SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-24908
TRANSPORT CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1386925
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1769 YANKEE DOODLE ROAD
EAGAN, MINNESOTA 55121
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (651) 686-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of shares held by non-affiliates of the Registrant as
of March 24, 2000 (based on the closing sale price of the Common Stock on that
date) was $45,983,303.
As of March 24, 2000, the Company had outstanding 8,318,546 shares of Common
Stock, $.01 par value.
Documents Incorporated by Reference: Part III, Items 10, 11, 12 and 13
incorporate by reference portions of Transport Corporation of America, Inc.'s
Proxy Statement for the 2000 Annual Meeting of Shareholders.
This Form 10-K report consists of 54 pages (including exhibits: the index to
exhibits is set forth on page 24).
TRANSPORT CORPORATION OF AMERICA, INC.
PART I
ITEM 1. BUSINESS
OVERVIEW
Transport Corporation of America, Inc. (the "Company" or "Transport
America"), which began substantial operations in 1984, provides a wide range of
truckload carriage and logistics services in various lengths of haul in the
United States and parts of Canada. The Company has designed its business to
provide high quality, customized logistics services that allow it to be a
preferred partner or core carrier to major shippers. The Company serves as an
integral part of the distribution system of many of its major customers,
including Federal Express, P.P.G. Industries, 3M Company, Ford Motor Company,
S.C. Johnson & Sons, General Mills, Hon Company, Polaris Industries, and Sears,
Roebuck & Co. The Company's customers require time-definite pick-up and delivery
to support just-in-time inventory management; specialized equipment, such as
temperature controlled trailers, trailers designed to support decking,
multi-stop loading and unloading and electronic data interchange services to
automate the exchange of order and load data. The Company also provides
transportation logistics services in which it arranges transportation for
customers with other third-party transportation providers. To support these
complex customer requirements and deliver logistics services cost effectively,
Transport America has developed a sophisticated information management system
which it believes makes it a technological leader in the industry.
The Company carries out its business strategy by assigning an
experienced marketing representative to each customer to tailor its logistics
services, and by providing a wide range of transportation services, including
line-haul, multi-stop capability, regional and local operations, van trailers
with and without refrigeration or temperature control, time-definite pick-up and
delivery, satellite monitored transit, and information technology services. As
part of its mission to serve the logistics needs of its mostly Fortune 500
customers, Transport America provides dedicated transportation and logistic
services.
On July 1, 1998, the Company acquired North Star Transport, Inc.
("North Star"), a private truckload carrier based in Eagan, Minnesota. The
operations of North Star were integrated into those of the Company during the
second half of 1998. The Company operated Transport International Express, Inc.
("TIE") from August 1997 through December 1998. This less-than-truckload express
service did not meet Company expectations. Consequently, the Company sold the
assets and operations of TIE to Express America, Inc. effective January 1, 1999
and obtained a minority ownership interest in Express America. On May 1, 1999,
Transport America acquired Robert Hansen Trucking, Inc. ("RHT"), a private
truckload carrier in Delavan, Wisconsin. Integration of RHT operations with
those of Transport America is complete.
In October 1999, the Company announced the formation of TA Logistics, a
wholly owned subsidiary that will provide services related to transportation
procurement and logistics processes. Operations of TA Logistics commenced in the
first quarter of year 2000.
2
TRANSPORT CORPORATION OF AMERICA, INC.
On January 17, 2000, Transport America entered into an Agreement and
Plan of Merger (the "Merger Agreement") with USFreightways Corporation based in
Chicago, Illinois, and Zeus Acquisition Corporation, a wholly-owned subsidiary
of USFreightways. On February 8, 2000, the parties terminated the Merger
Agreement by mutual agreement.
CUSTOMER FOCUS AND SERVICES
The Company has designed its business to be a core carrier or preferred
partner to major shippers by providing high quality, tailored logistics service.
The Company serves as an integral part of the distribution system of many of its
major customers, including Polaris Industries, Federal Express, 3M Company,
General Mills, Ford Motor Company, Hon Company, S.C. Johnson & Sons, Sears
Roebuck & Co., and P.P.G. Industries. Some of the Company's other major
customers are Target Stores, K-Mart Corporation, Dupont, Arctic Cat, Inc.,
Pillsbury, and Clorox Company. The principal categories of freight hauled by the
Company are department store merchandise, grocery, industrial, consumer, paper
products, and expedited services.
During 1999, the Company's largest 5, 10, and 25 customers accounted
for approximately 45%, 63% and 77%, respectively, of operating revenues. During
1999, Sears, Roebuck & Co. accounted for approximately 15% of the Company's
operating revenues.
MARKETING. The Company's marketing personnel seek to strengthen
Transport America's position with existing customers and establish it with
prospective customers by taking advantage of the trend among shippers toward
private fleet conversions, outsourcing of transportation requirements, and
utilization of core carriers. The Company employs a marketing force located
throughout its primary business areas. Senior management is also actively
involved in marketing, logistics planning, and customer relations, especially
with large national customers.
SERVICE CENTERS. The Company utilizes strategically located service
centers to provide an added level of customer service and support. These
facilities are located in close proximity to major customer locations, thereby
enabling the Company to provide a large amount of equipment, local cartage
service, and local customer service representatives to work directly with
customers on a day-to-day basis. The Company believes these service centers
provide a competitive advantage by allowing it to work more directly and
frequently with customers and provide equipment more rapidly. The Company also
believes that its service centers allow it to maintain closer relationships with
its driver workforce through on-site driver amenities and interactions with
service center personnel.
3
TRANSPORT CORPORATION OF AMERICA, INC.
TIME-DEFINITE SERVICE. In each of its markets, the Company seeks to
provide 100% on-time pickup and delivery, expedited time-in-transit, logistical
planning to coordinate and deliver freight within time-definite parameters, and
advanced information capabilities that provide value to customers. Time-definite
transportation requires pick-ups and deliveries to be performed within narrowly
defined time frames. Time-definite services are particularly important to the
Company's customers who operate just-in-time manufacturing, distribution, and
retail inventory systems.
HUMAN RESOURCES
Transport America's human resources are an important element of its
customer-focused business strategy. Employee drivers, independent contractors,
and non-driver employees regularly interact with customers and are ultimately
responsible for customer satisfaction. In order for the Company to grow and
continue to be positioned as a quality carrier of choice for existing and new
customers, changes to the driver's work environment are necessary. The Company
continues to emphasize competitive pay packages, quality at-home time, and
"driver friendly" freight as principal means to attract and retain its driver
workforce.
INDEPENDENT CONTRACTORS. The Company believes that a fleet of both
employee drivers and independent contractors is essential if the Company is to
continue its growth. Independent contractors provide their own tractors,
generally have a lower turnover rate than the Company has experienced with
employee drivers, and have a strong emphasis on safety.
The Company enters into operating agreements with its independent
contractors, pursuant to which its independent contractors agree to furnish a
tractor and driver to transport, load and unload goods on behalf of the Company.
These agreements typically have terms for less than one year and provide for the
payment to independent contractors of fixed compensation for total loaded and
empty miles as well as for performing other ancillary services. Independent
contractors must pay all of their operating expenses and must meet DOT
regulatory requirements, as well as safety and other standards established by
the Company. The Company has implemented an incentive program to encourage safe
driving and good customer service habits.
DRIVER WORK ENVIRONMENT. The Company believes that the type of freight
it typically handles is a significant factor in retention of employee drivers
and independent contractors. Consequently, the Company focuses much of its
marketing efforts on customers with freight that is "driver-friendly" in that it
requires minimal loading or unloading by drivers and customer employees.
4
TRANSPORT CORPORATION OF AMERICA, INC.
The Company utilizes late-model, reliable equipment including standard
features such as double sleeper bunks, extra large cabins, air-ride suspensions,
and anti-lock brakes. The Company also provides satellite communications
technology which enables drivers to receive load-related information,
directions, pay information, and family emergency information. The Company's
service centers are strategically located to provide services for the driver,
such as showers, laundry facilities, break-rooms, fuel, tractor and trailer
maintenance, and in-person assistance from service center personnel.
COMPENSATION AND BENEFITS. The Company's compensation and benefits
package has been structured to compensate drivers on the basis of miles driven
and ancillary services performed, with increases in base compensation
commensurate with length of service. Employee driver benefits include paid
holiday and vacation days, health insurance, and a Company funded 401(k)
retirement plan. Performance bonuses are paid based upon safety, customer
service and fuel consumption. The Company believes its compensation and benefits
package for employee drivers and independent contractors continue to rank among
the highest in the truckload industry.
RECRUITING AND TRAINING. The Company's employee drivers are hired, and
independent contractors are approved, in accordance with specific Company
guidelines relating to safety records, prior work history, personal evaluation,
accident and driving record verification, drug and alcohol screening, and a
physical examination. The Company's initial orientation and training seminar
includes a review of all Company policies and operating requirements, written
and road driving tests, defensive driving and safety skills, DOT compliance
requirements, and the employee driver's and independent contractor's role in
providing safe and efficient value-added service to customers. The Company has
increased the recruitment and training of inexperienced driver trainees. These
driver candidates are placed in an extensive training program before being
assigned their own truck. In the first quarter of 2000, the Company opened a new
school that will enable persons new to the transportation industry to acquire a
commercial driver's license ("CDL"). The Company anticipates that the CDL school
will enhance its recruiting efforts and that all school graduates will be
employed as Company drivers.
In addition to the initial training seminar, on-going training on
subjects such as safety, compliance, the handling of hazardous materials,
equipment operation, customer expectations, and Company policies is conducted at
the Company's service centers and periodically at outside training facilities
under contract with the Company. The Company also conducts driver meetings,
publishes a newsletter, and conducts specific professional development training,
including training to become an over-the-road driver instructor.
5
TRANSPORT CORPORATION OF AMERICA, INC.
DRIVER AND INDEPENDENT CONTRACTOR SUPERVISION. The Company assigns each
employee driver and independent contractor to a specific fleet manager. The
fleet manager's role is to be the primary support resource for the employee
driver or independent contractor. The fleet manager also communicates the work
assignments using satellite technology, schedules time off, arranges required
safety inspections, reviews performance, provides day-to-day training, and is
accountable for the retention and productivity of the assigned employee drivers
and independent contractors.
NON-DRIVER EMPLOYEES. Mechanics, service center personnel, corporate
staff, and marketing employees are as important to the success of the Company in
meeting or exceeding customer expectations as are employee drivers and
independent contractors. Employee task groups are used to analyze specific
problems, recommend a course of corrective action, and assist in the
implementation of required changes.
As of December 31, 1999, the Company employed 1,179 student and
professional employee drivers, 109 mechanics, 432 persons in operations,
marketing, training, and administration, and had agreements with 811 independent
contractors. The Company's employees are not represented by any collective
bargaining units, and the Company considers relations with its employees and
independent contractors to be good.
