SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
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.)
1715 YANKEE DOODLE ROAD
EAGAN, MINNESOTA 55121
-----------------------
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (651) 686-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: YES _X_ NO ___
As of August 12, 2001, the Company had outstanding 7,202,363 shares of
Common Stock, $.01 par value.
This Form 10-Q consists of 15 pages.
TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000........................ Page 3
Consolidated Statements of Operations for the three
and six months ended June 30, 2001 and 2000................ Page 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 2001 and 2000.................... Page 5
Notes to Consolidated Financial Statements................. Page 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ Page 7
Item 3. Quantitative and Qualitative Disclosure about Market
Risk....................................................... Page 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........ Page 13
Item 6. Exhibits and Reports on Form 8-K........................... Page 13
2
Transport Corporation of America, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
June 30, December 31,
2001 2000
--------- ----------
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 1,074 $ 234
Trade accounts receivable, net 31,754 31,279
Other receivables 485 561
Operating supplies - inventory 1,163 1,244
Deferred income tax benefit 3,151 3,087
Prepaid expenses 3,379 1,974
--------- ---------
Total current assets 41,006 38,379
Property and equipment:
Land, buildings, and improvements 19,961 19,907
Revenue equipment 224,495 227,205
Other equipment 23,723 22,881
--------- ---------
Total property and equipment 268,179 269,993
Less accumulated depreciation (92,167) (78,947)
--------- ---------
Property and equipment, net 176,012 191,046
Other assets, net 26,582 27,231
--------- ---------
Total assets $ 243,600 $ 256,656
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 70,409 $ 18,670
Current maturities of capital lease obligations 4,101 3,964
Accounts payable 5,301 5,221
Checks issued in excess of cash balances 3,892 4,099
Due to independent contractors 1,898 2,395
Accrued expenses 12,862 12,527
--------- ---------
Total current liabilities 98,463 46,876
Long-term debt, less current maturities 6,358 68,591
Capital lease obligations, less current maturities 25,209 27,294
Deferred income taxes 33,197 33,207
Commitments and contingencies
Stockholders' equity
Common stock 72 72
Additional paid-in capital 30,155 30,094
Retained earnings 50,146 50,522
--------- ---------
Total stockholders' equity 80,373 80,688
--------- ---------
Total liabilities and stockholders' equity $ 243,600 $ 256,656
========= =========
* Based upon audited financial statements
See accompanying notes to consolidated financial statements
3
Transport Corporation of America, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating revenues $ 69,395 $ 73,431 $ 135,502 $ 145,631
Operating expenses:
Salaries, wages, and benefits 20,359 21,346 39,623 42,068
Fuel, maintenance, and other expenses 10,100 10,525 19,987 20,819
Purchased transportation 22,470 22,717 44,531 46,503
Revenue equipment leases 18 88 32 169
Depreciation and amortization 7,490 7,313 15,074 14,499
Insurance, claims and damage 2,227 2,397 4,589 4,419
Taxes and licenses 1,319 1,260 2,501 2,544
Communications 726 937 1,344 1,823
Other general and administrative expenses 2,292 2,455 4,622 5,238
Loss (gain) on sale of property and equipment 10 182 59 (327)
------------ ------------ ------------ ------------
Total operating expenses 67,011 69,220 132,362 137,755
------------ ------------ ------------ ------------
Operating income 2,384 4,211 3,140 7,876
Interest expense 1,769 2,240 3,762 4,410
Interest income (2) (99) (7) (102)
------------ ------------ ------------ ------------
Interest expense, net 1,767 2,141 3,755 4,308
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 617 2,070 (615) 3,568
Provision (benefit) for income taxes 241 807 (239) 1,391
------------ ------------ ------------ ------------
Net earnings (loss) $ 376 $ 1,263 $ (376) $ 2,177
============ ============ ============ ============
Net earnings (loss) per share:
Basic $ 0.05 $ 0.15 $ (0.05) $ 0.26
============ ============ ============ ============
Diluted $ 0.05 $ 0.12 $ (0.05) $ 0.22
============ ============ ============ ============
Average common shares outstanding:
Basic 7,192,032 8,323,991 7,190,698 8,321,253
Diluted 7,203,740 10,356,660 7,190,698 9,725,636
See accompanying notes to consolidated financial statements
4
Transport Corporation of America, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six months ended
June 30,
---------------------
2001 2000
-------- --------
Operating activities:
Net (loss) earnings $ (376) $ 2,177
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 15,074 14,499
Loss (gain) on sale of property and equipment 59 (327)
Deferred income taxes (74) 1,347
Changes in operating assets and liabilities:
Trade receivables (475) (2,847)
Other receivables 76 585
Operating supplies 81 184
Prepaid expenses and tires (1,405) (1,811)
Accounts payable 80 (792)
Due to independent contractors (497) 123
Accrued expenses 335 352
-------- --------
Net cash provided by operating activities 12,878 13,490
-------- --------
Investing activities:
Purchases of revenue equipment (198) (7,549)
Purchases of property and other equipment (883) (4,682)
Proceeds from sales of equipment 1,631 5,028
-------- --------
Net cash provided (used) by investing activities 550 (7,203)
-------- --------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 61 73
Principal payments on long-term debt (9,292) (7,853)
Proceeds from issuance of notes payable to bank 59,100 65,170
Principal payments on notes payable to bank (62,250) (65,670)
Change in net checks issued in excess of cash balances (207) 1,801
-------- --------
Net cash used by financing activities (12,588) (6,479)
-------- --------
Net increase (decrease) in cash 840 (192)
Cash and cash equivalents, beginning of period 234 745
-------- --------
Cash and cash equivalents, end of period $ 1,074 $ 553
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3,600 $ 4,354
Income taxes, net 114 448
See accompanying notes to consolidated financial statements
5
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Consolidated Financial Statements
1. Interim Consolidated Financial Statements (unaudited)
The unaudited interim consolidated financial statements
contained herein reflect all adjustments which, in the opinion of
management, are necessary to a fair statement of the interim periods.
