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 MARCH 31, 1997
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 May 12, 1997, the Company had outstanding 6,593,108 shares of Common
Stock, $.01 par value.
-------------------------------
This Form 10-Q consists of 12 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
Balance Sheets as of
March 31, 1997 and December 31, 1996 .......................... Page 3
Statements of Earnings for the
three months ended March 31, 1997 and 1996...................... Page 4
Statements of Cash Flows for the
three months ended March 31, 1997 and 1996...................... Page 5
Notes to 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 6. Exhibits and Reports on Form 8-K.................................. Page 10
Exhibit 11 Statement re: Computation of Net Earnings per
Weighted Common and Common Equivalent Share.......... Page 11
Exhibit 27 Financial Data Schedule.............................. Page 12
TRANSPORT CORPORATION OF AMERICA, INC.
BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
ASSETS: (unaudited) *
Current assets:
Cash and cash equivalents $ 2,182,051 $ 6,340,991
Trade receivables, net of allowance for doubtful accounts 14,725,438 12,617,377
Other receivables 1,969,453 656,753
Operating supplies 721,092 810,180
Deferred income taxes 2,183,000 2,113,000
Prepaid expenses and tires 3,649,450 2,102,271
------------- -------------
Total current assets 25,430,484 24,640,572
Revenue equipment, at cost 99,220,293 94,691,320
Less: accumulated depreciation (26,705,857) (25,121,215)
------------- -------------
Net revenue equipment 72,514,436 69,570,105
Property, other equipment, and improvements:
Land, buildings, and improvements 11,259,722 11,042,479
Furniture and other equipment 5,531,073 5,183,786
Less: accumulated depreciation (5,219,514) (4,879,203)
------------- -------------
Net property, other equipment, and improvements 11,571,281 11,347,062
Other assets, net 2,850,560 3,113,171
------------- -------------
TOTAL ASSETS $ 112,366,761 $ 108,670,910
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of long-term debt $ 15,226,399 $ 15,258,593
Accounts payable 3,018,924 2,607,861
Checks issued in excess of cash balances 1,402,793 350,950
Due to independent contractors 1,749,494 1,385,364
Accrued expenses 11,292,688 10,837,326
------------- -------------
Total current liabilities 32,690,298 30,440,094
Long term debt, less current maturities 22,065,057 21,837,713
Deferred income taxes 13,778,000 13,310,000
Stockholders' equity:
Common stock 66,081 64,960
Additional paid-in capital 23,612,810 23,851,516
Retained earnings 20,154,515 19,166,627
------------- -------------
Total stockholders' equity 43,833,406 43,083,103
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 112,366,761 $ 108,670,910
============= =============
* Based upon audited financial statements.
TRANSPORT CORPORATION OF AMERICA, INC.
STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
------------------------- -------------------------
AMOUNT % AMOUNT %
------------ -------- ------------ --------
(UNAUDITED)
OPERATING REVENUES $ 43,475,225 100.0 $ 38,794,178 100.0
OPERATING EXPENSES:
Salaries, wages, and benefits 12,361,708 28.5 11,368,882 29.3
Fuel, maintenance, and other expense 6,213,722 14.3 5,975,694 15.4
Purchased transportation 13,471,974 31.0 10,636,242 27.4
Revenue equipment leases 1,284,728 3.0 1,777,492 4.6
Depreciation and amortization 3,705,959 8.5 3,307,524 8.5
Insurance, claims, and damage 1,494,753 3.4 1,360,970 3.5
Taxes and licenses 798,787 1.8 781,347 2.0
Communication 535,163 1.2 485,978 1.3
Other general and administrative expenses 1,628,995 3.7 1,327,620 3.4
Gain on disposition of equipment (307,624) (0.7) (24,203) (0.1)
------------ -------- ------------ --------
TOTAL OPERATING EXPENSES 41,188,165 94.7 36,997,546 95.3
------------ -------- ------------ --------
OPERATING INCOME 2,287,060 5.3 1,796,632 4.7
Interest expense 663,956 1.5 687,111 1.8
Interest income (51,784) (0.1) (2,658) 0.0
------------ -------- ------------ --------
INTEREST EXPENSE, NET 612,172 1.4 684,453 1.8
EARNINGS BEFORE INCOME TAXES 1,674,888 3.9 1,112,179 2.9
Provision for income taxes 687,000 1.6 467,000 1.2
------------ -------- ------------ --------
NET EARNINGS $ 987,888 2.3 $ 645,179 1.7
============ ======== ============ ========
Net earnings per weighted common and