TECHNOLOGY
The Company has developed an integrated, client/server computer
information system. This system integrates operations with the principal
back-office functions of safety, maintenance, driver and independent contractor
settlement, fuel, billing, and accounting. The system also includes
satellite-based communications with the fleet. This system provides information
directly to and from the Company, its customers, and drivers to assist in
managing a complex information environment. During year 2000, the Company
expects to fully implement a replacement operations system to complete its
migration to client/server technology. The Company believes that utilizing
advanced technology is the best way to manage a complex, customer-driven
logistics process in a cost effective manner.
OPERATIONS AND COMMUNICATIONS. The Company utilizes information systems
and satellite-based communications to process orders, dispatch loads, and
monitor loads in transit. Load planners match customer orders daily with driver
availability. Once the most appropriate decision respecting a load is made,
based on computer monitored load factors, the load information is sent directly
to the driver through the satellite network. The satellite system simplifies
locating of equipment and permits timely and efficient communication of critical
operating data such as shipment orders, loading instructions, routing, fuel,
taxes paid and mileage operated, payroll, safety, traffic, and maintenance
information.
6
TRANSPORT CORPORATION OF AMERICA, INC.
ELECTRONIC DATA INTERCHANGE ("EDI"). The Company's system enables full
electronic data interchange of load tendering, shipment status, freight billing,
and payment. This system provides significant operating advantages to the
Company and its customers, including real-time information flow, reduction or
elimination of paperwork, error-free transcription, and reductions in clerical
personnel. EDI allows the Company to exchange data with its customers in a
variety of formats, depending on the individual customer's capabilities, which
significantly enhances quality control, customer service, and efficiency. A
significant portion of the Company's revenues are currently processed through
EDI.
INTERNET ACCESS. The Company is expanding customer on-line access to
certain load status information, with full implementation expected in mid-year
2000, with other features to follow, depending upon customer needs. The Company
currently provides on-line download capability for images of various shipping
documents and on-line shipment status. The Company also maintains an internet
web site (www.transportamerica.com) to provide information for customers,
potential employees, and investors. The Company expects to continue to expand
its use of the internet.
REVENUE EQUIPMENT
The Company operates a modern fleet of tractors and trailers. Tractors
are typically replaced every 48 to 60 months, based on factors such as age and
condition, current interest rates, the market for used equipment, and
improvements in technology and fuel efficiency. The average age of the
Company-operated tractors at December 31, 1999 was approximately 19 months.
The Company has available a variety of trailers to meet customer
requirements. At December 31, 1999, these included 5,680 dry vans, most of which
are logistic capable and many of which are equipped with heaters, 398
refrigerated vans, and 41 flat beds. The trailer-to-tractor ratio of 3.0 allows
the Company to provide its high-volume customers with extra trailers to
accommodate loading and unloading, and to improve driver and asset utilization.
Depending on market conditions, the Company generally replaces trailers after
four to six years of service. The average age of in-service trailers at December
31, 1999 was approximately 33 months.
7
TRANSPORT CORPORATION OF AMERICA, INC.
The following table shows the model years of the Company tractors and
trailers as of December 31, 1999:
Model Year Tractors Trailers
- ---------- ------------ ------------
2000 244 706
1999 480 1,539
1998 391 1,006
1997 129 587
1996 2 964
1995 and prior 10 1,317
------------ ------------
Total Company 1,256 6,119
Independent Contractor 811 0
------------ ------------
Total available 2,067 6,119
============ ============
COMPETITION
The truckload transportation business is extremely competitive and
fragmented. The Company competes primarily with other truckload carriers,
particularly those in the high service end of the truckload market. The Company
also competes with alternative forms of transportation, such as rail,
intermodal, and air freight, particularly in the longer haul segments of its
business. Competition in the truckload industry has created pressure on the
industry's pricing structure. Generally, competition for the freight transported
by the Company is based more on service, equipment availability, trailer type,
and efficiency than freight rates. There are a number of competitors that have
substantially greater financial resources, operate more equipment, and transport
more freight than the Company.
8
TRANSPORT CORPORATION OF AMERICA, INC.
EXECUTIVE OFFICERS
The executive officers of Transport America are as follows:
NAME AND AGE POSITION WITH TRANSPORT AMERICA
- ------------ -------------------------------
Robert J. Meyers (46) Director of Transport America since 1997; Chief
Executive Officer of Transport America since
December 1999; President and Chief Operating Officer
of Transport America since May 1997; Chief Financial
Officer of Transport America from January 1993 to
July 1998 and from December 1998 to July 1999; and
Chief Information Officer of Transport America since
January 1992. Prior to joining Transport America,
Mr. Meyers was founder and President of MicroMation,
Inc., a Minneapolis/St. Paul - based software
development company from February 1982 to January
1992. During this same period, he founded and served
as a certified public accountant with Meyers and
Meyers, Ltd.
Keith R. Klein (36) Chief Financial Officer of Transport America since
July 1999; From 1997 to July 1999, Mr. Klein was
founder and owner of a financial consulting firm;
From 1990 to 1997, he served in various positions at
Deluxe Corporation, most recently as Vice President
and Corporate Controller.
David L. Carter (51) Vice President of Risk Management of Transport
America since March 1999. Prior to March 1999, Mr.
Carter served as Transport America's Director of
Risk Management since March 1997, and Loss
Prevention Manager from February 1995 to March 1997.
Prior to joining Transport America, he served in
several risk management and training positions with
Schneider National, Inc. Prior to that time, he
served as a pilot on the Inland Waterways of the
United States.
Larry E. Johnson (55) Vice President of Marketing Services of Transport
America since March 1999. Mr. Johnson joined
Transport America in September 1984 as Manager of
Marketing Services and has served as Director of
Marketing Services since January 1995. Prior to
joining Transport America he worked for Overland
Express, Inc. as Manager of Marketing Services from
January 1981 to September 1984. Prior to Overland
Express, he served in various management positions
with Target Stores, Inc. from January 1968 to
December 1980.
9
TRANSPORT CORPORATION OF AMERICA, INC.
Jeffrey P. Vandercook (44) Vice President of Operations of Transport America
since March 1999. Prior to March 1999, Mr.
Vandercook served as Director of Operations of
Transport America from 1993 to March 1999,
Operations Manager from 1989 to 1993, Area Manager
from 1987 to 1989, and a dispatcher from 1986 to
1987. Prior to joining Transport America, he worked
as a Dispatcher for Overland Express.
Robert C. Stone (47) Vice President of Fleet Services of Transport
America since March 1999. Prior to March 1999, Mr.
Stone served as Director of Fleet Management of
Transport America from January 1997 to 1999, Manager
of Emergency Road Service from February 1993 to
December 1996, and Shop Supervisor from December
1991 to February 1993. Prior to joining Transport
America as a Maintenance Mechanic in 1985, Mr. Stone
served as a Mechanic for Overland Express beginning
in 1971. In addition to his years at Overland
Express, Mr. Stone served as Warehouse Coordinator
for Gazda-Bekins and a franchise operator for MAC
tools.
Jon M. Seebach (46) Vice President of Information Services of Transport
America since March 1999. Prior to joining Transport
America, Mr. Seebach was Director of Client
Operations from May 1997 through February 1999 at
Deluxe Corporation; Director of Information Services
at Transport America from October 1995 to May 1997;
Director of Information Services at AmeriData
Technologies from April 1993 to October 1995;
Director of System Support at EduServ Technologies
from April 1993 to April 1994; Assistant Vice
President and Network Services Technical Manager at
First Bank Systems from December 1988 to April 1993;
Manager of Microcomputer Development at McGladrey
and Pullen, CPA's, from June 1984 to December 1988;
and Senior Auditor/Planning & Budget Analyst at St.
Paul Companies, Inc. from June 1973 to June 1984.
Daniel L. VanAlstine (41) Vice President of Marketing of Transport America
since July 1999; Prior to July 1999, Mr. VanAlstine
served as President of Logistics Services of
AmeriTruck Distribution Corp. from June 1997 until
March 1999. From April 1993 to June 1997, he served
as Executive Vice President at Transtar,
Inc./Proline Carriers.
10
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 2. PROPERTIES
The following chart provides information concerning the Company's
service centers and other facilities:
SERVICE CENTERS AND OTHER OWNED SQUARE
FACILITIES OR LEASED ACREAGE FOOTAGE
- ------------------ --------- ------- -------
Clarksville, Indiana Owned 14.7 18,126
Hudson, Wisconsin Owned 6.8 4,896
Janesville, Wisconsin Owned 13.6 36,700
North Jackson, Ohio Owned 8.1 11,230
North Liberty, Iowa Owned 13.0 15,150
Kansas City, Missouri Owned 10.0 14,862
Columbus, Ohio Owned 17.0 43,000
Garland, Texas Owned 9.2 32,000
Bishopville, South Carolina Leased 3.5 1,500
Atlanta, Georgia Owned 16.2 14,860
Harrisburg, Pennsylvania Leased * *
Eagan, Minnesota (1769 Yankee Doodle Road) Owned 2.5 29,000
Eagan, Minnesota (Terminal Drive) Owned 14.9 17,500
Eagan, Minnesota (Apollo Road) Leased 4.0 15,760
Eagan, Minnesota (1750 Yankee Doodle Road) Leased ** 11,358
Eagan, Minnesota (1715 Yankee Doodle Road)*** Leased 8.32 118,978
* This facility is shared with another company.
** Office facility.
***Under Construction.
The Company's current rental payments for its leased facilities range
from approximately $1,000 to $12,000 per month. The terms of the Company's
leases for the Bishopville, Atlanta, Harrisburg and Apollo Road (Eagan, MN)
locations are month-to-month and do not include automatic renewal options. The
Company does not anticipate any difficulties renewing or continuing these
leases. The Company intends to vacate the 1750 Yankee Doodle Road (Eagan, MN)
premises prior to the lease expiration in May 2000. The Company also plans to
vacate the Apollo Road (Eagan, MN) location in April 2000.
In addition to the properties listed above, Transport America leases
parking and drop lot space at various locations.
11
TRANSPORT CORPORATION OF AMERICA, INC.
In April 1999, Transport America entered into a five-year operating
lease for the construction of a new headquarters facility located at 1715 Yankee
Doodle Road in Eagan, MN. Construction is expected to be substantially complete
in the first quarter of 2000 with move-in expected by April 2000. The aggregate
lease payments are contingent on the final construction costs, which are
currently estimated to be $13 million.