They have been prepared in accordance with the instructions to Form
10-Q, Article 10 of Regulation S-X and, accordingly, do not include all
the information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements.
These financial statements should be read in conjunction with
the financial statements and footnotes included in the Company's most
recent annual financial statements on Form 10-K for the year ended
December 31, 2000. The policies described in that report are used in
preparing quarterly reports. Certain balances from prior periods have
been restated to conform to current presentation.
The Company's business is seasonal. Operating results for the
three and six month periods ended June 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2001.
2. Commitments
As of June 30, 2001 the Company had gross commitments for the
purchase of approximately $20 million of revenue equipment, with
deliveries anticipated during the remainder of 2001 and in 2002.
3. Effect of New Accounting Standard
The Company implemented SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," on January 1, 2001. The
adoption of SFAS 133 has not had any impact on the Company's results of
operations for the first six months of 2001 or its financial condition
as of June 30, 2001.
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 2001 and 2000
Operating revenues were $69.4 million for the quarter ended
June 30, 2001, compared to $ 73.4 million for the quarter ended June
30, 2000. The decline of revenues in 2001 reflects weak economic
conditions that have led to reduced shipments among the Company's
manufacturing, industrial and retail customers. Revenues per mile,
excluding fuel surcharges, were $1.28 for the second quarter of both
2001 and 2000. Equipment utilization, as measured by average revenues
per tractor per week, was $2,633 during the second quarter of 2001,
compared to $2,748 for the same quarter of 2000. The decline reflects
lower freight volume, a higher percentage of empty miles driven, and a
greater number of unseated tractors in 2001.
At June 30, 2001 and 2000, respectively, the Company's fleet
included 1,259 and 1,288 Company-owned tractors, and 732 and 739
tractors owned by independent contractors.
Salaries, wages, and benefits, as a percentage of operating
revenues, was 29.4% for the second quarter of 2001, compared to 29.1%
for the same quarter of 2000. The percentage increase reflects an
increase in the driver compensation package that was placed into effect
in the first quarter of 2001, and higher medical and workers
compensation claim expenses in 2001, partially offset by reductions in
non-driver payroll expense in 2001. Efficiency, as measured by average
annualized revenues per non-driver employee, was $560,600 for the
second quarter of 2001, compared to $557,300 for the same quarter of
2000.
Fuel, maintenance, and other expenses, as a percentage of
operating revenues, was 14.6 % for the second quarter of 2001, compared
to 14.4% for the same quarter of 2000. The percentage increase in 2001
reflects higher fuel costs and increases in other fleet operating
costs, partially offset by a decline in the proportion of miles driven
by employee drivers as a percentage of all miles driven, when compared
to the same period of 2000.
Purchased transportation, as a percentage of operating
revenues, was 32.4% for the second quarter of 2001, compared to 30.9%
for the same quarter of 2000. Expenses in 2001 reflect a greater
proportion of miles driven by independent contractors, an increased
pass-through of fuel surcharge revenues to independent contractors, and
an independent contractor rate increase implemented after the second
quarter of 2000.
7
Depreciation and amortization, as a percentage of operating
revenues, was 10.8% of operating revenues for the second quarter of
2001, compared to 10.0% for the same quarter of 2000. The percentage
increase is primarily the result of leasehold improvements and computer
software that were placed in service after the second quarter of 2000,
and the effect of lower revenues in 2001.
