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, 1998
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, 1998, the Company had outstanding 6,711,574 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
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997........................Page 3
Consolidated Statements of Earnings for the
three months ended March 31, 1998 and 1997..................Page 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997..................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
PART II OTHER INFORMATION
Item 5. Other Information ............................................Page 10
Item 6. Exhibits and Reports on Form 8-K...............................Page 10
Exhibit 11 Statement re: Computation of Earnings per
Common Share .....................................Page 11
Exhibit 27 Financial Data Schedule............................
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
1998 1997
--------- ---------
ASSETS: (unaudited) *
Current assets:
Cash and cash equivalents $ 6,868 $ 1,383
Trade receivables, net of allowance for doubtful accounts 17,705 17,482
Other receivables 1,078 4,757
Operating supplies 904 989
Deferred income taxes 3,492 3,945
Prepaid expenses and tires 3,610 1,921
--------- ---------
Total current assets 33,657 30,477
Revenue equipment, at cost 128,958 126,886
Less: accumulated depreciation (33,006) (29,871)
--------- ---------
Net revenue equipment 95,952 97,015
Property, other equipment, and improvements:
Land, buildings, and improvements 17,272 17,120
Furniture and other equipment 7,500 7,082
Less: accumulated depreciation (6,513) (6,177)
--------- ---------
Net property, other equipment, and improvements 18,259 18,025
Other assets, net 2,151 2,276
--------- ---------
TOTAL ASSETS $ 150,019 $ 147,793
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of long-term debt $ 19,385 $ 19,077
Accounts payable 3,215 3,557
Checks issued in excess of cash balances 1,643 0
Due to independent contractors 1,855 518
Accrued expenses 11,514 9,563
--------- ---------
Total current liabilities 37,612 32,715
Long term debt, less current maturities 39,834 44,618
Deferred income taxes 20,069 19,652
Stockholders' equity:
Common stock 67 66
Additional paid-in capital 24,219 23,824
Retained earnings 28,218 26,918
--------- ---------
Total stockholders' equity 52,504 50,808
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 150,019 $ 147,793
========= =========
* Based upon audited financial statements.
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARES AND EARNINGS PER SHARE)
THREE MONTHS ENDED
MARCH 31,
----------------------------------------------------------------
1998 1997
----------------------------- ------------------------------
AMOUNT % AMOUNT %
------------- -------- ------------- ---------
(unaudited)
OPERATING REVENUES $ 49,488 100.0 $ 43,475 100.0
OPERATING EXPENSES:
Salaries, wages, and benefits 15,106 30.5 12,362 28.4
Fuel, maintenance, and other expense 6,796 13.7 6,368 14.7
Purchased transportation 14,160 28.6 13,472 31.0
Revenue equipment leases 966 2.0 1,285 3.0
Depreciation and amortization 4,410 8.9 3,706 8.5
Insurance, claims, and damage 1,525 3.1 1,340 3.1
Taxes and licenses 835 1.7 799 1.8
Communication 612 1.2 535 1.2
Other general and administrative expenses 1,933 3.9 1,629 3.7
(Gain) on disposition of equipment (12) 0.0 (308) (0.7)
------------- ------------- ------------- -------------
TOTAL OPERATING EXPENSES 46,331 93.6 41,188 94.7
------------- ------------- ------------- -------------
OPERATING INCOME 3,157 6.4 2,287 5.3
Interest expense 1,115 2.3 664 1.5
Interest income (91) (0.2) (52) (0.1)
------------- ------------- ------------- -------------
INTEREST EXPENSE, NET 1,024 2.1 612 1.4
EARNINGS BEFORE INCOME TAXES 2,133 4.3 1,675 3.9
Provision for income taxes 833 1.7 687 1.6
------------- ------------- ------------- -------------
NET EARNINGS $ 1,300 2.6 $ 988 2.3
============= ============= ============= =============
Earnings per common share
Basic $ 0.19 $ 0.15
Diluted $ 0.19 $ 0.15
Average common shares outstanding
Basic 6,669,700 6,515,624
Diluted 6,767,671 6,735,828
TRANSPORT CORPORATION OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
---------------------
MARCH 31,
---------------------
1998 1997
-------- --------
(unaudited)
OPERATING ACTIVITIES:
Net earnings $ 1,300 $ 988
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,410 3,706
Gain on disposition of equipment (12) (308)
Deferred income taxes 870 398
Changes in operating assets and liabilities:
Trade receivables (223) (2,108)
Other receivables 3,679 (1,313)
Operating supplies 85 89
Prepaid expenses and tires (1,689) (1,547)
Accounts payable (342) 411
Due to independent contractors 1,337 364
Accrued expenses 1,952 455
-------- --------
Net cash provided by operating activities 11,367 1,135
