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, 1996
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: (612) 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 7, 1996, the Company had outstanding 6,424,096 shares of Common
Stock, $.01 par value.
This Form 10-Q consists of 14 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
Condensed Balance Sheets as of
June 30, 1996 and December 31, 1995...................................... Page 3
Condensed Statements of Earnings for the
three and six months ended June 30, 1996 and 1995........................ Page 4
Condensed Statements of Cash Flows for the
six months ended June 30, 1996 and 1995.................................. Page 5
Notes to Condensed Financial Statements.................................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................ Page 7
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holder......................... Page 11
Item 5. Other Information.......................................................... Page 11
Item 6. Exhibits and Reports on Form 8-K........................................... Page 11
Exhibit 11 Statement re: Computation of Net Earnings per Weighted
Common and Common Equivalent Share.......................... Page 13
Exhibit 27 Financial Data Schedule...................................... Page 14
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
ASSETS: (unaudited) *
Current assets:
Cash and cash equivalents $ 1,615,571 $ 165,173
Trade receivables, net of allowances 13,428,312 13,040,508
Other receivables 1,480,915 3,322,095
Operating supplies 861,692 963,490
Deferred income taxes 2,427,000 2,538,000
Prepaid expenses and tires 2,819,019 1,891,670
------------- -------------
Total current assets 22,632,509 21,920,936
Revenue equipment, at cost 85,200,788 81,203,390
Less: accumulated depreciation (21,294,283) (16,161,324)
------------- -------------
Net revenue equipment 63,906,505 65,042,066
Property, other equipment, and improvements:
Land, buildings, and improvements 10,104,133 8,832,102
Furniture and other equipment 4,757,320 4,634,034
Less: accumulated depreciation (4,245,050) (4,051,995)
------------- -------------
Net property, other equipment,
and improvements 10,616,403 9,414,141
Other assets, net 3,087,913 3,080,043
------------- -------------
TOTAL ASSETS $ 100,243,330 $ 99,457,186
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank $ 0 $ 2,230,000
Current maturities of long-term debt 10,704,220 9,314,272
Accounts payable 2,241,087 2,997,255
Checks issued in excess of cash balances 869,881 1,152,928
Due to independent contractors 1,772,991 980,075
Accrued expenses 11,571,113 11,544,928
------------- -------------
Total current liabilities 27,159,292 28,219,458
Long term debt, less current maturities 22,623,591 24,436,325
Deferred income taxes 11,700,000 10,494,000
Stockholders' equity:
Common stock 64,218 64,206
Additional paid-in capital 23,381,583 23,370,469
Retained earnings 15,314,646 12,872,728
------------- -------------
Total stockholders' equity 38,760,447 36,307,403
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 100,243,330 $ 99,457,186
============= =============
* Based upon audited financial statements.
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
AMOUNT AMOUNT AMOUNT AMOUNT
------------ ------------ ------------ ------------
(unaudited) (unaudited)
OPERATING REVENUES $ 41,225,259 $ 34,972,128 $ 80,019,437 $ 69,322,742
OPERATING EXPENSES:
Salaries, wages, and benefits 11,111,748 9,897,058 22,480,630 20,273,779
Fuel, maintenance, and
other expenses 5,650,291 4,901,528 11,625,985 9,970,394
Purchased transportation 11,545,448 9,040,106 22,181,690 17,436,748
Revenue equipment leases 1,772,823 1,704,314 3,550,315 3,547,283
Depreciation and amortization 3,430,593 2,366,615 6,738,117 4,620,017
Insurance, claims, and damage 1,403,441 1,459,384 2,764,411 3,301,255
Taxes and licenses 794,783 754,852 1,576,130 1,502,540
Communication 476,063 398,982 962,041 927,023
Other general and
administrative expenses 1,248,866 1,324,027 2,576,486 2,679,442
Loss (gain) on disposition of equipment 12,335 (575,857) (11,868) (919,438)
------------ ------------ ------------ ------------
Total operating expenses 37,446,391 31,271,009 74,443,937 63,339,043
------------ ------------ ------------ ------------
OPERATING INCOME 3,778,868 3,701,119 5,575,500 5,983,699
Interest expense 683,693 500,131 1,370,804 1,030,855
Interest income (3,564) (58,068) (6,222) (142,568)
------------ ------------ ------------ ------------
Interest expense, net 680,129 442,063 1,364,582 888,287
EARNINGS BEFORE INCOME TAXES 3,098,739 3,259,056 4,210,918 5,095,412
Provision for income taxes 1,302,000 1,402,000 1,769,000 2,192,000
------------ ------------ ------------ ------------