Insurance, claims and damage expense as a percentage of
operating revenues was 3.2% and 3.3% for the second quarter of 2001 and
2000, respectively. The percentage decrease reflects lower accident and
claims experience in 2001, partially offset by higher liability
insurance premium expense.
Taxes and licenses, as a percentage of operating revenues, was
1.9% for the second quarter of 2001, compared to 1.7% for the same
quarter of 2000. The percentage increase primarily reflects the effect
of lower revenues in the second quarter of 2001, when compared to 2000.
Communication, as a percentage of operating revenues, was 1.0%
for the second quarter of 2001, compared to 1.3% for the same quarter
of 2000. The percentage decrease is primarily the result of favorable
rates for communication services in 2001.
Other general and administrative expenses, as a percentage of
operating revenues, was 3.3% for the second quarter of 2001, compared
to 3.4% for the same quarter of 2000.
Net interest expense, as a percentage of operating revenues,
was 2.5% for the second quarter 2001, compared to 2.9% for the same
quarter of 2000. The decline reflects reduced average outstanding debt
and lower average rates in 2001, compared to the same quarter of 2000.
Loss on the disposition of revenue equipment was $10,000 for
the second quarter of 2001, compared to a loss of $182,000 for the same
quarter of 2000, reflecting fewer equipment dispositions in 2001.
The effective tax rate for the second quarter of both 2001 and
2000 was 39.0%.
As a result of the items discussed above, the Company's
operating ratio (operating expenses as a percentage of operating
revenues) was 96.6% during the second quarter of 2001, compared to
94.3% for the year ago quarter. Net earnings for the second quarter of
2001 were $0.4 million, or 0.5% of operating revenues, compared to $1.3
million, or 1.7% of operating revenues, for the same quarter of 2000.
8
Six Months Ended June 30, 2001 and 2000
Operating revenues were $135.5 million for the six months
ended June 30, 2001, compared to $145.6 million for the same period of
2000. The revenue decline reflects weak economic conditions throughout
2001 that have led to reduced shipments among the Company's largest
customers. Revenues per mile, excluding fuel surcharges, were $1.27 for
the first six months of both 2001 and 2000. Equipment utilization, as
measured by average revenue per tractor per week, including fuel
surcharges, was $2,562 for the first six months of 2001, compared to
$2,679 for the same period of 2000. The decline of equipment
utilization reflects lower freight volumes, a higher percentage of
deadhead miles in 2001, and a greater number of unseated tractors in
2001.
Salaries, wages, and benefits, as a percentage of operating
revenues, was 29.3% for the first six months of 2001, compared to 28.9%
for the same period of 2000. The percentage increase reflects an
increase in the driver compensation package 2001 that was placed into
effect late in the first quarter of 2001 and higher benefits expenses
in 2001, partially offset by reductions in non-driver payroll expense
in 2001.
Fuel, maintenance, and other expenses, as a percentage of
operating revenues, was 14.8% for the first six months of 2001,
compared to 14.3% for the same period of 2000. The percentage increase
in 2001 reflects higher equipment operating costs due to adverse
weather conditions in the first quarter of 2001 and higher fuel costs,
partially offset be a decline of the proportion of miles driven by
employee drivers as a percentage of all miles driven, when compared to
the same period of 2000.
Purchased transportation, as a percentage of operating
revenues, was 32.9% for the first six months of 2001, compared to 31.9%
for the same period of 2000. The percentage increase in 2001 is
primarily a result of a greater proportion of miles driven by
independent contractors, an increased pass-through of fuel surcharge
revenues to independent contractors, and an independent contractor rate
increase implemented in the third quarter of 2000.
Depreciation and amortization, as a percentage of operating
revenues, was 11.1% for the first six months of 2001, compared to 10.0%
for the same period of 2000. The increase is primarily a result of
leasehold improvements and computer software that were placed in
service after the first six months of 2000, and the effect of lower
revenues in 2001.
Insurance, claims and damage expense as a percentage of
operating revenues was 3.4% for the first six months of 2001, compared
to 3.0% for the
9
same period of 2000. The increase is primarily a result of higher
liability insurance premium expense and unfavorable accident and claims
experience in the first quarter of 2001.
Taxes and licenses, as a percentage of operating revenues, was
1.8% for the first six months of 2001, compared to 1.7% for the same
period of 2000. The percentage increase primarily reflects the effect
of lower revenues in 2001, when compared to 2000.
Communication, as a percentage of operating revenues, was 1.0%
for the first six months of 2001, compared to 1.3% for the same period
of 2000. The percentage decrease is primarily the result of favorable
rates for communication services in 2001.
