SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-23341
MOTOR CARGO INDUSTRIES, INC.
(Exact Name of the Registrant as Specified in its Charter)
UTAH 87-0406479
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
845 West Center Street
North Salt Lake, Utah 84054
(801) 936-1111
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, no par value
--------------------------
(Title of Class)
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. /X/
As of March 20, 2001, the aggregate market value of the Registrant's voting
Common Stock held by non-affiliates of the Registrant based upon the last sale
price reported for such date on the Nasdaq National Market System was
approximately $16,033,414.
The number of shares of the Registrant's Common Stock outstanding as of March
20, 2001 was 6,473,140.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934 in connection with the
2001 Annual Meeting of Shareholders of the Registrant is incorporated by
reference into Part III of this Form 10-K.
This report contains certain forward-looking statements that involve risks
and uncertainties, including statements regarding the Company's plans,
objectives, goals, strategies and financial performance. The Company's actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Cautionary Statement for Forward-Looking Information" and elsewhere
in this report.
PART I
ITEM 1. BUSINESS
GENERAL
Motor Cargo Industries, Inc. (the "Company") is a regional
less-than-truckload ("LTL") carrier that provides transportation and logistics
services to shippers within the western United States, including Arizona,
California, Colorado, Idaho, New Mexico, Oregon, Texas, Utah and Washington. The
Company transports general commodities, including consumer goods, packaged
foodstuffs, electronics, computer equipment, apparel, hardware, industrial goods
and auto parts for a diversified customer base. The Company offers a broad range
of services, including expedited scheduling and full temperature-controlled
service. Through its wholly-owned subsidiary, MC Distribution Services, Inc.
("MCDS"), the Company also provides customized logistics, warehousing and
distribution management services.
The Company utilizes 30 strategically located service centers (also
referred to as "terminals") to serve major markets within the Company's service
region. In addition, the Company provides service to 24 smaller markets within
its service region pursuant to agreements with independent agents, most of which
act as exclusive agents for the Company. See Item 1 "Business - Operations."
THE LTL INDUSTRY
The Company transports primarily LTL shipments. LTL shipments are shipments
weighing less than 10,000 pounds. Generally, LTL carriers transport freight from
multiple shippers to multiple consignees on a scheduled basis. Unlike truckload
carriers, LTL carriers typically do not transport full trailer loads directly
from origin to destination. LTL operations require the handling of shipments in
several coordinated stages.
Typically, LTL carriers transport freight along scheduled routes from
multiple shippers to multiple consignees using a network of terminals, together
with fleets of tractors and trailers. Freight is picked up from customers by
local drivers and consolidated for shipment. The freight is then loaded into
inter-city trailers and transported to other terminals by linehaul drivers.
Large LTL carriers have traditionally employed a series of hub and spoke
terminals. This method improves truck utilization but requires expensive
multiple cargo rehandlings, and a fixed network of pickup, breakbulk and
destination terminals. At each breakbulk terminal, freight is unloaded and
reloaded with other freight destined for locations in the same general direction
of another breakbulk terminal, where the truck is sent for further unloading and
loading, until the freight arrives at a destination terminal located nearest the
delivery address of the consignee. At the destination terminal, freight is then
loaded onto a local truck for final delivery. The Company emphasizes direct
loading between the originating and destination service centers in order to
avoid the costly and time-consuming use of breakbulk terminals.
LTL companies are generally categorized as regional, interregional or
national carriers, based upon length of haul and service territory. Carriers
with average lengths of haul less than 500 miles are referred to as regional
carriers and generally provide either overnight or second day service. Regional
LTL carriers usually are able to load freight for direct transport to a
destination terminal, thereby avoiding the costly and time-consuming use of
breakbulk terminals. Carriers with average lengths of haul between 500 and 1,000
miles are generally referred to as inter-regional carriers. National carriers,
with average lengths of haul greater than 1,000 miles, generally operate coast
to coast relying on networks of breakbulk and satellite terminals. Due to the
longer distances between major cities in the western United States, the Company
has a longer average length of haul than most other regional carriers. For the
year ended December 31, 2000, the Company had an average length of haul of
approximately 600 miles.