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its
business, primarily involving claims for workers' compensation or for personal
injury and property damage incurred in the transportation of freight. The
Company maintains insurance which covers liability amounts in excess of retained
liabilities from personal injury and property damage claims. The Company
currently carries a total of $30 million liability insurance coverage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
12
TRANSPORT CORPORATION OF AMERICA, INC.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
PRICE RANGE OF COMMON STOCK. The Company's Common Stock is traded on
the Nasdaq National Market under the symbol TCAM. The following table sets forth
the high and low closing prices for the Company's Common Stock, as reported by
Nasdaq, for the periods indicated:
PERIOD HIGH LOW
------ ---- ---
1999
1st Quarter 13.750 11.250
2nd Quarter 13.438 9.750
3rd Quarter 16.250 12.375
4th Quarter 13.500 10.563
1998:
1st Quarter 18.250 14.250
2nd Quarter 18.250 16.250
3rd Quarter 17.250 10.000
4th Quarter 12.875 10.875
SHAREHOLDERS. As of March 24, 2000, the Company had 384 shareholders of
record, including Depository Trust Company, which held of record 5,867,303
shares.
DIVIDENDS. The Company has never paid any cash dividends on its Common
Stock and does not intend to pay cash dividends for the foreseeable future. Any
future decision as to the payment of dividends will be at the discretion of the
Company's Board of Directors and will depend upon the Company's results of
operations, financial position, cash requirements, certain corporate law
restrictions, restrictions under loan agreements and such other factors as the
Board of Directors deems relevant.
13
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share and operating data) DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Income Statement Data:
Operating revenues $ 285,585 $ 245,913 $ 186,392 $ 164,666 $ 144,254
Operating expenses:
Salaries, wages and benefits 79,938 67,937 53,166 45,515 41,479
Fuel, maintenance and other expenses 31,742 26,916 25,028 23,877 21,191
Purchased transportation 97,695 83,005 55,614 46,761 37,258
Revenue equipment leases 2,543 3,731 4,893 6,490 7,090
Depreciation and amortization 25,715 19,348 15,494 13,966 10,273
Insurance, claims and damage 7,270 6,816 5,620 4,686 5,727
Taxes and licenses 5,249 4,016 3,248 2,952 2,873
Communications 3,307 2,869 2,072 1,974 1,978
Other general and administrative expenses 11,849 9,310 6,410 5,324 5,389
Gain on disposition of equipment (794) (503) (1,336) (275) (1,755)
--------- --------- --------- --------- ---------
Total operating expenses 264,514 223,445 170,209 151,270 131,503
Operating income 21,071 22,468 16,183 13,396 12,751
Interest expense, net 7,504 4,999 3,242 2,734 2,038
--------- --------- --------- --------- ---------
Earnings before income taxes 13,567 17,469 12,941 10,662 10,713
Provision for income taxes 5,291 6,813 5,190 4,368 4,607
--------- --------- --------- --------- ---------
Net earnings $ 8,276 $ 10,656 $ 7,751 $ 6,294 $ 6,106
========= ========= ========= ========= =========
Net earnings per share - basic $ 1.02 $ 1.46 $ 1.18 $ 0.98 $ 0.96
========= ========= ========= ========= =========
Net earnings per share - diluted $ 0.97 $ 1.42 $ 1.15 $ 0.94 $ 0.91
========= ========= ========= ========= =========
Weighted average shares outstanding 8,142 7,300 6,568 6,442 6,361
========= ========= ========= ========= =========
Weighted average shares outstanding,
assuming dilution 8,570 7,521 6,734 6,718 6,709
========= ========= ========= ========= =========
Pretax margin 4.8% 7.1% 6.9% 6.5% 7.4%
OPERATING DATA (TRUCKLINE ONLY):
Tractors (at end of period)
Company 1,256 1,078 891 775 779
Independent contractor 811 922 448 445 401
--------- --------- --------- --------- ---------
Total 2,067 2,000 1,339 1,220 1,180
Trailers (at end of period) 6,119 5,387 3,723 3,236 2,913
Average revenues per tractor per week $ 2,692 $ 2,831 $ 2,837 $ 2,736 $ 2,739
Average revenues per mile (1) $ 1.27 $ 1.28 $ 1.28 $ 1.28 $ 1.28
Average empty mile percentage 12.1% 10.8% 11.0% 11.2% 11.4%
Average length of haul, miles 712 674 629 644 674
Average annual revenues per non-driver
employee $ 561,800 $ 591,000 $ 544,300 $ 526,700 $ 477,300
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets $ 272,141 $ 224,552 $ 147,528 $ 108,671 $ 99,457
Long term debt, net of current maturities (2) 106,106 79,531 44,618 21,838 24,436
Common stock with non-detachable put 20,268 20,268 -- -- --
Stockholders' equity 75,129 61,733 50,807 43,083 36,307
1. Net of fuel surcharges
2. Long-term debt excludes $1,951,000 for the total of obligations under
revenue equipment operating leases for regular lease payments plus the
residual cost of acquiring the leased equipment at the end of the lease
term. The combined total of long term indebtedness (excluding current
maturities), lease obligations, and residual acquisition costs at
December 31, 1999 was $108,057,000.
14
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company's primary business strategy is to provide truckload
carriage and logistics services throughout the United States and parts of Canada
as an integral part of the distribution system of many of its major customers.
Operations are conducted primarily from the Company's Eagan, Minnesota corporate
offices, with maintenance and driver services at its eleven terminal facilities
located throughout the United States.
During the most recent three and five year periods ended December 31,
1999, the Company increased its revenues at a compounded annual growth rate of
20.2% and 17.5%, respectively. In addition to internal growth, the acquisitions
of two private truckload carriers, North Star Transport, Inc. ("North Star") in
July 1998, and Robert Hansen Trucking, Inc. ("RHT") in May 1999, contributed to
the revenue increases. The acquisitions allowed the Company to expand its
business with several significant new customers and to expand its relationship
with an existing significant customer. In October 1999, the Company announced
the formation of TA Logistics to provide services related to transportation
procurement and the management of logistics processes.
The Company uses both employee drivers and independent contractors for
its fleet operations. As of December 31, 1999, the Company's tractor fleet
consisted of 2,067 units of which approximately 39% were owned by independent
contractors, compared to approximately 36% and 31% at the end of 1996 and 1994,
respectively. The Company expects that the independent contractor portion of its
fleet will continue to increase from the current levels. As a result of the
growth of its independent contractor fleet as a percentage of its total fleet,
purchased transportation expenses have increased and other expenses associated
with its company-owned fleet have decreased as a percentage of operating
revenues. The Company intends to increase its tractor fleet, both company-owned
and independent contractor, along with its trailer fleet, as profitable customer
opportunities arise.
15
TRANSPORT CORPORATION OF AMERICA, INC.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of expense
items to operating revenues for the periods indicated:
Years ended December 31,
------------------------------
(amounts in percents) 1999 1998 1997
- -------------------------------------------------------------------------------
Operating revenues 100.0 100.0 100.0
Operating expenses:
Salaries, wages, and benefits 28.0 27.6 28.5
Fuel, maintenance, and other expenses 11.1 10.9 13.4
Purchased transportation 34.2 33.8 29.9
Revenue equipment leases 0.9 1.5 2.6
Depreciation and amortization 9.0 7.9 8.3
Insurance, claims and damage 2.5 2.8 3.0
Taxes and licenses 1.8 1.6 1.7
Communications 1.2 1.2 1.1
Other general and administrative expenses 4.2 3.8 3.5
Gain on sale of equipment (0.3) (0.2) (0.7)
------ ------ ------
Total operating expenses 92.6 90.9 91.3
------ ------ ------
Operating income 7.4 9.1 8.7
Interest expense, net 2.6 2.0 1.8
------ ------ ------
Earnings before income taxes 4.8 7.1 6.9
Provision for income taxes 1.9 2.8 2.7
------ ------ ------
Net earnings 2.9 4.3 4.2
====== ====== ======
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Operating revenues increased 16.1% to $285.6 million for the year ended
December 31, 1999 from $245.9 million for the year ended December 31, 1998.
Revenue growth was driven by expansion of existing customer relationships, new
customer additions, and business attributable to the North Star acquisition,
which became effective July 1, 1998, and the RHT acquisition, which became
effective May 1, 1999. Revenues per mile, excluding fuel surcharges, were $1.27
per mile for 1999 compared to $1.28 per mile for 1998. Equipment utilization, as
measured by average revenues per tractor per week, was $2,692 during 1999,
compared to $2,831 during 1998. The decline reflects decreased equipment
utilization from the historically lower utilization of the North Star and RHT
businesses and a significant number of unseated tractors during the last half of
the year. In addition, the Company experienced computer database problems in
August 1999, which caused the Company to forgo freight revenue opportunities for
over 2,000 loads.
16
TRANSPORT CORPORATION OF AMERICA, INC.
The pre-tax margin (earnings before income taxes as a percentage of
operating revenues) was 4.8% for 1999, compared to 7.1% for 1998. Salaries,
wages and benefits was 28.0% for 1999, compared to 27.6% for 1998. Non-driver
efficiency, as measured by average annual revenues per non-driver employee, was
$561,800 for 1999 and $591,000 for 1998. The percentage of miles driven by
independent contractors increased to 45.5% in 1999 from 43.8% in 1998, as a
result of the higher average number of independent contractors in 1999.
Accordingly, purchased transportation increased as a percentage of operating
revenues to 34.2% for 1999 from 33.8% for 1998. Fuel, maintenance and other
expense was 11.1% of operating revenue in 1999, compared to 10.9% of operating
revenues in 1998, reflecting significantly higher fuel costs in the last half of
1999 and partially offset by the lower proportion of miles driven by Company
drivers in 1999, when compared to 1998. Revenue equipment leases decreased as a
percentage of operating revenues to 0.9% for 1999 from 1.5% for 1998, reflecting
reduced leasing activity. Depreciation and amortization was 9.0% for 1999,
compared to 7.9% for 1998, resulting from reduced equipment leasing activity and
under-utilized equipment capacity in the last half of 1999 and a higher
proportion of Company-owned equipment in 1999, compared to 1998. Improved
accident and claims experience in 1999 was the primary reason for the decrease
of insurance, claims and damage expense as a percentage of operating revenues to
2.5% for 1999 from 2.8% for 1998. Net interest expense increased as a percentage
of operating revenues to 2.6% for 1999 from 2.0% for 1998, primarily reflecting
higher average debt in 1999 associated with the acquisition of RHT in May 1999,
and purchases of additional revenue equipment in 1999, when compared to 1998.
Other general and administrative expenses increased as a percentage of
revenues to 4.2% for 1999 from 3.8% for 1998, reflecting a special pretax
charge. In the fourth quarter of 1999, a special bad debt reserve of $2.7
million was established for certain specific receivables, decreasing 1999
earnings by $0.20 per share. This reserve was established due to a change in
strategy relating to a particular type of relationship and increased exposure
risk.
Gain on the disposition of equipment was $0.8 million in 1999, compared
to a gain of $0.5 million in 1998, as a result of a higher number of equipment
dispositions in 1999 when compared to 1998.