Other general and administrative expense, as a percentage of
operating revenues, was 3.4% for the first six months of 2001, compared
to 3.7% for the same period of 2000. The decline is primarily a result
of one-time expenses associated with a terminated merger in the first
quarter of 2000 and other expense reduction initiatives implemented in
2001.
Net interest expense, as a percentage of operating revenues,
was 2.8% for the first six months of 2001, compared to 2.9% for the
same period of 2000. The decrease primarily reflects lower average
outstanding debt balances during 2001.
The effective tax rates for the first six months of both 2001
and 2000 was 39.0%.
As a result of the items discussed above, the Company's
operating ratio (operating expenses as a percentage of operating
revenues) was 97.7% during the first six months of 2001, compared to
94.6% for the year ago period. Net loss for the first six months of
2001 was $0.4 million, or 0.3% of operating revenues, compared to net
profit of $2.2 million, or 1.5% of operating revenues, for the year ago
period of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the first six
months of 2001 was $12.9 million, including $2.0 million consumed by
the net change of operating assets and liabilities.
Investing activities for the first six months of 2001 provided
net cash of $0.6 million. Proceeds from sales of equipment exceeded
expenditures for revenue and other equipment during the first six
months of 2001.
10
Financing activities for first six months of 2001 consumed net
cash of $12.6 million for the first six months of 2001, including $3.2
million representing net repayments to the Company's credit facility
and $9.3 million for net repayments of long-term debt. As of June 30,
2001, the Company had outstanding commitments of approximately $20
million for the purchase of revenue equipment, which will be partially
offset by anticipated proceeds from used equipment dispositions and
trade-in amounts.
Working Capital was negative $57.3 million, including $57.0
million associated with the Company's credit facility, compared to
negative $8.5 million at December 31, 2000. As required by accounting
rules, the Company has classified the outstanding balance of its credit
facility as a current liability as of June 30, 2001, because it will
mature within twelve months of the balance sheet date. At December 31,
2000, the credit facility balance was classified as a long-term
liability.
The Company has a credit agreement with seven major banks for
an unsecured credit facility with maximum combined borrowings and
letters of credit of $62 million. Amounts actually available under the
credit facility are limited by the Company's accounts receivable and
unencumbered revenue equipment. The credit facility is used to meet
working capital needs, purchase revenue equipment and other assets, and
to satisfy letter of credit requirements associated with the Company's
self-insured retention arrangements. At June 30, 2001, there were
outstanding borrowings and letters of credit of $57.0 million and $1.8
million, respectively. During 2001, the Company negotiated amendments
to certain covenant restrictions related to financial ratios required
under its credit agreement, and reduced maximum borrowings available
under the credit facility. The Company has commenced negotiations to
replace the credit facility, which expires on March 30, 2002, and
believes it will be successful in arranging such financing. The Company
expects to continue to fund its liquidity needs and anticipated capital
expenditures with cash flows from operations, the credit facility, and
other borrowing arrangements related to revenue equipment purchases.
NEW ACCOUNTING PRONOUNCEMENTS
In July of 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard (SFAS) No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated after June
30, 2001, as well as all purchase method business combinations
completed after June 30, 2001. Statement 142 will require that goodwill
and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually. The
11
Company will be required to adopt Statement 142 beginning January 1,
2002. The impact of adoption of Statement 142 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 cautions 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, (8) changes in interest rates at which the Company
borrows money, and (9) 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to certain market risks with its $62
million credit agreement, of which $57.0 million was outstanding at
June 30, 2001. The agreement bears interest at a variable rate, which
was 6.5% at June 30, 2001. Consequently, the Company is exposed to the
risk of greater borrowing costs if interest rates increase. Although
the Company does not currently 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.
12
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On May 22, 2001 the Company held its Annual Meeting of
Shareholders. At the meeting, the following actions were taken:
(a) The following persons were elected to the Company's Board of
Directors:
Votes For Votes Withheld
--------- --------------
William D. Slattery 6,262,475 597,316
Robert J. Meyers 6,185,078 674,713
Anton J. Christianson 6,377,261 482,530
Michael J. Paxton 6,363,478 496,313
Kenneth J. Roering 6,374,078 485,713
(b) The Company's shareholders approved the adoption of Transport
America's 2001 Employee Stock Purchase Plan by a vote of
6,561,522 shares in favor, 282,747 shares against, and 15,522
shares abstaining.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description
------- -----------
11.1 Statement re: Computation of Net Earnings per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2001.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORT CORPORATION OF AMERICA, INC.
Date: August 13, 2001 /s/ Robert J. Meyers
--------------------------------------
Robert J. Meyers
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Keith R. Klein
--------------------------------------
Keith R. Klein
Chief Financial Officer and Chief
Information Officer
(Principal Financial Officer)
14