-------- --------
INVESTING ACTIVITIES:
Payments for purchases of revenue equipment (3,774) (7,879)
Payments for purchases of property, other equipment,
and leasehold improvements (633) (590)
Increase in other assets 0 (2)
Proceeds from disposition of equipment 962 2,167
-------- --------
Net cash used in investing activities (3,445) (6,304)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 396 256
Payments for repurchase and retirement of common stock 0 (493)
Proceeds from issuance of long-term debt 0 3,510
Principal payments on long-term debt (4,476) (3,315)
Net checks issued in excess of cash balances 1,643 1,052
-------- --------
Net cash provided (used) by financing activities (2,437) 1,010
-------- --------
INCREASE (DECREASE) IN CASH 5,485 (4,159)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,383 6,341
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,868 $ 2,182
======== ========
Supplemental disclosure of cashflow information:
Cash paid during the period for:
Interest, net $ 1,099 $ 691
Income taxes, net 41 104
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 generally accepted accounting
principles 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, 1997. 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 month period ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31,
1998.
2. New Accounting Pronouncements
The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, in the first quarter of 1998. There were no components of
comprehensive income which require disclosure in any of the periods
presented herein.
3. Commitments
As of March 31, 1998 the Company had commitments for the
purchase of approximately $21 million of revenue equipment, net of
anticipated 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, 1998 and 1997
Operating revenues increased 13.8% to $49.5 million for the
quarter ended March 31, 1998 from $43.5 million for the quarter ended
March 31, 1997. Excluding fuel surcharges in both periods, revenues
increased 15.6% in the first quarter of 1998, compared to the same
period of 1997. Revenues per mile, excluding fuel surcharges, were
$1.25 per mile in the first quarter of 1998, compared to $1.27 per mile
for the same period of 1997, reflecting a trend in 1998 toward slightly
longer lengths of haul and reduced accessorial demands. Equipment
utilization, as measured by average revenues per tractor per week, net
of fuel surcharges, was $2,795 during the first quarter of 1998,
compared to $2,717 in the first quarter of 1997, a 2.9% improvement.
Pre-tax margin (earnings before income taxes as a percentage
of operating revenues), including the effect of an approximately
$269,000 loss related to Transport International Express,
Inc.("T.I.E."), the Company's airport-to-airport expedited
less-than-truckload service, increased to 4.3% in the first quarter of
1998 from 3.9% for the same period of 1997. Efficiency, as measured by
average annualized revenues per non-driver employee, improved 3.5% to
$548,000 for the first quarter of 1998, compared to $529,600 for the
same period of 1997. Salaries, wages and benefits as a percentage of
operating revenues rose to 30.5% in the first quarter of 1998, compared
to 28.4% for the same period of 1997. The increase is primarily a
reflection of the greater number of employee drivers and incremental
T.I.E. expense during 1998, compared to the same period of 1997.
Consistent with a lower average number of independent contractors in
the first quarter of 1998, compared to the first quarter of 1997, the
miles driven by independent contractors declined as a percentage of all
miles in the first quarter of 1998. Accordingly, purchased
transportation decreased as a percentage of operating revenues to 28.6%
in the first quarter of 1998 from 31.0% for the same period of 1997.
Purchased transportation in the first quarter of 1998, when compared to
the first quarter of 1997, also reflects a decrease in the pass-through
of fuel surcharges which were collected on behalf of independent
contractors during 1997. As of March 31, 1998 and 1997, there were 445
and 484 independent contractors, respectively. The decline of fuel,
maintenance and other expenses as a percentage of operating revenues to
13.7% in the first quarter of 1998, compared to 14.7% in the first
quarter of 1997, reflects significantly lower fuel prices and favorable
winter operating conditions which were enjoyed in the first quarter of
1998, partially offset by the increase in employee driver miles as a
percent of total miles during the first quarter of 1998, when compared
to the same period of 1997. As a result of the expanded use of
debt-financed equipment, revenue equipment leases decreased as a
percentage of operating revenues to 2.0% in the first quarter of 1998
from 3.0% for the same period of 1997.