The provision for income taxes as a percentage of operating revenues
was 1.9% for 1999 and 2.8% for 1998. The effective tax rate was 39.0% for both
1999 and 1998.
As a result of the items discussed above, net earnings were $8.3
million, or 2.9% of operating revenues, for the year ended December 31, 1999,
compared to $10.7 million, or 4.3% of operating revenues, for the year ended
December 31, 1998.
17
TRANSPORT CORPORATION OF AMERICA, INC.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Operating revenues increased 31.9% to $245.9 million for the year ended
December 31, 1998, from $186.4 million for the year ended December 31, 1997.
Revenue growth from existing customers, as well as additional revenues
attributable to the North Star acquisition, were the primary factors of the
revenue increase in 1998, when compared to 1997. The additional North Star
drivers provided significantly greater capacity throughout the last six months
of 1998. Equipment utilization, as measured by average revenues per tractor per
week, was $2,831 during 1998, approximating 1997 utilization.
North Star utilized the services of independent contractors for
substantially all of its driver workforce. Following the North Star acquisition,
independent contractors represented a significantly higher share of the
Company's total driver workforce than in prior periods. In addition to providing
their own tractors, independent contractors are responsible for operating
expenses including repairs, fuel and other direct costs associated with their
equipment. As a result of the greater proportion of independent contractors than
in prior years, several expense categories declined as a percentage of revenue
in 1998, offsetting an increase of purchased transportation expense as a
percentage of revenues, when compared to 1997. At December 31, 1998 there were
922 independent contractors, compared to 448 at the end of 1997.
The Company sold TIE, its less-than-truckload express service which had
been operated since the third quarter of 1997 effective January 1, 1999. TIE
operating losses during 1998 were approximately $1.8 million, compared to an
operating loss of $0.9 million in 1997.
18
TRANSPORT CORPORATION OF AMERICA, INC.
The pre-tax margin (earnings before income taxes as a percentage of
operating revenues) increased to 7.1% for 1998 from 6.9% for 1997. Excluding
gain on sale of equipment, pre-tax margin was 6.9% and 6.2% for 1998 and 1997,
respectively. Salaries, wages and benefits declined as a percentage of operating
revenues to 27.6% for 1998 from 28.5% for 1997. Non-driver efficiency, as
measured by average annual revenues per non-driver employee, improved 8.6% to
$591,000 for 1998 from $544,300 for 1997. Miles driven by independent
contractors increased 42.6% over 1997 miles as a result of the higher average
number of independent contractors in 1998, when compared to 1997. Accordingly,
purchased transportation increased as a percentage of operating revenues to
33.8% for 1998 from 29.9% in 1997. Fuel, maintenance and other expense was 10.9%
of operating revenues in 1998, compared to 13.4% for 1997, reflecting the lower
proportion of miles driven by Company drivers as well as the lower fuel prices
which existed throughout 1998, when compared to 1997. Revenue equipment leases
decreased as a percentage of operating revenues to 1.5% for 1998 from 2.6% for
1997. Depreciation and amortization as a percentage of operating revenues was
7.9% for 1998, compared to 8.3% for 1997, as a result of the larger proportion
of revenue equipment supplied by independent contractors during 1998 and a
change of estimated salvage values of certain of the Company's revenue
equipment, which reduced depreciation expense by approximately $1,095,000 in
1998. Improved accident and claims experience in 1998, as well as favorable
premium rates for policies renewed in 1998, resulted in a decrease of insurance,
claims and damage expense as a percentage of operating revenues to 2.8% in 1998
from 3.0% in 1997. Net interest expense increased as a percentage of operating
revenues to 2.0% for 1998 from 1.8% for 1997, primarily reflecting higher
average debt in 1998 resulting from the acquisition of North Star in July 1998,
and purchases of additional revenue equipment in 1998, when compared to 1997.
Gain on the disposition of equipment was $0.5 million in 1998, compared
to a gain of $1.3 million in 1997, as a result of fewer equipment dispositions
in 1998 when compared to 1997, along with the Company's continuing effort to
more closely reflect the estimated useful lives and salvage values of its
revenue equipment.
The provision for income taxes as a percentage of operating revenues
was 2.8% for 1998 and 2.7% for 1997. The effective tax rate for 1998 was 39.0%,
compared to the tax rate of 40.1% for 1997. The lower effective rate in 1998 was
due primarily to a continued decline in Company per diem payments, which are not
fully deductible for income tax purposes, when compared to 1997. The Company
pays certain of its drivers a per diem allowance while on the road to cover
meals and other expenses.
As a result of the items discussed above, net earnings increased 37.5%
to $10.7 million, or 4.3% of operating revenues, for the year ended December 31,
1998, from $7.8 million, or 4.2% of operating revenues, for the year ended
December 31, 1997.
19
TRANSPORT CORPORATION OF AMERICA, INC.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $35.4 million, $40.3
million, and $16.8 million for the years ended 1999, 1998, and 1997,
respectively. Working capital was $0.6 million at December 31, 1999, compared to
a $3.2 million deficit at December 31, 1998. Accrued liabilities include normal
provisions for accident and workers' compensation claims associated with the
Company's self-insured retention insurance program, less claim payments actually
made. The Company believes that its reserves and liquidity are adequate for
expected future claim payments.
Investing activities consumed $51.4 million in 1999, including $2.7
million for the cash portion of the RHT acquisition, $40.7 million for the
purchase of new revenue equipment, net of proceeds from the disposition of used
revenue equipment, and $2.1 million for the completion of construction of the
facility in Atlanta, Georgia, as well as other equipment and improvements. As of
December 31, 1999, the Company had commitments totaling $15.0 million for the
purchase of revenue and other equipment. The Company believes that cash flows
from operating activities, proceeds from the disposition of used revenue
equipment, and borrowings available under its credit facility will be adequate
to meet its needs.
Net cash provided by financing activities in 1999 was $16.4 million.
The primary source of financing was net borrowings of $37.0 million under the
Company's long-term credit facility. Payments under the Company's term loan
agreements were $23.6 million, including approximately $8.9 million of normal
payments and early retirement of certain debt assumed at the acquisition of RHT.
The Company also received $1.1 million of proceeds from the exercise of options
and warrants for the purchase of common stock during 1999.
The Company has a credit agreement with seven major banks for an
unsecured credit facility with maximum combined borrowings and letters of credit
of $100 million. Amounts actually available under the credit facility may be
limited by the Company's accounts receivable and unencumbered revenue equipment.
During 1999, the Company negotiated an extension of the term of credit facility
to March 2002. Also during 1999, the credit facility was used to purchase
revenue equipment and other assets, retire certain RHT long-term debt, and to
fund other cash requirements. In the future, the facility will be used to meet
working capital needs, make purchases of revenue equipment and other assets,
satisfy letter of credit requirements associated with the Company's self-insured
retention arrangements, and for acquisitions. At December 31, 1999, there were
outstanding borrowings of $90.0 million and letters of credit outstanding
totaling $2.7 million under this credit facility.
20
TRANSPORT CORPORATION OF AMERICA, INC.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board (SFAS) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes new standards for recognizing all derivatives as either assets
or liabilities, and measuring those instruments at fair value. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," changed the effective date to fiscal
years beginning after June 15, 2000. The Company will be required to adopt the
new standard beginning with the first quarter of fiscal 2001. The impact of
adoption on the Company's financial statements has not yet been determined.
FORWARD-LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, in the Company's Annual Report,
elsewhere in this Report, in future filings by the Company with the SEC, in the
Company's press releases, and in oral statements made with the approval of an
authorized executive officer which are not historical or current facts, are
forward-looking statements made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any forward-looking statements which speak only as of the date
made. The following important factors, among other things, in some cases have
affected and in the future could affect the Company's actual results and could
cause the Company's actual financial performance to differ materially from that
expressed in any forward-looking statement: (1) the highly competitive
conditions that currently exist in the Company's market and the Company's
ability to compete, (2) the Company's ability to recruit, train, and retain
qualified drivers, (3) increases in fuel prices, and the Company's ability to
recover these costs from its customers, (4) changes in governmental regulations
applicable to the Company's operations, (5) adverse weather conditions, (6)
accidents, (7) the market for used revenue equipment, and (8) downturns in
general economic conditions affecting the Company and its customers. The
foregoing list should not be construed as exhaustive and the Company disclaims
any obligation subsequently to revise or update any previously made
forward-looking statements. Unanticipated events are likely to occur.
YEAR 2000
The Company's total costs to address Year 2000 compliance issues with
its information systems were approximately $700,000. The Company did not
experience any significant difficulties as a result of the millennium change.
Although the Company has not experienced any significant Year 2000 difficulties
to date, the Company plans to continue to monitor the situation closely.
21
TRANSPORT CORPORATION OF AMERICA, INC.
SEASONALITY
As is typical in the truckload industry, the Company's operations
fluctuate seasonally according to customer shipping patterns which tend to peak
in the summer and fall, then increase again after the holiday and winter
seasons. Operating expenses also tend to be higher during the cold weather
months, primarily due to poorer fuel economy and increased maintenance costs.
INFLATION
Many of the Company's operating expenses are sensitive to the effects
of inflation, which could result in higher operating costs. With the exception
of fuel price increases, particularly in the last six months of 1999, the
effects of inflation on the Company's business have not been significant during
the last three years. The Company has in place with the majority of its
customers fuel surcharge provisions that allow the Company to partially recover
additional fuel costs when fuel prices exceed a certain reference price per
gallon.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks with its $100 million
credit agreement, of which $90 million was outstanding at December 31, 1999. The
agreement bears interest at a variable rate, which was 7.4% at December 31,
1999. Consequently, the Company is exposed to the risk of greater borrowing
costs if interest rates increase. Although the Company does not employ
derivatives, or similar instruments to hedge against increases in fuel prices,
fuel surcharge provisions enable the Company to reduce the effects of price
increases. The Company has 1.2 million shares of common stock with a
non-detachable Put option. The Put gives the shareholder the right to sell some
or all of the 1.2 million shares of the Company's common stock back to the
Company at $16.89 per share, payable in cash, during a 60-day period commencing
June 30, 2001.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements described in Item 14(a)1 of this report are
incorporated herein. See "Quarterly Financial Data" appearing on page F-23 of
the audited consolidated financial statements which are incorporated herein, by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
22
TRANSPORT CORPORATION OF AMERICA, INC.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning the Company's executive officers, reference
is made to the information set forth under the caption "Executive Officers"
located in Item 1 of this Form 10-K. For information concerning the Company's
directors and compliance by the Company's directors, executive officers and
significant shareholders with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, reference is made to the
information set forth under the captions "Election of Directors" and "Beneficial
Ownership of Common Stock," respectively, in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on May 17, 2000 to be filed
pursuant to Regulation 14A, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption
"Executive Compensation and Other Information" in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on May 17, 2000 to be filed
pursuant to Regulation 14A, which information is incorporated herein by
reference, except to the extent stated therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information set forth under the caption
"Beneficial Ownership of Common Stock" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 17, 2000 to be filed pursuant
to Regulation 14A, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under caption "Certain
Transactions" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 17, 2000 to be filed pursuant to Regulation 14A,
which information is incorporated herein by reference.