common equivalent share $ 0.15 $ 0.10
============ ===========
Weighted average number of common and
common equivalent shares outstanding - primary 6,735,828 6,708,277
============ ===========
TRANSPORT CORPORATION OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
------------ ------------
(unaudited)
OPERATING ACTIVITIES:
Net earnings $ 987,888 $ 645,179
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 3,705,959 3,307,524
Gain on disposition of equipment (307,624) (24,203)
Deferred income taxes 398,000 481,000
Changes in operating assets and liabilities:
Trade receivables (2,108,061) (860,385)
Other receivables (1,312,700) 1,640,596
Operating supplies 89,088 53,156
Prepaid expenses and tires (1,547,179) (1,339,602)
Accounts payable 411,063 (238,222)
Due to independent contractors 364,130 666,219
Accrued expenses 455,362 (366,315)
------------ ------------
Net cash provided by operating activities 1,135,926 3,964,947
------------ ------------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (7,878,733) (5,696,303)
Payments for purchases of property, other equipment,
and leasehold improvements (590,272) (491,302)
Increase (decrease) in other assets (2,200) 21,341
Proceeds from disposition of equipment 2,166,930 771,040
------------ ------------
Net cash used in investing activities (6,304,275) (5,395,224)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 255,845 11,126
Payments for repurchase and retirement of common stock (493,429) 0
Proceeds from issuance of long-term debt 3,510,496 4,326,600
Principal payments on long-term debt (3,315,346) (2,308,643)
Proceeds from issuance of notes payable to bank 0 13,260,000
Principal payments on notes payable to bank 0 (14,390,000)
Increase in net checks issued in excess of cash balances 1,051,843 537,949
------------ ------------
Net cash provided by financing activities 1,009,409 1,437,032
------------ ------------
INCREASE (DECREASE) IN CASH (4,158,940) 6,755
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,340,991 165,173
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,182,051 $ 171,928
============ ============
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 691,164 $ 667,869
Income taxes, net 104,000 120,889
TRANSPORT CORPORATION OF AMERICA, INC.
Notes to Financial Statements
1. Interim Financial Statements (unaudited)
The unaudited interim 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, 1996. The policies described in that report are used in
preparing quarterly reports.
The Company's business is seasonal. Operating results for the
three month period ended March 31, 1997 are not necessarily indicative
of the results that may be expected for the year ending December 31,
1997.
2. Commitments
As of March 31, 1997 the Company had commitments for the
purchase of approximately $15.8 million of revenue equipment, net of
proceeds from the disposition of used equipment.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended March 31, 1997 and 1996
Operating revenues increased 12.1% to $43.5 million for the
quarter ended March 31, 1997 from $38.8 million for the quarter ended
March 31, 1996. Freight volume increases from existing customers
continued as the primary source of revenue growth. Revenues per mile,
excluding fuel surcharges, increased to $1.29 per mile in the first
quarter of 1997 from $1.26 per mile for the same period of 1996.
Equipment utilization, as measured by average revenue per tractor per
week, rose 11.1% to $2,847 during the first quarter of 1997, from
$2,563 in the first quarter of 1996.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues) increased to 3.9% in the first quarter of 1997
from 2.9% for the same period of 1996. Efficiency, as measured by
average annualized revenues per non-driver employee, improved 7.2% to
$529,600 for the first quarter of 1997, compared to $493,900 for the
same period of 1996. Salaries, wages and benefits as a percentage of
operating revenues were 28.5% in the first quarter of 1997, compared to
29.3% for the same period of 1996. Reflecting the increase in the
average number of independent contractors in 1997 over 1996, miles
driven by independent contractors increased 18.9% in the first quarter
of 1997, compared to the same period of 1996. Accordingly, purchased
transportation increased as a percentage of operating revenues to 31.0%
in the first quarter of 1997 from 27.4% for the same period of 1996.