Gain on the disposition of equipment was $12,000 in the first
quarter of 1998, compared to a gain of $308,000 in the first quarter of
1997, as a result of the fewer number of dispositions in 1998, when
compared to the same period of 1997.
The effective tax rate for the first quarter of 1998 was
39.0%, compared to the 41.0% effective tax rate for the first quarter
of 1997. The lower effective rate in 1998 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 1997.
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 32% to $1,300,000, or 2.6% of operating revenues for the
quarter ended March 31, 1998 from $988,000, or 2.3% of operating
revenues for the quarter ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $11.4 million in
the first three months of 1998. The working capital deficit as of March
31, 1998 was $4.0 million, compared to the $2.2 million deficit which
existed as of December 31, 1997. The working capital deficit at March
31, 1998 includes $19.4 million of current maturities of long-term debt
associated with revenue equipment which is treated as a non-current
asset on the balance sheet. The Company has historically operated
effectively with current liabilities in excess of current assets
through a combination of operating profits, collections on accounts
receivable, proceeds from the disposition of equipment, and other cash
management strategies. The Company expects that working capital
deficits will continue in the future. Management expects to be able to
continue to meet its obligations, including liabilities for claim
payments associated with the Company's retention of accident and
workers' compensation claims.
Investing activities in the first three months of 1998
consumed net cash of $3.4 million, primarily for the purchase of 46 new
tractors, as well as other equipment and improvements, less proceeds
from the disposition of 23 used tractors. These expenditures were
financed through a combination of cash generated by operations and
proceeds from equipment dispositions. As of March 31, 1998 the Company
had commitments for the purchase of approximately $21 million of
revenue equipment, net of anticipated proceeds from the disposition of
used equipment. The Company has arranged to finance the revenue
equipment purchases.
Net cash used by financing activities was $2.4 million in the
first three months of 1998, including $4.5 million representing
payments under the Company's term loan agreements.
The Company has a $15 million credit facility with a bank,
consisting of a $10 million line of credit secured primarily by its
accounts receivable, and an additional $5 million line of credit
secured by revenue equipment not otherwise pledged. The credit
facility, which expires in May 1999, 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. At
March 31, 1998, there were letters of credit outstanding totaling $2.8
million under this program and no other outstanding borrowings.
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. The Company intends to increase its bank credit facility to $25
million to fund the cash portion of its planned acquisition of North
Star Transport, Inc. See "Item 5, Other Information."
FORWARD-LOOKING STATEMENTS
The Company has included various statements in this
Management's Discussion and Analysis and Results Of Operations which
may be considered as forward-looking statements of expected future
results of operations or events made pursuant to the safe harbor
provisions of the Private Securities Litigations Reform Act of 1995.
Such statements, based upon management's interpretation of currently
available information, are subject to risks and uncertainties that
could cause future financial results or events to differ materially
from those which are presented. Such risks and factors which are
outside of the Company's control include general economic conditions,
competition in the transportation industry, governmental regulation,
the Company's ability to recruit, train and retain qualified drivers,
fuel prices, and adverse weather conditions. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
YEAR 2000
The Company believes it is on schedule with its project to
complete, during 1998, the replacement and upgrade of those systems
which are not currently Year 2000 compliant. This project is part of a
larger on-going upgrade initiative to replace all key operational
support systems within the company.
PART II OTHER INFORMATION
Item 5. Other Information:
The Company is negotiating a definitive agreement to acquire
North Star Transport, Inc., a private truckload carrier based in Eagan,
Minnesota, and expects the transaction to proceed to its conclusion in
the early part of the third quarter of fiscal 1998 following
satisfaction of certain closing conditions, including the required
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
The Company will pay a purchase price consisting of approximately $15.8
million of cash and 1.2 million of the Company's Common Stock, in
addition to quarterly payments totaling up to approximately $750,000.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description Page
------ ----------- ----
11 Statement re: Computation of Net Earnings per Share.......11
27 Financial Data Schedule...................................
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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, 1998 /s/ James B. Aronson
--------------- --------------------------------------------------
James B. Aronson
Chairman of the Board and Chief Executive Officer
/s/ Robert J. Meyers
--------------------------------------------------
Robert J. Meyers
President, Chief Operating Officer, and
Chief Financial Officer (Principal
Financial and Accounting Officer)