23
TRANSPORT CORPORATION OF AMERICA, INC.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K
1. Consolidated Financial Statements
Form 10-K
Page Reference
--------------
Index to Consolidated Financial Statements.................F-1
Independent Auditors' Report...............................F-2
Consolidated Balance Sheets................................F-3
Consolidated Statements of Earnings........................F-4
Consolidated Statements of Stockholders' Equity............F-5
Consolidated Statements of Cash Flows......................F-6
Notes to Consolidated Financial Statements.................F-7
2. Consolidated Financial Statement Schedules
Consolidated Financial Statement Schedules
Included in Part IV of this report:
Independent Auditors' Report on Schedule...................S-1
Schedule II - Valuation and Qualifying Accounts............S-2
3. Exhibits
Exhibit
Number Description
------- -----------
Page
----
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on
Form S-1 (File No. 33-84140) as declared effective by
the Commission on November 3, 1994 (the "1994 S-1")).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the
1994 S-1).
24
TRANSPORT CORPORATION OF AMERICA, INC.
4.1 Rights Agreement by and between the Company and Norwest
Bank Minnesota, N.A., dated February 25, 1997
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, as amended, filed
with the SEC on February 27, 1997; to Exhibit 1 to the
Company's Registration Statement on Form 8-K/A, filed
with the SEC on June 29, 1998; and to Exhibit 1 to the
Company's Registration Statement on Form 8-A/A, filed
with the SEC on January 21, 2000).
10.1 Credit Agreement dated as of August 14, 1998 among
ABN-AMRO Bank, N.V., certain other bank parties, and the
Company (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.2 1986 Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-K for
the year ended December 31, 1996).
10.3 401(k) Retirement Plan (incorporated by reference to
Exhibit 10.3 to the 1994 S-1).
10.4 Master Lease, dated as of April 9, 1999, between the
Company and ABN/AMBRO Leasing, Inc. (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999).
10.5 Form of Change in Control Severance Agreement
(incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
10.6 Form of Vehicle Lease and Independent Contractor
Agreement (incorporated by reference to Exhibit 10.11 to
the Company's Form 10-K for the year ended December 31,
1996).
10.12 Employee Stock Purchase Plan (incorporated by reference
to Form S-8 which was filed on January 31, 1996 (File
No. 333-934)).
10.13 1995 Stock Plan, as amended (incorporated by reference
to Exhibit 10.13 to the Company's Form 10-K for the year
ended December 31, 1996).
11.1 Statement re: Computation of Earnings (Loss) per Share
23.1 Independent Auditors' Consent
21 Subsidiaries of the Registrant: North Star Transport,
Inc., and Robert Hansen Trucking, Inc., Minnesota
corporations.
27.1 Financial Data Schedule, Fiscal year end December 31,
1999.
25
TRANSPORT CORPORATION OF AMERICA, INC.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1999.
(c) Exhibits
Reference is made to Item 14(a)3.
(d) Schedules
Reference is made to Item 14(a)2.
26
TRANSPORT CORPORATION OF AMERICA, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRANSPORT CORPORATION OF AMERICA,
INC. ("Registrant")
Dated: March 29, 2000 By /s/ Robert J. Meyers
---------------------------------------
Robert J. Meyers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature and Title Date
- ------------------- ----
/s/ Robert J. Meyers March 29, 2000
- -------------------------------------------
Robert J. Meyers
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Keith R. Klein March 29, 2000
- -------------------------------------------
Keith R. Klein
Chief Financial Officer
(Principal Financial Officer)
/s/ William D. Slattery March 29, 2000
- -------------------------------------------
William D. Slattery, Director
/s/ Anton J. Christianson March 29, 2000
- -------------------------------------------
Anton J. Christianson, Director
/s/ Michael J. Paxton March 29, 2000
- -------------------------------------------
Michael J. Paxton, Director
/s/ Kenneth J. Roering March 29, 2000
- -------------------------------------------
Kenneth J. Roering, Director
27
Independent Auditors' Report on Schedule
The Board of Directors and Stockholders
Transport Corporation of America, Inc.
Under date of February 4, 2000, we reported on the consolidated balance sheets
of Transport Corporation of America, Inc. and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements, and our
report thereon, are included in the annual report on Form 10-K for the year
1999. In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule as listed in the accompanying index. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statement
schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Minneapolis, Minnesota
February 4, 2000
S-1
TRANSPORT CORPORATION OF AMERICA, INC.
SCHEDULE II
Valuation and Qualifying Accounts
(In thousands)
Additions
---------------------------
Additions
Balance at charged to Charged to Balance
beginning cost and other at end
Description of year expense accounts Deductions of year
- ---------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 31, 1999 $ 461 2,815(3) 44(1) 150 $ 3,170
Year ended December 31, 1998 $ 324 162 30(2) 55 $ 461
Year ended December 31, 1997 $ 313 115 104 $ 324
Reserve for insurance, claim and damage liability
Year ended December 31, 1999 $ 4,663 5,581 706(1) 6,446 $ 4,504
Year ended December 31, 1998 $ 3,408 5,191 1,490(2) 5,426 $ 4,663
Year ended December 31, 1997 $ 3,341 4,157 4,090 $ 3,408
Reserve for workers' compensation liability
Year ended December 31, 1999 $ 1,420 2,087 1,515 $ 1,992
Year ended December 31, 1998 $ 1,320 1,601 1,501 $ 1,420
Year ended December 31, 1997 $ 1,656 1,441 1,777 $ 1,320
(1) Robert Hansen Trucking valuation at date of acquisition
(2) North Star valuation at date of acquisition
(3) Includes $2.7 million special bad debt provision due to increased exposure
risk in the fourth quarter of 1999
S-2
TRANSPORT CORPORATION OF AMERICA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report ............................................... F-2
Consolidated Balance Sheets ................................................ F-3
Consolidated Statements of Earnings ........................................ F-4
Consolidated Statements of Stockholders' Equity ............................ F-5
Consolidated Statements of Cash Flows ...................................... F-6
Notes to Consolidated Financial Statements ................................. F-7
F-1
TRANSPORT CORPORATION OF AMERICA, INC.
Independent Auditors' Report
The Board of Directors and Stockholders
Transport Corporation of America, Inc.:
We have audited the accompanying consolidated balance sheets of Transport
Corporation of America, Inc. and subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Transport
Corporation of America, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Minneapolis, Minnesota
February 4, 2000
F-2
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31,
---------------------------
ASSETS 1999 1998
- --------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 745 $ 448
Trade accounts receivable, net (note 1 and 4) 30,133 27,403
Other receivables (note 2) 1,522 1,593
Operating supplies - inventory (note 1) 1,479 1,378
Deferred income tax benefit (note 1 and 9) 4,035 5,443
Prepaid expenses and tires 1,924 2,212
- --------------------------------------------------------------------------------------------------
Total current assets 39,838 38,477
Property and equipment:
Land, buildings, and improvements 21,469 18,759
Revenue equipment (note 1 and 4) 228,709 179,042
Other equipment 15,122 9,905
- --------------------------------------------------------------------------------------------------
Total property and equipment 265,300 207,706
Less accumulated depreciation (59,479) (46,946)
- --------------------------------------------------------------------------------------------------
Property and equipment, net 205,821 160,760
Other assets, net (note 3) 26,482 25,315
- --------------------------------------------------------------------------------------------------
Total assets $ 272,141 $ 224,552
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (note 4) $ 14,899 $ 13,717
Accounts payable 5,913 7,207
Checks issued in excess of cash balances 2,127 426
Due to independent contractors 2,908 2,126
Accrued expenses (note 5) 13,395 11,795
- --------------------------------------------------------------------------------------------------
Total current liabilities 39,242 35,271
Long term debt, less current maturities (note 4) 106,106 79,531
Deferred income taxes (note 9) 31,396 27,749
Commitments and contingencies (note 6, 7, 11, and 12)
1,200,000 shares of common stock with non-detachable put (note 6) 20,268 20,268
Stockholders' equity (note 7):
Common stock, $.01 par value; 15,000,000 shares authorized;
7,114,490 and 6,687,873 shares (excluding 1,200,000 shares
with non-detachable put) issued and outstanding as of
December 31, 1999 and 1998, respectively 71 67
Additional paid-in capital 29,209 24,093
Retained earnings 45,849 37,573
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 75,129 61,733
- --------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 272,141 $ 224,552
==================================================================================================
See accompanying notes to consolidated financial statements.
F-3
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Years ended December 31,
----------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------
Operating revenues $ 285,585 $ 245,913 $ 186,392
Operating expenses:
Salaries, wages, and benefits 79,938 67,937 53,166
Fuel, maintenance, and other expenses 31,742 26,916 25,028
Purchased transportation 97,695 83,005 55,614
Revenue equipment leases 2,543 3,731 4,893
Depreciation and amortization 25,715 19,348 15,494
Insurance, claims and damage 7,270 6,816 5,620
Taxes and licenses 5,249 4,016 3,248
Communications 3,307 2,869 2,072
Other general and administrative expenses 11,849 9,310 6,410
Gain on sale of equipment (794) (503) (1,336)
- ------------------------------------------------------------------------------------------
Total operating expenses 264,514 223,445 170,209
- ------------------------------------------------------------------------------------------
Operating income 21,071 22,468 16,183
Interest expense 7,544 5,129 3,306
Interest income (40) (130) (64)
- ------------------------------------------------------------------------------------------
Interest expense, net 7,504 4,999 3,242
- ------------------------------------------------------------------------------------------
Earnings before income taxes 13,567 17,469 12,941
Provision for income taxes (note 9) 5,291 6,813 5,190
- ------------------------------------------------------------------------------------------
Net earnings (note 7) $ 8,276 $ 10,656 $ 7,751
- ------------------------------------------------------------------------------------------
Net earnings per share:
Basic $ 1.02 $ 1.46 $ 1.18
Diluted $ 0.97 $ 1.42 $ 1.15
- ------------------------------------------------------------------------------------------
Average common shares outstanding:
Basic 8,142 7,300 6,568
Diluted 8,570 7,521 6,734
- ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-4
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998, and 1997
(In thousands, except share amounts)
Common Stock Additional Total
------------------------ paid-in Retained stockholders'
Shares Amount capital earnings equity
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,496,039 65 23,851 19,166 43,082
Common stock options,
warrants, and stock
purchase plan 170,295 2 358 0 360
Tax benefits related to
employee stock warrant
transactions 0 0 571 0 571
Repurchase and retirement
of common stock (75,700) (1) (956) 0 (957)
Net earnings 0 0 0 7,751 7,751
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,590,634 66 23,824 26,917 50,807
Common stock options,
warrants, and stock
purchase plan 128,239 1 559 0 560
Tax benefits related to
employee stock warrant
transactions 0 0 86 0 86
Repurchase and retirement
of common stock (31,000) 0 (376) 0 (376)
Net earnings 0 0 0 10,656 10,656
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 6,687,873 $ 67 $ 24,093 $ 37,573 $ 61,733
Common stock options,
warrants, and stock
purchase plan 116,617 1 1,000 0 1,001
Tax benefits related to
employee stock warrant
transactions 0 0 89 0 89
Common Stock issued
for acquisition 310,000 3 4,027 0 4,030
Net earnings 0 0 0 8,276 8,276
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 7,114,490 $ 71 $ 29,209 $ 45,849 $ 75,129
========================================================================================================
See accompanying notes to consolidated financial statements.