2
In general, the more freight volume an LTL carrier has within a given
geographical area, the lower its incremental operating costs. This is
particularly true with respect to its pickup and delivery operations where
increased freight volumes generally result in less distance between stops and
more shipments per stop ("route density"). As route density increases, an LTL
carrier is able to make more deliveries on shorter routes, thereby increasing
the number of shipments that can be delivered within a defined period and
lowering overall labor costs for each shipment. Similarly, the more business a
carrier experiences in a given traffic lane from one service center to another
("lane density"), the lower its incremental costs. As lane density increases, a
carrier experiences increased revenue per mile, reduced empty miles and reduced
costs associated with intermediate shipment handling and reconsolidation. A
carrier's incremental costs are also improved as the amount of freight handled
at a given service center location ("service center density") increases. As
service center density improves, a carrier experiences higher revenues, while
maintaining the same fixed cost structure, thereby improving asset utilization.
OPERATIONS
The Company picks up freight with pickup and delivery trucks during the day
and transports the freight to Company service centers by early evening. Pick-ups
and deliveries are typically made within a 70 mile radius of each service
center. Upon arrival at a service center, freight is unloaded, logged onto the
Company's computerized tracing system, and reloaded onto trailers destined for
the Company's other service centers. Trucks depart later in the evening for
their destination service centers. In order to ensure prompt service, the
Company enforces established time schedules for linehaul service between service
centers and utilizes an advanced computer system to track and coordinate
deliveries. Through the Company's wide area computer network, all vital
information relating to shipments is available to each service center on a
real-time basis. Before the cargo arrives at its destination service center, a
manifest showing the contents of each trailer and the sequence in which it is
loaded, along with the delivery bills, is generated by the Company's
computerized tracing system and is available to the destination service center
manager through the Company's computer network. Upon arrival at the destination
service center, the freight is unloaded, sorted and delivered to its final
destination by local delivery trucks.
Instead of utilizing a complete "hub and spoke" system, which is typically
used by large, national LTL carriers, the Company emphasizes direct loading of
freight between service centers with minimal handling. Hub and spoke systems
generally require shipments to be loaded and unloaded several times at a number
of service centers and breakbulk facilities prior to delivery. Direct loading
allows shipments to be transported directly from the originating service center
to the destination service center without intermediate handling. Although the
Company uses both direct loading and hub and spoke handling, the Company's
primary emphasis on direct loading reduces the Company's costs because it
requires less loading and unloading of freight and requires fewer terminals and
breakbulk facilities.
The Company uses a single service center, rather than multiple satellite
terminals, in each of the major cities it serves. Single service centers reduce
rehandling of freight, shorten delivery times and thereby reduce the risk of
freight damage or loss.