NET EARNINGS $ 1,796,739 $ 1,857,056 $ 2,441,918 $ 2,903,412
============ ============ ============ ============
Net earnings per weighted common and
common equivalent share - primary $ 0.27 $ 0.28 $ 0.36 $ 0.43
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 6,725,373 6,707,406 6,716,825 6,698,415
============ ============ ============ ============
TRANSPORT CORPORATION OF AMERICA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
------------------------------
1996 1995
------------ ------------
(unaudited)
OPERATING ACTIVITIES:
Net earnings $ 2,441,918 $ 2,903,412
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 6,738,117 4,620,017
Gain on disposition of equipment (11,868) (919,438)
Deferred income taxes 1,317,000 798,000
Changes in operating assets
and liabilities:
Trade receivables (387,804) (1,195,768)
Other receivables 1,841,180 (59,804)
Operating supplies 101,798 (28,824)
Prepaid expenses and tires (927,349) (628,627)
Accounts payable (756,168) (634,452)
Due to independent contractors 792,916 517,887
Accrued expenses 26,185 1,234,316
------------ ------------
Net cash provided by operating
activities 11,175,925 6,606,719
------------ ------------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (5,709,450) (10,869,477)
Payments for purchases of property, other
equipment, and leasehold improvements (1,855,987) (629,860)
Increase in other assets (21,798) 14,192
Proceeds from disposition of equipment 786,415 4,129,341
------------ ------------
Net cash used in investing
activities (6,800,820) (7,355,804)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 11,126 0
Proceeds from issuance of long-term debt 4,500,239 2,791,500
Principal payments on long-term debt (4,923,025) (3,668,758)
Proceeds from issuance of
notes payable to bank 21,888,000 1,010,000
Principal payments on notes payable to bank (24,118,000) (1,010,000)
Net checks issued in excess of cash balances (283,047) (695,493)
------------ ------------
Net cash provided by financing
activities (2,924,707) (1,572,751)
------------ ------------
INCREASE (DECREASE) IN CASH 1,450,398 (2,321,836)
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF PERIOD 165,173 7,372,042
AT END OF PERIOD $ 1,615,571 $ 5,050,206
============ ============
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 1,372,887 1,014,372
Income taxes, net 187,051 1,371,595
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Condensed Financial Statements
1. Interim Condensed Financial Statements (unaudited)
The unaudited interim condensed 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 generally accepted accounting principles for
complete financial statements.
These 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, 1995. The policies described in that report are used in
preparing quarterly reports.
The Company's business is seasonal. Operating results for the
six month period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1996.
2. Commitments
As of June 30, 1996 the Company had commitments for the
purchase of approximately $9.1 million of revenue equipment, net of
proceeds from the disposition of used equipment, $375,000 for the
purchase of land in Kansas City, Missouri, and approximately $300,000
to complete the expansion and upgrade of its Janesville, Wisconsin
facility.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 1996 and 1995
Operating revenues increased 17.9% to $41.2 million for the
quarter ended June 30, 1996 from $35.0 million for the quarter ended
June 30, 1995. Greater freight volumes from existing customers
continued as the primary source of revenue growth. Revenues per mile
declined slightly to $1.28 per mile in the second quarter of 1996 from
$1.29 per mile for the same period of 1995. Equipment utilization, as
measured by average revenue per tractor per week, rose to $2,749 during
the second quarter of 1996, from $2,741 in the second quarter of 1995.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) declined to 7.5% in the second quarter of 1996
from 9.3% for the same period of 1995. Efficiency, as measured by
average annualized revenues per non-driver employee, improved 13.6% to
$536,000 for the second quarter of 1996, compared to $471,800 for the
same period of 1995. Salaries, wages and benefits as a percentage of
operating revenues were 27.0% in the second quarter of 1996, compared
to 28.3% for the same period of 1995. There were 423 independent
contractors at June 30, 1996, an increase of 71 from 352 a year prior.
Reflecting the increase in the number of independent contractors,
independent contractor miles increased 28.6% in the second quarter of
1996, compared to the same period of 1995. Accordingly, purchased
transportation increased as a percentage of operating revenues to 28.0%
in the second quarter of 1996 from 25.8% for the same period of 1995.