F-5
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
--------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------
Operating activities:
Net earnings $ 8,276 $ 10,656 $ 7,751
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 25,715 19,348 15,494
Gain on sale of equipment (794) (503) (1,336)
Deferred income taxes 3,368 6,599 4,510
Tax benefits related to employee stock transactions 89 87 571
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade receivables 35 (1,652) (4,864)
Other receivables 132 2,899 (3,835)
Operating supplies (101) (389) (179)
Prepaid expenses and tires 630 841 181
Accounts payable (2,411) 2,284 950
Due to independent contractors 744 408 (179)
Accrued expenses (329) (247) (2,228)
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 35,354 40,331 16,836
- --------------------------------------------------------------------------------------------------------
Investing activities:
Purchases of revenue equipment (65,766) (56,382) (51,002)
Purchases of property and other equipment (8,165) (3,544) (8,049)
(Increase) decrease in other assets 131 (200) (196)
Acquisition of business, net of cash acquired (2,696) (15,555) 0
Proceeds from sales of equipment 25,042 7,710 11,803
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (51,454) (67,971) (47,444)
- --------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 1,131 559 361
Payments of loan origination fees 0 (267) 0
Payments for repurchase and retirement of common stock 0 (376) (958)
Proceeds from issuance of long-term debt 165 10,577 44,538
Principal payments on long-term debt (23,600) (37,214) (17,940)
Proceeds from issuance of notes payable to bank 147,696 96,450 38,060
Principal payments on notes payable to bank (110,696) (43,450) (38,060)
Change in net checks issued in excess of cash balances 1,701 426 (351)
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 16,397 26,705 25,650
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 297 (935) (4,958)
Cash and cash equivalents, beginning of year 448 1,383 6,341
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 745 $ 448 $ 1,383
========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 7,598 $ 5,028 $ 3,425
Income taxes, net 695 (949) 1,296
During 1999, the Company issued 310,000 shares of common stock at $13.00 per
share totalling $4.0 million in connection with the acquisition of Robert
Hansen Trucking, Inc.
During 1998, the Company issued 1.2 million shares of common stock at $16.89 per
share totalling $20.3 million in connection with the acquisition of North Star
Transport, Inc.
See accompanying notes to consolidated financial statements.
F-6
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998, and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS
NATURE OF BUSINESS
Transport Corporation of America, Inc. (the "Company") is a truckload
motor carrier engaged in the transportation of a variety of general
commodities for customers principally in the United States and portions
of Canada, pursuant to nationwide operation authority. Customer freight
is transported by Company equipment and by independent contractors.
Payments to Company drivers and independent contractors are primarily
based upon miles driven.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of the Company
and its wholly owned subsidiaries, TA Logistics, Inc., Robert Hansen
Trucking, Inc. ("RHT"), North Star Transport, Inc. ("North Star") and
Transport International Express, Inc. ("TIE"). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements in order to conform to the 1999 presentation.
REVENUE RECOGNITION
Operating revenues are recognized when the freight to be transported has
been loaded. Amounts payable to independent contractors for purchased
transportation, to Company drivers for wages and any other direct
expenses are accrued when the related revenue is recognized.
TRADE ACCOUNTS RECEIVABLE
Trade Accounts Receivable at December 31, 1999 and 1998 are net of
allowances for doubtful accounts of $3,170,000 and $461,000,
respectively.
REVENUE EQUIPMENT, PROPERTY, AND OTHER EQUIPMENT
Revenue equipment, property, and other equipment are recorded at cost.
Depreciation, including amortization of capitalized leases, is computed
using the straight-line basis over the estimated useful lives of the
assets or the lease periods, whichever is shorter. The Company
regularly updates its estimates of revenue equipment salvage values and
adjusts depreciation expense prospectively if there has been a
significant change from earlier estimates.
F-7
TRANSPORT CORPORATION OF AMERICA, INC.
The estimated useful lives for new equipment when placed in service are as
follows:
Years
--------------------------------------------------------------------------
Tractors 5
Trailers 5
Buildings 30
Other equipment, including computers and furniture 3 - 8
--------------------------------------------------------------------------
The Company changed the estimated salvage value of certain of its revenue
equipment during 1998 and 1997, and, during 1997, the estimated life of
its computer software. The changes resulted in a net decrease in
depreciation expense of approximately $1,095,000 and $750,000 for 1998
and 1997, respectively, an increase in net income of approximately
$668,000 and $450,000 for 1998 and 1997, respectively, and an increase
of basic and diluted earnings per share of $0.09 for 1998, and $0.07
for 1997. The Company periodically assesses its salvage values to
better match revenues and expenses.
TIRES
Tires placed on new equipment after December 31, 1996 are capitalized as
part of revenue equipment and amortized over their estimated life.
Tires placed on new equipment prior to December 31, 1996 are included
in other assets (net) and are capitalized and recorded as prepaid tires
and amortized over their estimated life. Replacement tires are expensed
when placed in service.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net undiscounted cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, 25 years. Amortization expense
charged to operations for 1999, 1998, and 1997 was $1,035,000,
$480,000, and $0, respectively. The Company assesses the recoverability
of the intangible assets in accordance with its Impairment of
Long-lived Assets policy.
F-8
TRANSPORT CORPORATION OF AMERICA, INC.
OPERATING SUPPLIES
Operating supplies representing repair parts, fuel, and replacement tires
for revenue equipment are recorded at cost.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
ESTIMATED LIABILITY FOR INSURANCE CLAIMS
The Company maintains automobile, general, cargo, and workers'
compensation claim liability insurance coverages under both deductible
and retrospective rating policies. In the month claims are reported,
the Company estimates and establishes a liability for its share of
ultimate settlements using all available information, coupled with the
Company's history of such claims. Claim estimates are adjusted when
additional information becomes available. The recorded expense depends
upon actual loss experience and changes in estimates of settlement
amounts for open claims which have not been fully resolved. However,
final settlement of these claims could differ materially from the
amounts the Company has accrued at year-end. The Company accrues for
health insurance claims reported, as well as for claims incurred but
not reported, based upon the Company's past experience.
STOCK-BASED EMPLOYEE COMPENSATION
The Company follows the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for its stock-based employee
compensation plans. The Company has adopted the disclosure-only
requirements of Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the amounts presented
on the consolidated financial statements for the existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-9
TRANSPORT CORPORATION OF AMERICA, INC.
NET EARNINGS PER SHARE: BASIC AND DILUTED
Basic net earnings per common share is computed by dividing net earnings
by the weighted average number of common shares outstanding during the
year. The 310,000 shares of common stock which were issued at the time
of the acquisition of RHT and the 1.2 million shares of common stock
which were issued at the time of the acquisition of North Star are
considered outstanding effective May 1, 1999 and July 1, 1998,
respectively.
Diluted net earnings per share is computed by dividing net earnings by the
weighted average number of potential common shares outstanding,
assuming exercise of dilutive stock options and warrants. The potential
common shares are computed using the treasury stock method based upon
the average market price of the Company's stock during each period.
Diluted net earnings for 1999 and 1998 include the effect of a
non-detachable put option associated with the acquisition of North
Star. The potential common shares for the Put have been calculated
using the reverse treasury stock method and the average market price of
the Company's stock for the period since the July 1, 1998 effective
date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial assets and liabilities,
because of their short-term nature, approximate fair value. The fair
value of the Company's borrowing, if recalculated based on current
interest rates, would not significantly differ from the recorded
amounts.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with initial maturities of three months or
less to be cash equivalents.
(2) OTHER RECEIVABLES
Other receivables at December 31, 1999 and 1998 include a receivable of
approximately $1.0 million and $1.4 million, respectively, related to
the sale of certain revenue equipment.
(3) OTHER ASSETS
Other assets at December 31, 1999 include Goodwill from the acquisition of
RHT of $2.1 million (net of accumulated amortization of $0.1 million)
and $22.4 million (net of accumulated amortization of $1.4 million)
from the acquisition of North Star (see notes 12 and 13).
F-10
TRANSPORT CORPORATION OF AMERICA, INC.
(4) CREDIT FACILITY AND LONG-TERM DEBT
The Company has a credit agreement with seven major banks for an unsecured
credit facility with maximum combined borrowings and letters of credit
of $100 million. Amounts actually available under the credit facility
may be limited by the Company's accounts receivable and unencumbered
revenue equipment. The credit agreement expires in March 2002. At
December 31, 1999, the credit facility bears interest at 7.375% and
there were letters of credit outstanding totaling $2.73 million under
this credit facility. Under the terms of the agreement, the Company had
available $10 million at December 31, 1999.
The credit agreement contains certain financial covenants, which include
maintenance of a minimum net worth, maintenance of a consolidated
funded indebtedness to consolidated earnings before interest, taxes,
depreciation, amortization and lease rental expenses of 3 to 1, and
maintenance of a consolidated fixed charge coverage ratio not less than
2 to 1. The Company was in compliance with these covenants at December
31, 1999.
The following is a summary of data relating to the current and expired
credit facilities:
Years ended
December 31,
----------------------
1999 1998
- --------------------------------------------------------------------------------
Long Term
- ---------
Outstanding balance at year end $90,000 $53,000
Average amount outstanding 75,061 39,456
Maximum amount outstanding 90,750 53,000
Weighted average interest rate during the year 6.18% 6.40%
Commitment fee on unused balances 0.200% 0.175%
Short Term (expired facility)
- -----------------------------
Outstanding balance at year end $ -- $ --
Average amount outstanding 0 2,950
Maximum amount outstanding during the year 0 13,641
Weighted average interest rate during the year 0.00% 8.50%
Commitment fee on unused balances 0.00% 0.210%
F-11
TRANSPORT CORPORATION OF AMERICA, INC.