Purchased transportation in the first quarter of 1997 also reflects an
increase in the compensation scale paid to independent contractors as
well as a pass-through of fuel surcharges collected on behalf of
independent contractors. There were 484 independent contractors at
March 31, 1997, compared to 398 a year prior. The decline of fuel,
maintenance and other expenses as a percentage of operating revenues to
14.3% in the first quarter of 1997, when compared to 15.4% in the first
quarter of 1996, reflects the increase of independent contractor miles
as a percent of total miles, partially offset by significantly higher
fuel prices during the first quarter of 1997, when compared to the same
period of 1996. Revenue equipment leases decreased as a percentage of
operating revenues to 3.0% in the first quarter of 1997 from 4.6% for
the same period of 1996, as a result of the decline of leased equipment
and an expanded use of owned equipment.
In the first quarter of 1997, gain on the disposition of
equipment was $308,000, compared to a gain of $24,000 in the first
quarter of 1996, due to the larger number of dispositions in 1997, when
compared to the same period of 1996.
The effective tax rate for the first quarter of 1997 was
41.0%, compared to the 42.0% effective tax rate for the first quarter
of 1996. The lower effective rate in 1997 was due to a continued
decline in Company per diem payments, which are not fully deductible
for income tax purposes, when compared to the first quarter of 1996.
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
increased 53% to $988,000, or 2.3% of operating revenues for the
quarter ended March 31, 1997 from $645,000, or 1.7% of operating
revenues for the quarter ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $1.1 million in
the first three months of 1997. The working capital deficit as of March
31, 1997 was $7.3 million, compared to the $5.8 million deficit which
existed as of December 31, 1996. The working capital deficit at March
31, 1997 includes $15.2 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 three months of 1997
consumed net cash of $6.3 million, primarily for the purchase of new
revenue equipment including 44 tractors and 164 trailers, less proceeds
from the disposition of used equipment, including 66 tractors and 24
trailers. These expenditures were financed through a combination of
cash generated by operations, long-term debt financing and proceeds
from equipment dispositions. As of March 31, 1997 the Company had
commitments for the purchase of approximately $15.8 million of revenue
equipment, net of proceeds from the disposition of used equipment. The
Company has arranged to finance the revenue equipment purchases.
Net cash provided by financing activities was $1.0 million in
the first three months of 1997. Payments under the Company's term loan
agreements were $3.3 million. The primary source of financing was the
issuance of $3.5 million of long-term debt associated with the purchase
of revenue equipment. In addition, during the first quarter of 1997,
$493,000 was used for the repurchase and retirement of 40,700 shares of
the Company's common stock under the stock repurchase program.
The Company maintains a $10 million working capital line of
credit with a bank, secured primarily by its accounts receivable. This
credit facility, which expires in May 1997, is used to meet short-term
operating cash needs as well as letter of credit requirements
associated with the Company's self-insured retention arrangements. As
of March 31, 1997, there was no outstanding debt under this line of
credit. There was $2.8 million of outstanding letters of credit which
reduced the amount available under the line of credit as of March 31,
1997. The Company has negotiated a replacement credit facility with a
bank under terms similar to the expiring facility, plus an additional
$5 million line of credit secured by the book value of revenue
equipment not otherwise pledged. The Company expects that the new
credit facility will be in place prior to the expiration of the current
credit facility.
The Company expects to continue to fund its liquidity needs
and anticipated capital expenditures with cash flows from operations,
long-term debt financing, equipment dispositions, and the line of
credit.
PART II OTHER INFORMATION
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................... 11
27 Financial Data Schedule.......................... 12
(b) Reports on Form 8-K:
A current report on Form 8-K (Item 5, Other Events) was
filed with the SEC on March 14, 1997 to describe the main
features of the Company's shareholder rights plan which was
adopted by the Board of Directors on February 25, 1997. A
Registration Statement on Form 8-A to register the shareholder
rights plan interests was declared effective by the SEC on
March 13, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORT CORPORATION OF AMERICA, INC.
Date: May 12, 1997 /s/ James B. Aronson
------------------- -------------------------------------------
James B. Aronson
Chief Executive Officer
/s/ Robert J. Meyers
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Robert J. Meyers
Executive Vice President, Chief Financial
Officer and Chief Information Officer
(Principal Financial and Accounting Officer)