The decline of fuel, maintenance and other expenses as a percentage of
operating revenues to 13.7% in the second quarter of 1996, when
compared to 14.0% in the second quarter of 1995, reflects the increase
of independent contractor miles as a percent of total miles, partially
offset by significantly higher fuel prices during the second quarter of
1996, when compared to the same period of 1995. Revenue equipment
leases decreased as a percentage of operating revenues to 4.3% in the
second quarter of 1996 from 4.9% for the same period of 1995, primarily
as a result of the expanded use of debt financed equipment in place of
leased equipment and an increase in independent contractors.
Correspondingly, depreciation and amortization for the second quarter
of 1996 increased to 8.3% of operating revenues from 6.8% for the same
period of 1995, due to new revenue equipment purchases and replacement
during 1995 of leased equipment with debt-financed equipment.
Insurance, claims and damage decreased as a percentage of operating
revenues to 3.4% in the first quarter of 1996 from 4.2% for the same
period of 1995 as a result of favorable insurance premium costs for
policies which were renewed at the start of 1996 and more favorable
accident experience in the second quarter of 1996, when compared to the
same period of 1995.
In the second quarter of 1996, loss on the disposition of
equipment was $12,000, compared to a gain of $576,000 in the second
quarter of 1995, a reflection of the large number of equipment
dispositions and the favorable market for the sale of used equipment in
the same period of 1995.
The effective tax rate for the second quarter of 1996 was
42.0%, compared to the 43.0% effective tax rate for the second quarter
of 1995. The lower effective rate in 1996 was primarily due to a
decline in Company per diem payments, which are not fully deductible
for income tax purposes, when compared to the second quarter of 1995.
The Company pays certain of its drivers a per diem allowance while on
the road to cover meals and other expenses.
As a consequence of the items discussed above, net earnings
declined to $1.8 million, or 4.4% of operating revenues for the quarter
ended June 30, 1996 from $1.9 million, or 5.3% of operating revenues
for the quarter ended June 30, 1995.
Six Months Ended June 30, 1996 and 1995
Operating revenues increased 15.4% to $80.0 million for the
six months ended June 30, 1996 from $69.3 million for the first six
months of 1995. Increases in freight volumes from existing customers
continued as the primary source of revenue growth. Reflecting soft
demand and industry overcapacity which contributed to higher empty
miles as a percentage of total miles driven, revenues per mile declined
slightly to $1.27 per mile in the first six months of 1996 from $1.28
per mile for the same period of 1995. Equipment utilization, as
measured by average revenues per tractor per week, was $2,656 during
the first six months of 1996 compared to $2,744 for the same period of
1995.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) declined to 5.3% in the first six months of 1996
from 7.4% for the same period of 1995. Efficiency, as measured by
average annualized revenues per non-driver employee, increased 10.4% to
$514,700 for the first six months of 1996 from $466,200 for the same
period of 1995. Independent contractor miles increased 28.2% in the
first six months of 1996, compared to the same period of 1995, as a
result of the increase in the average number of contractors during the
first six months of 1996 compared to the same period of 1995.
Correspondingly, purchased transportation increased as a percentage of
operating revenues to 27.7% in the first six months of 1996 from 25.2%
for the same period of 1995. Fuel, maintenance and other expenses
increased as a percentage of operating revenues to 14.5% in the first
six months of 1996 from 14.4% for the same period of 1995 as a result
of unusually severe winter weather conditions and higher fuel costs in
1996, compared to 1995, partially offset by the increase in independent
contractor miles as a percentage of total miles when compared to 1995.
Revenue equipment leases decreased as a percentage of operating
revenues to 4.4% in the first six months of 1996 from 5.1% for the same
period of 1995, primarily as a result of an increase in independent
contractors and the expanded use of debt financed equipment. For the
first six months of 1996, depreciation and amortization increased to
8.4% of operating revenues from 6.7% for the same period of 1995 due to
purchases of new revenue equipment and replacement of leased equipment
with debt financed equipment. Insurance, claims and damage decreased as
a percentage of operating revenues to 3.5% in the first six months of
1996 from 4.8% for the same period of 1995, as a result of improved
accident and claim experience in 1996 when compared to 1995, and lower
insurance premium costs for policies which were renewed at the start of
1996.
In the first six months of 1996, gain on the disposition of
equipment was $12,000, compared to a gain of $919,000 in the first six
months of 1995, due to the large number of equipment dispositions and
the favorable market for used equipment in the first six months of
1995.