Long-term debt consists of the following:
December 31,
-----------------------
1999 1998
- --------------------------------------------------------------------------------------------------
Notes payable to banks and other financial institutions with maturities
through October 2003, secured by certain revenue equipment:
Interest rates ranging from 6.6% to 7.7% $ 31,005 $ 39,649
Obligations under capital lease payable with maturity through
November 1999, interest rate of 8.35%,
and secured by certain revenue equipment 0 599
Unsecured credit facility 90,000 53,000
- --------------------------------------------------------------------------------------------------
Total long-term debt 121,005 93,248
Less current maturities of long-term debt 14,899 13,717
- --------------------------------------------------------------------------------------------------
Long-term debt, less current maturities $ 106,106 $ 79,531
==================================================================================================
The aggregate annual maturities of long-term debt at December 31, 1999 are as
follows:
Year ending December 31, Amount
- --------------------------------------------------------------------------------------------------
2000 $ 14,899
2001 12,966
2002 92,768
2003 372
- --------------------------------------------------------------------------------------------------
Total $ 121,005
==================================================================================================
(5) ACCRUED EXPENSES
Accrued expenses are as follows:
December 31,
-----------------------
1999 1998
- --------------------------------------------------------------------------------------------------
Salaries and wages $ 2,745 $ 2,515
Insurance, claims and damage 4,504 4,663
Workers compensation 1,992 1,420
Taxes 1,697 1,321
Interest 240 242
Other 2,217 1,634
- --------------------------------------------------------------------------------------------------
Total $ 13,395 $ 11,795
==================================================================================================
F-12
TRANSPORT CORPORATION OF AMERICA, INC.
(6) COMMON STOCK WITH NON-DETACHABLE PUT
In July 1998, as part of its acquisition of North Star, the Company issued
1.2 million shares of common stock with a non-detachable put option
("Put"). The shares are considered issued and outstanding as of
December 31, 1999 and December 31, 1998.
The Put gives the shareholder the right to sell some or all of the 1.2
million shares of the Company's common stock back to the Company at
$16.89 per share, payable in cash, during a 60-day period commencing
June 30, 2001. The maximum repurchase obligation of 1.2 million shares
at $16.89 per share is $20,268,000, and has been classified outside of
stockholders' equity. In the event the Put expires unexercised, this
amount will be reclassified to stockholders' equity.
The effect of the 1.2 million shares associated with the Put is included
in the computations of both basic and diluted earnings per share.
Additionally, for dilutive earnings per share, the reverse treasury
stock method is applied to the 1.2 million shares because the Company's
average stock price has been below the Put price of $16.89. The
dilutive effect for 1999 and 1998 is $0.05 and $0.03 per share,
respectively.
(7) STOCKHOLDERS' EQUITY
STOCKHOLDER RIGHTS PLAN AND PREFERRED STOCK DISTRIBUTION
In February 1997, the Company adopted a stockholder rights plan and
declared a dividend of one Preferred Stock Purchase Right (Right) for
each outstanding share of the Company's common stock. The plan and
dividend become operative in certain events involving the acquisition
of 15% or more of the Company's voting stock by any person or group in
a transaction not approved by the Board of Directors.
Each Right entitles the holder to purchase two-hundredths of a share of
Series A Junior Participating Preferred Stock for $60 upon the
occurrence of certain specified events. Additionally, the Rights
entitle the holder, upon the occurrence of certain specified events, to
purchase common stock having a value of twice the exercise price of the
Right; upon the occurrence of certain other specified events, to
purchase from an entity acquiring at least 15% of the voting securities
or voting power of the Company, common stock of the acquiring entity
having twice the exercise price of the Right. The Rights may be
redeemed by the Company at a price of $0.001 per Right. The Rights
expire on February 25, 2007, and are not presently exercisable.
F-13
TRANSPORT CORPORATION OF AMERICA, INC.
WARRANTS
At December 31, 1998, the Company had outstanding warrants for the
purchase of 22,500 shares of the Company's common stock at $5.20 per
share. All of the warrants were exercised prior to December 31, 1999.
No warrants were granted during 1999 or 1998.
Warrant transactions are summarized as follows:
Years ended
December 31,
---------------------
1999 1998
- --------------------------------------------------------------------------------
Warrants outstanding at beginning of year 22,500 37,500
Warrants exercised 22,500 15,000
- --------------------------------------------------------------------------------
Warrants outstanding at end of year 0 22,500
================================================================================
Weighted average price of warrants outstanding at
end of year $0.00 $5.20
================================================================================
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted an Employee Stock Purchase Plan ("the Plan"). The
purpose of the Plan is to encourage employees to purchase shares of
Common Stock in the Company thereby providing a greater community of
interest between the Company and its employees. There are 100,000
shares of the Company's Common Stock reserved for issuance under the
Plan, which terminates on December 31, 2000.
The Plan permits employees to purchase shares of Common Stock of the
Company at a price equal to the lesser of 85% of the market value of
the Common Stock at the commencement or termination dates of each
phase. Each year, during the term of the plan, there are two six-month
phases commencing on January 1 and July 1, respectively. Employees who
have been employed for one year and who are regularly scheduled to work
more than 20 hours per week and who are less than 5% owners are
eligible to participate in the program via payroll deductions.
Purchases are limited to 10% of a participant's base pay during the
respective phase.
During 1999 and 1998, employees purchased 7,375 and 4,389 shares
respectively, at average prices of $10.20 and $12.25 per share,
respectively.
TA REWARDS PROGRAM
During 1997 the Company established an incentive program to reward
employee drivers and independent contractor drivers that achieve
certain performance and safety goals. Under this program, drivers are
awarded points on a quarterly basis for achieving their safety and
performance goals. Drivers may redeem these points for various rewards,
including shares of the Company's common stock. Through 1998, the
Company satisfied driver point redemptions for shares of the Company's
common stock by purchasing the shares on the open market on behalf of
the drivers.
F-14
TRANSPORT CORPORATION OF AMERICA, INC.
In 1998, the Board approved the T.A. Rewards Program - Stock Component
("TA Rewards"). TA Rewards provides for the issuance of up to 100,000
shares of the Company's common stock for driver redemptions of their TA
Rewards points. During 1999 and 1998, 7,471 and 0 common shares,
respectively, were issued under this program.
STOCK OPTION PLANS
The Company has adopted two stock option plans which allow for the grant
of options to officers and other key employees to purchase common
shares at an exercise price not less than 100% of fair market value on
the date of grant. Officers and other key employees of the Company who
are responsible for, or contribute to, the management, growth and/or
profitability of the business of the Company, as well as selected
consultants under contract to the Company and non-employee directors
are eligible to be granted awards. No options were granted to
consultants during 1999, 1998, or 1997.
These option plans allow for the grant of up to 725,000 shares. Options
generally vest in cumulative annual increments over periods from one to
four years and expire five years from date of issuance. At December 31,
1999, the exercise prices of outstanding options ranged from $10.44 to
$18.00, with a weighted average contractual life of approximately 3.3
years.
Option transactions are summarized as follows:
Weighted Average
Shares Exercise Price
- ----------------------------------------------------------------------------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Options outstanding at beginning of year 193,197 240,047 $ 10.80 $ 7.61
Granted 47,000 92,000 12.93 11.42
Cancelled (18,400) (30,000) 11.27 10.44
Exercised (89,120) (108,850) 9.39 4.38
- ----------------------------------------------------------------------------------------------
Options outstanding at end of year 132,677 193,197 $ 12.44 $ 10.80
==============================================================================================
Options exercisable at end of year 76,011 143,197 $ 12.85 $ 10.93
==============================================================================================
F-15
TRANSPORT CORPORATION OF AMERICA, INC.
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
Outstanding Options Exercisable Options
----------------------------------------------- ---------------------------
Exercise Weighted Average Weighted Weighted
Price Remaining Average Average
Range Number Contractual Life Exercise Price Number Exercise Price
- ----------- --------- ------------------ ---------------- --------- ----------------
$ 10 - 15 120,677 3.3 years 11.89 64,011 11.89
15 - 20 12,000 3.4 years 18.00 12,000 18.00
--------- ---------
132,677 76,011
========= =========
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. Accordingly, no compensation cost has been recognized
with respect to the Company's stock option plans or the Employee Stock
Purchase Plan. Had compensation cost been determined on the basis of
fair value pursuant to the provisions of SFAS No. 123, net earnings and
net earnings per share would have been reduced to the pro forma amounts
indicated below.
1999 1998
- --------------------------------------------------------------------------------
Net earnings:
As reported $ 8,276 $ 10,656
======== ========
Pro forma $ 8,142 $ 10,521
======== ========
Net basic earnings per share:
As reported $ 1.02 $ 1.46
======== ========
Pro forma $ 1.00 $ 1.44
======== ========
Net diluted earnings per share:
As reported $ 0.97 $ 1.42
======== ========
Pro forma $ 0.95 $ 1.40
======== ========
The above pro forma amounts may not be representative of the effects on
reported net earnings for future years. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted-average assumptions
used for grants in 1999 and 1998:
1999 1998
- --------------------------------------------------------------------------------
Dividend yield 0.00% 0.00%
Expected volatility 55.00% 52.00%
Risk-free interest rate 5.40% 4.75%
Expected lives 5 years 5 years
F-16
TRANSPORT CORPORATION OF AMERICA, INC.
(8) EMPLOYEE BENEFIT PLANS
The Company has a savings retirement plan ("the Plan") for eligible
employees under Section 401(k) of the Internal Revenue Code. The Plan
allows employees to defer up to 19% of their compensation on a pretax
basis. The Company may, at its discretion, match a portion of the
employee deferrals. During 1999, 1998, and 1997 the Company contributed
amounts equal to one-fourth of the employee deferrals, up to 1% of each
participant's compensation. For participants who are employed as truck
drivers with pay based on actual miles driven, the Company may also
elect to contribute 1/2(cent) and 1(cent) per paid mile driven for
drivers with over one and two years of service, respectively. On behalf
of all employees, the Company contributed $638,000, $506,000, and
$525,000 to the Plan in 1999, 1998, and 1997, respectively.
F-17
TRANSPORT CORPORATION OF AMERICA, INC.
