,417,467 11,694,210
Current maturities of
long-term debt 20,229,842 14,315,462
______________________________________
Total current liabilities 65,735,985 43,031,619
Long-term debt, less current maturities 54,982,472 45,373,288
Deferred income taxes 52,859,885 48,045,423
Stockholders' equity:
Common stock, $.01 par value, 121,631 120,096
Authorized shares - 20,000,000
Issued and outstanding shares -
12,163,101 at September 30, 1997 and
12,009,633 at December 31, 1996
Additional paid-in capital 63,533,860 59,959,590
Retained earnings 109,607,279 96,135,352
Cumulative translation adjustments (2,003,654) (2,003,654)
______________________________________
Total stockholders' equity 171,259,116 154,211,384
______________________________________
Total liabilities and stockholders'
equity $344,837,458 $290,661,714
______________________________________
______________________________________
See accompanying notes.
- 4 -
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
_______________________________________________________
Operating revenues $107,465,935 $85,822,977 $301,677,875 $249,780,482
Operating expenses:
Salaries, wages and benefits 33,288,290 31,744,986 98,000,840 94,336,135
Operations and maintenance 17,680,798 16,119,444 51,632,095 48,804,729
Taxes and licenses 2,818,984 1,684,384 7,902,127 6,487,765
Insurance and claims 4,933,022 4,029,075 13,888,529 12,561,977
Communications and utilities 1,367,845 1,212,927 3,958,139 3,854,623
Depreciation and amortization 9,908,039 9,078,669 28,939,798 27,516,400
Loss (gain) on disposals of revenue
equipment 53,722 (310,969) (8,455) (1,544,567)
Rent and purchased transportation 26,624,458 13,989,970 70,616,114 36,889,831
Other 464,925 586,346 1,439,882 1,649,886
_______________________________________________________
97,140,083 78,134,832 276,369,069 230,556,779
_______________________________________________________
Operating income 10,325,852 7,688,145 25,308,806 19,223,703
Other expense (income):
Interest expense 1,739,182 1,110,858 4,342,186 3,623,884
Other (68,674) (66,537) (24,572) (346,985)
_______________________________________________________
1,670,508 1,044,321 4,317,614 3,276,899
_______________________________________________________
Income before income taxes 8,655,344 6,643,824 20,991,192 15,946,804
Income taxes 3,085,265 2,387,308 7,519,265 5,772,031
_______________________________________________________
Net income $ 5,570,079 $ 4,256,516 $ 13,471,927 $ 10,174,773
_______________________________________________________
_______________________________________________________
Common shares and common
stock equivalents 12,589,587 12,205,507 12,554,948 12,294,998
Earnings per share $0.44 $0.35 $1.07 $0.83
_______________________________________________________
_______________________________________________________
See accompanying notes.
-5-
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity (Unaudited)
Nine Months Ended September 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
Issuance of common
stock 153,468 1,535 3,574,270 3,575,805
Net Income 13,471,927 13,471,927
____________________________________________________________________________________
Balance at September
30, 1997 $12,163,101 $121,831 $63,533,860 $109,607,279 $(2,003,654) $171,259,116
____________________________________________________________________________________
____________________________________________________________________________________
See accompanying notes.
-6-
M.S. Carriers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30
1997 1996
______________________________________
Operating activities
Net income $ 13,471,927 $10,174,773
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 28,939,798 27,516,400
Gain on disposal of revenue
equipment (8,455) (1,544,567)
Other 150,174 231,891
Provision for deferred income taxes 3,726,462 2,875,116
Changes in operating assets and
liabilities:
Accounts receivable (9,138,542) (3,976,171)
Current and other assets 2,171,742 4,525,308
Trade accounts payable 7,243,158 2,154,838
Other current liabilities 8,770,442 561,066
______________________________________
41,854,779 32,343,881
______________________________________
Net cash provided by operating
activities 55,326,706 42,518,654
Investing activities
Purchases of property and
equipment (72,210,590) (32,803,834)
Proceeds from disposals of property
and equipment 17,458,948 11,637,449
______________________________________
Net cash used in investing
activities (54,751,642) (21,166,385)
Financing activities
Proceeds from revolving line of
credit and long-term debt 134,354,000 86,872,515
Proceeds from exercise of stock
options 802,994
Reurchase of Common Stock (11,530,250)
Principal payments on revolving
line of credit and long-term debt (134,918,437) (97,707,708)
______________________________________
Net cash provided by (used in)
financing activities (564,437) (21,562,449)
______________________________________
Increase (decrease) in cash and cash
equivalents 10,627 (210,180)
Cash and cash equivalents at
beginning of period 1,153,993 486,459
______________________________________
Cash and cash equivalents at end
of period $ 1,164,620 $ 276,279
______________________________________
______________________________________
See accompanying notes.
-7-
M.S. Carriers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1997
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the nine-month period ended September 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 Nine
Months Ended
September 30
September 30
1997 1996 1997 1996
_______________________________________________________
Average common shares 12,009,633 11,998,281 12,009,633 12,161,280
outstanding
Common stock
equivalents 579,954 207,226 545,315 133,718
_______________________________________________________
Average common shares
and common stock
equivalents 12,589,587 12,205,507 12,554,948 12,294,998
_______________________________________________________
_______________________________________________________
Net income $ 5,570,079 $ 4,256,516 $ 13,471,927 $10,174,773
_______________________________________________________
_______________________________________________________
Net income per common
and equivalent share $0.44 $0.35 $1.07 $0.83
_______________________________________________________
_______________________________________________________
3. Non Cash Transaction
On September 18, 1997, the Company purchased 261 tractors and 486 trailers
operated by New Hi-Way Express, Inc., an Arkansas based truckload carrier
in exchange for Common Stock and other consideration.