The effective tax rate for the first six months of 1996 was 42.0%,
compared to the 43.0% effective tax rate for the first six months of
1995. The lower effective rate in 1996 is due to a decline in Company
per diem payments, which are not fully deductible for income tax
purposes, when compared to the first six months of 1995. The Company
pays certain of its drivers a per diem allowance while on the road to
cover meals and other expenses.
As a consequence of the items discussed above, net earnings
declined to $2.4 million, or 3.1% of operating revenues, for the six
months ended June 30, 1996 from $2.9 million, or 4.2% of operating
revenues, for the six months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $11.2 million in
the first six months of 1996. The working capital deficit as of June
30, 1996 was $4.5 million, compared to the $6.3 million deficit which
existed as of December 31, 1995. The working capital deficit at June
30, 1996 includes $10.7 million of current maturities of long-term debt
associated with the purchase of revenue equipment. Historically, the
Company has operated effectively with current liabilities in excess of
current assets through a combination of operating profits, collections
on accounts receivable, and other cash management strategies.
Management expects to continue to do so while meeting its obligations.
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 reserves are adequate for expected future claim
payments.
Investing activities in the first half of 1996 consumed net
cash of $6.8 million, primarily for the purchase of new revenue
equipment including 7 tractors and 220 trailers, less proceeds from the
disposition of used equipment, including 41 trailers and 3 tractors.
These expenditures were financed through a combination of cash
generated by operations, long-term debt financing and proceeds from
equipment dispositions. As of June 30, 1996 the Company had commitments
for the purchase of approximately $9.1 million of revenue equipment,
net of proceeds from the disposition of used equipment, $375,000 for
the purchase of land in Kansas City, Missouri, and approximately
$300,000 to complete the expansion and upgrade of its Janesville,
Wisconsin facility. The Company has arranged to finance the revenue
equipment purchases; the remaining commitments are expected to be
financed by cash flows from operating activities.
Net cash used by financing activities was $2.9 million in the
first half of 1996. Payments under the Company's term loan agreements
were $4.9 million. The primary source of financing was the issuance of
$4.5 million of long-term debt associated with the purchase of revenue
and computer equipment.
In April, 1996 the Company renewed its working capital line of
credit with a bank. This $10 million credit facility, secured primarily
by its accounts receivable, expires in May, 1997. This facility is used
to meet short-term operating cash requirements as well as letter of
credit requirements associated with the Company's self-insured
retention arrangements under its insurance program and the
self-insurance authority which was granted by the Federal Highway
Administration (FHWA) in April, 1996. As of June 30, 1996, there was no
outstanding debt under this line of credit and there was $1.8 million
of outstanding letters of credit which reduced the amount available
under the line of credit. An additional $1 million of letters of credit
was issued in July, 1996 upon activation of the FHWA self-insurance
authority.
The Company expects to continue to fund its liquidity needs
and anticipated capital expenditures with cash flows from operations,
long-term debt financing and operating leases, equipment dispositions,
and the line of credit.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On May 14, 1996 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
--------- --------------
James B. Aronson 4,709,323 700
Robert E. Johnson 4,709,323 700
Dennis M. Mathisen 4,709,323 700
Anton J. Christianson 4,709,323 700
Michael J. Paxton 4,709,323 700
Kenneth J. Roering 4,709,323 700
(b) The Company's shareholders approved the Transport Corporation
of America, Inc. Employee Stock Purchase Plan by a vote of
4,617,896 shares voting in favor, 11,486 shares against, and
5,650 shares abstaining.
(c) The Company's shareholders approved the selection of KPMG Peat
Marwick LLP as independent public accountants by a vote of
4,706,196 shares voting in favor, 2,100 shares against and
1,727 shares abstaining.
Item 5. Other Information:
On June 14, 1996 the Company announced that Robert E. Johnson,
president and chief operating officer and a director, resigned to
pursue other interests. James B. Aronson, chief executive officer, has
assumed Mr. Johnson's responsibilities.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description Page
------ ----------- ----
11 Statement re: Computation of Net Earnings
per Weighted Common and Common Equivalent Share.. 13
27 Financial Data Schedule.......................... 14
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended June 30, 1996.
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, 1996 /s/ James B. Aronson
James B. Aronson
Chief Executive Officer
/s/ Robert J. Meyers
Robert J. Meyers
Executive Vice President, Chief Financial
Officer and Chief Information Officer
(Principal Financial and Accounting Officer)