(9) INCOME TAXES
The provision for income taxes consists of the following:
(In thousands)
Current Deferred Total
- ------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1999:
Federal $ 133 $ 4,105 $ 4,238
State 190 863 1,053
- ------------------------------------------------------------------------------------------------------------
Total $ 323 $ 4,968 $ 5,291
============================================================================================================
For the year ended December 31, 1998:
Federal $ 27 $ 5,474 $ 5,501
State 106 1,206 1,312
- ------------------------------------------------------------------------------------------------------------
Total $ 133 $ 6,680 $ 6,813
============================================================================================================
For the year ended December 31, 1997:
Federal $ (21) $ 4,148 $ 4,127
State 150 913 1,063
- ------------------------------------------------------------------------------------------------------------
Total $ 129 $ 5,061 $ 5,190
============================================================================================================
The income tax expense differs from the "expected" tax expense as follows
for the years ended December 31, 1999, 1998, and 1997:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
Expected federal tax expense at statutory rates $ 4,748 $ 6,114 $ 4,529
Increases in taxes resulting from:
State income taxes, net of federal benefit 684 853 691
Expenses not deductible for tax purposes 157 191 216
Other (298) (345) (246)
- ------------------------------------------------------------------------------------------------------------
Actual tax expense $ 5,291 $ 6,813 $ 5,190
============================================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998 are presented below:
1999 1998
- -----------------------------------------------------------------------------------------------------------
Deferred tax assets:
Vacation accrual $ 481 $ 439
Allowance for doubtful accounts 1,217 233
Net operating loss carryforward 7,557 2,890
Insurance, claims, and damage reserves 2,449 2,239
Alternative minimum tax credit carryforward 3,334 2,162
- ------------------------------------------------------------------------------------------------------------
Total deferred tax assets 15,038 7,963
- ------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Equipment, principally due to differences in depreciation and lease 42,399 30,269
- ------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 27,361 $ 22,306
============================================================================================================
F-18
TRANSPORT CORPORATION OF AMERICA, INC.
At December 31, 1999, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $19.5 million which are
available to offset future federal taxable income, if any, through
2013. The Company also has alternative minimum tax credit carryforwards
of approximately $3.3 million which are available to reduce future
federal regular income taxes, if any, over an indefinite period.
The Company has reviewed the need for a valuation allowance relating to
the deferred tax assets and has ascertained that no allowance is
needed.
(10) MAJOR CUSTOMERS
Sales to the Company's five largest customers represented 45%, 39%, and
43%, of total revenues for 1999, 1998, and 1997, respectively. One
customer accounted for approximately 15% of sales in 1999 and 14 % in
1998 and 1997.
(11) COMMITMENTS
REVENUE EQUIPMENT LEASES
The Company has entered into operating leases for certain revenue
equipment. The aggregate cost of this leased equipment at the beginning
of the leases was approximately $9.0 million.
Approximately $2.3 million of the equipment is under non-cancelable
operating leases of 36 to 60 months, with the equipment reverting to
the lessor at the end of lease term.
Approximately $6.7 million of the equipment is under TRAC (terminal rental
adjustment clause) operating leases, over periods generally ranging
from 48 to 72 months. The Company typically continues its leases
through the full term of the lease agreement. The full term guaranteed
termination values vary from 20% to 40% of the original cost for
tractors, van trailers, and temperature-controlled trailers. As of
December 31, 1999, guaranteed termination values under the Company's
TRAC leases were approximately $1.7 million through 2001. Typically the
lessor assumes a portion of the residual risk for the condition of the
equipment upon termination of the contract.
Rental expense under these operating leases was approximately $2,522,000
in 1999, $3,477,000 in 1998, and $4,751,000 in 1997.
F-19
TRANSPORT CORPORATION OF AMERICA, INC.
Aggregate future minimum lease payments as of December 31, 1999 for the
non-cancelable portion of revenue equipment under operating leases are
as follows:
Years ending December 31,
--------------------------------------------------------------------------
2000 $ 1,941,627
2001 22,259
--------------------------------------------------------------------------
Total $ 1,963,886
==========================================================================
OTHER LEASES
The Company leases one facility with future minimum lease payments of
$53,714 which expires in 2000. The total facility operating lease
expense was $407,471 in 1999, $286,108 in 1998, and $155,785 in 1997.
In 1999, the Company entered into a five-year operating lease for the
construction of a new headquarters facility. Construction is expected
to be completed in 2000. The aggregate lease payments are contingent on
the final construction costs estimated to be $13 million.
CAPITAL ADDITIONS
The Company has committed to purchase approximately $15 million of revenue
and other equipment to be delivered during 2000.
GUARANTEE OF INDEBTEDNESS
In 1997, the Company established a program whereby experienced Company
drivers can purchase their own truck. As part of the program, the
driver agrees to make certain commitments to the Company and to
purchase a vehicle meeting certain specifications established by the
Company. In exchange, the Company facilitates the financing of the
vehicle and may guarantee some or all of the loans made to drivers
participating in the program.
To accommodate the financing for this program, the Company has entered
into a loan, servicing, and guaranty agreement with two banks. Under
the terms of the agreement, the Company guarantees 100% of individual
driver loans for one bank and 10% of the driver loans with the other
bank. The Company has the right to repossess the vehicle in the event a
driver defaults on the loan. There were 99 loans with outstanding
balances totaling $4.3 million at December 31, 1999 and 59 loans with
outstanding balances totaling approximately $3.0 million as of December
31, 1998. No loans were in default. The Company guaranteed $2.4 and
$3.0 million of the outstanding balances as of December 31, 1999 and
1998, respectively.
F-20
TRANSPORT CORPORATION OF AMERICA, INC.
(12) ACQUISITION OF NORTH STAR TRANSPORT, INC.
On July 1, 1998, the Company acquired all of the issued and outstanding
capital stock of North Star Transport, Inc. ("North Star"). The
purchase price paid by the Company consisted of 1.2 million shares of
the Company's Common Stock (valued at $16.89 per share) and $15.8
million in cash, for a total purchase price of $36.1 million.
Additionally, beginning with the quarter ended June 30, 1999, the
Company is obligated to pay $0.0756 per share of the Company's stock
still owned by the sellers of North Star for each quarter through June
30, 2001. The Company made payments totaling $272,160 in 1999 related
to the contingent consideration. Maximum contingent consideration
remaining to be paid at December 31, 1999 is $544,320.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the operating results of North Star have been
included in the Company's consolidated financial statements since the
date of acquisition. The total purchase price for the acquisition has
been allocated to tangible and intangible assets and liabilities based
upon management's estimates of their fair value on the acquisition
date. The $23.9 million excess of purchase price over fair value of net
assets acquired has been recorded as goodwill with amortization on a
straight-line basis over 25 years.
The following unaudited pro forma combined historical results are based on
available information and certain assumptions which management believes
are reasonable and appropriate to give effect to the North Star
acquisition as if the transaction occurred at the beginning of fiscal
1998 and 1997. No adjustments have been made to the historical results
to reflect anticipated improvements which may be realized in the
future. Accordingly, the pro forma information may not be indicative of
actual results of operations which would have been obtained, or which
may be realized in the future, if the acquisition had occurred on
January 1, 1997.
(In thousands, except per share amounts)
1998 1997
-------------------------------------------------------------------------
Operating revenues $283,275 $256,573
Net earnings $ 10,934 $ 9,112
Net earnings per share:
Basic $ 1.38 $ 1.17
Diluted $ 1.34 $ 1.11
-------------------------------------------------------------------------
F-21
TRANSPORT CORPORATION OF AMERICA, INC.
(13) ACQUISITION OF ROBERT HANSEN TRUCKING, INC.
On May 1, 1999, the Company issued 350,000 shares (valued at $13.00 per
share) of its common stock as a portion of the purchase price to
acquire Robert Hansen Trucking, Inc. ("RHT"). The Company subsequently
retired 40,000 of these shares as part of the final purchase price
adjustment. The purchase price consisted of $2.7 million in cash and
the 310,000 net shares of the Company's common stock, for a total
purchase price of $6.2 million.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the operating results of RHT have been included in
the Company's consolidated financial statements since the date of
acquisition. The total purchase price for the acquisition has been
allocated to tangible and intangible assets and liabilities based upon
management's estimates of their fair value on the acquisition date. The
$2.2 million excess of purchase price over fair value of net assets
acquired has been recorded as goodwill with amortization on a
straight-line basis over 25 years.
The following unaudited pro forma combined historical results are based on
available information and certain assumptions which management believes
are reasonable and appropriate to give effect to the RHT acquisition as
if the transaction occurred at the beginning of fiscal 1999 and 1998.
No adjustments have been made to the historical results to reflect
anticipated improvements which may be realized in the future.
Accordingly, the pro forma information may not be indicative of actual
results of operations which would have been obtained, or which may be
realized in the future, if the acquisition had occurred on January 1,
1998.
(In thousands, except per share amounts)
1999 1998
-------------------------------------------------------------------------
Operating revenues $295,074 $307,208
Net earnings $ 7,965 $ 10,778
Net earnings per share:
Basic $ 0.97 $ 1.31
Diluted $ 0.92 $ 1.27
-------------------------------------------------------------------------
F-22
TRANSPORT CORPORATION OF AMERICA, INC.
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1999, 1998, and 1997:
(In thousands, except per share amounts)
Quarter
----------------------------------------------
1999: First Second Third Fourth
- -----------------------------------------------------------------------------------------
Operating revenues $ 67,145 $ 75,034 $ 70,722 $ 72,684
Operating income 4,979 8,402 6,366 1,324
- -----------------------------------------------------------------------------------------
Net earnings (loss) $ 2,079 $ 3,959 $ 2,644 $ (406)
Net earnings (loss) per common share:
Basic $ 0.26 $ 0.49 $ 0.32 $ (0.05)
Diluted $ 0.25 $ 0.46 $ 0.31 $ (0.05)
=========================================================================================
Quarter
----------------------------------------------
1998: First Second Third Fourth
- -----------------------------------------------------------------------------------------
Operating revenues $ 49,488 $ 53,075 $ 74,087 $ 69,263
Operating income 3,157 4,680 7,885 6,746
- -----------------------------------------------------------------------------------------
Net earnings $ 1,300 $ 2,214 $ 3,940 $ 3,202
Net earnings per common share:
Basic $ 0.19 $ 0.33 $ 0.50 $ 0.41
Diluted $ 0.19 $ 0.33 $ 0.48 $ 0.38
=========================================================================================
Quarter
----------------------------------------------
1997: First Second Third Fourth
- -----------------------------------------------------------------------------------------
Operating revenues $ 43,475 $ 46,369 $ 47,100 $ 49,448
Operating income 2,287 4,199 4,790 4,907
- -----------------------------------------------------------------------------------------
Net earnings $ 988 $ 2,074 $ 2,389 $ 2,300
Net earnings per common share:
Basic $ 0.15 $ 0.32 $ 0.36 $ 0.35
Diluted $ 0.15 $ 0.31 $ 0.36 $ 0.34
=========================================================================================
* Includes $2.7 million pre tax special bad debt provision due to increased
exposure risk in the fourth quarter of 1999.
(15) RELATED PARTY TRANSACTIONS
During fiscal 1999, 1998, and 1997, the Company paid MicroMation, Inc.
$469,357, $193,362, and $0, respectively, for information technology
services, primarily for the development of the Company's web site and
document imaging systems. Robert J. Meyers, the Company's President and
Chief Executive Officer, is the founder, former executive officer, and
current shareholder of MicroMation, Inc.
F-23