-8-
PAGE
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 Nine Months Ended
September 30 September 30
1997 1996 1997 1996
_______________________________________________________
Operating revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 31.0 37.0 32.5 37.8
Operations and maintenance 16.4 18.8 17.1 19.5
Taxes and licenses 2.6 2.0 2.6 2.6
Insurance and claims 4.6 4.7 4.6 5.0
Communications and utilities 1.3 1.4 1.3 1.5
Depreciation and amortization 9.2 10.6 9.6 11.0
Loss (gain) on disposals of
revenue equipment 0.1 (0.4) - (0.6)
Rent and purchased transportation 24.8 16.3 23.4 14.8
Other 0.4 0.6 0.5 0.7
_______________________________________________________
Total operating expenses 90.4 91.0 91.6 92.3
_______________________________________________________
Operating income 9.6 9.0 8.4 7.7
Interest expense (1.6) (1.3) (1.4) (1.4)
Other income 0.1 0.1 - 0.1
_______________________________________________________
Income before income taxes 8.1 7.8 7.0 6.4
Income Taxes 2.9 2.8 2.5 2.3
_______________________________________________________
Net income 5.2% 5.0% 4.5% 4.1%
_______________________________________________________
_______________________________________________________
Results of Operations
Operating revenues for the first nine months of 1997 increased $51.9 million,
or 20.8%, to $301.7 million compared with $249.8 million for the same period
in the prior year. For the quarter ended September 30, 1997, operating
revenues increased $21.6 million, or 25.2%, to $107.5 million compared
with $85.8 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 3,113 tractors at September 30, 1997 from 2,426 at
September 30, 1996, an increase of 687 tractors.
-9-
CAPTION
The sources of the Company's revenues were as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
___________________________________________
(in thousands) (in thousands)
Domestic Linehaul $ 51,877 $ 39,371 $144,660 $121,321
Interline Service - Mexico 7,738 8,115 22,100 23,407
Dedicated 6,815 7,263 20,275 20,460
Regional 30,791 24,773 89,490 68,983
Logistics 10,245 6,301 25,153 15,609
___________________________________________
Total $107,466 $ 85,823 $301,678 $249,780
___________________________________________
___________________________________________
The operating ratio (operating expenses as a percentage of revenues) for
the first nine months of 1997 was 91.6% compared to 92.3% for the same
period of 1996 and was 90.4% for the third quarter of 1997 compared to
91.0% for the same quarter in 1996.
Salaries, wages and benefits decreased to 32.5% and 31.0% of operating
revenues for the nine-month and three-month periods ending
September 30, 1997, from 37.8% and 37.0% for the same periods in 1996.
These decreases were due primarily to the increased use of owner-
operators. The Company had 743 owner-operators at September 30, 1997
compared to 338 at September 30, 1996.
Operations and maintenance expenses decreased to 17.1% and 16.4% of
operating revenues for the nine-month and three-month periods ending
September 30, 1997 from 19.5% and 18.8% for the same periods in 1996
due primarily from the increased use of owner-operators by the Company.
Insurance and claims decreased to 4.6% of operating revenues for the nine-
month and three-month periods ended September 30, 1997 from 5.0% and
4.7% for the same periods ended September 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.
Depreciation and amortization was 9.6% of operating revenues for the
first nine months of 1997 compared to 11.0% for the same period in
1996 and 9.2% of operating revenues for the quarter ended
September 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 minimal gain from the disposals of revenue
equipment during the nine-month period ended September 30, 1997
compared to reported gains of .6% of operating revenues for the
same period of 1996. For the quarter ended September 30, 1997
the Company reported a loss equal to .1% of operating revenues
from the disposals of revenue equipment compared to a reported
gain from the disposals of revenue equipment of .4% of operating
revenues for the same quarter of 1996.
Rent and purchased transportation increased to 23.4% of operating
revenues in the first nine months of 1997 compared to 14.8% 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 24.8% of operating revenues for the quarter ended
September 30, 1997 from 16.3% 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 nine month period ending September 30, 1997, the Company
had expenditures, net of sales, of $54.8 million for purchases of
property and equipment. The Company funded these purchases of
property and equipment through cash on hand and cash from operations.
Net cash provided by operating activities was $55.3 million.
The Company has bank lines of credit providing for borrowings of up
to $58.6 million, with interest at the lower of the bank's
corporate prime rate or the 30-day LIBOR rate plus .45%. At
September 30, 1997 there was $46.4 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.
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
No matters were submitted to a vote of security holders during the third
quarter of 1997.
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).
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 1993 Incentive Plan for Designated Incorporated by reference
Key Employees from exhibits to the
registrant's 2nd Quarter
1995 Form 10-Q.
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 September 30, 1997.
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)
Date: November 14, 1997 s/Dwight M. Bassett
Dwight M. Bassett,
Director of Accounting
(Chief Accounting Officer
of the Company)