In addition to the Company's 30 service centers, the Company also utilizes
independent agents in 24 smaller markets in which the Company does not operate
service centers. These agents are independent businesses that operate within a
specific area as the Company's pick-up and delivery agent. Shipments are
coordinated through these agents' facilities in the same manner as the Company's
service centers. Agents are compensated based upon a percentage of freight bill
revenue and are required to maintain standards established by the Company. The
Company believes that its use of agents in smaller markets helps the Company
maintain a lower fixed cost structure, improve local market presence and provide
customers with broader geographical coverage. The following table indicates the
location of each of the Company's service centers and agent facilities:
3
SERVICE CENTERS AGENT FACILITIES
--------------- ----------------
Albuquerque, New Mexico Baker City, Oregon
Bakersfield, California Battle Mountain, Nevada
Boise, Idaho Beatty, Nevada
Colorado Springs, Colorado Bend, Oregon
Dallas, Texas Bishop, California
Denver, Colorado Burns, Oregon
El Paso, Texas Cedar City, Utah
Eugene, Oregon The Dalles, Oregon
Flagstaff, Arizona Elko, Nevada
Fremont, California Ely, Nevada
Fresno, California Hawthorne, Nevada
Grand Junction, Colorado John Day, Oregon
Imperial, California Kennewick, Washington
Kent, Washington Kingman, Arizona
Las Vegas, Nevada Klamath, Oregon
Medford, Oregon LaGrande, Oregon
North Salt Lake, Utah Lakeview, Oregon
Oxnard, California Lovelock, Nevada
Phoenix, Arizona Pendleton Oregon
Pico Rivera, California Ridgecrest, California
Pocatello, Idaho Tonopah, Nevada
Portland, Oregon Wells, Nevada
Redding, California Wendover, Utah
Reno, Nevada Winnemucca, Nevada
Rialto, California
Sacramento, California
San Diego, California
Spokane, Washington
Tucson, Arizona
Twin Falls, Idaho
Approximately 45% of the Company's shipments are currently delivered
overnight, and an additional 33% of the Company's shipments are delivered within
two days. The Company uses single driver and two-person "sleeper" teams in its
linehaul operations. The Company also contracts with third parties for
transportation services ("purchased linehaul transportation") to supplement peak
demand periods and address lane imbalances. The Company obtains purchased
linehaul transportation from several sources, including truckload carriers and
independent contractors. By utilizing purchased linehaul transportation, the
Company is able to reduce empty miles and improve load factors.
During the year ended December 31, 2000, the Company handled an average of
approximately 3,700 shipments per day with an average weight per shipment of
approximately 1,140 lbs. and average revenue per bill of approximately $132. The
Company's revenue per hundredweight was $11.55 for the year ended December 31,
2000.
The Company's rates for LTL shipments are typically based on weight and
volume characteristics and the distance traveled. The Company periodically
publishes base rates that are generally applicable to customer shipments. The
Company typically offers special rates to customers based on tonnage levels and
other factors. In certain instances, the Company competes with other carriers
for business by participating in competitive bidding. Customers generally
solicit bids for relatively large shipment and tonnage volumes over a one or two
year period. These customers often enter into contractual relationships with a
limited number of carriers based upon price and service.
4
SPECIALIZED SERVICES
The Company offers a broad range of services, including service
capabilities beyond the scope of most LTL carriers. These services include
PRIORITY+PLUS, an expedited time-definite service; PROTECTIVE+PLUS, a full
temperature-controlled service for LTL shipments within the Company's service
region; CANADIAN+PLUS, full points coverage into all major Canadian markets
through an exclusive regional marketing partnership with one of Canada's leading
LTL carriers and TRUCKLOAD+PLUS, a specialized truckload service designed to
meet the truckload needs of its customers at competitive rates. The Company also
provides less-than-container load service to Hawaii. The Company consolidates
shipments, loads containers and tenders them to a major transoceanic carrier for
transport to Hawaii. The shipments are then delivered by a local carrier in
Hawaii pursuant to an agreement between the carrier and the Company.
In addition to the service offerings described above, the Company offers
customized services tailored to the ongoing needs of a particular customer.
These customized services often involve a high level of coordination between the
Company and the customer and may include time definite delivery, highly
specialized reporting requirements and electronic data interchange, full time
on-site loading by Company employees, return goods consolidation and management,
and specialized handling and equipment requirements.
Through a program referred to as "Motor Cargo USA," the Company also
provides customers with service to points outside its core service region. The
Company enters into interline agreements with other carriers to provide delivery
of freight outside of the Company's core service region.
The Company provides customized logistics, warehousing and distribution
management services through its subsidiary MCDS. MCDS currently provides
"just-in-time" delivery services for a small number of specialty retailers. One
customer currently accounts for more than 88% of the operating revenues of MCDS.
For the year ended December 31, 2000, $4.7 million or 3.6% of the Company's
revenues were generated by MCDS.
CUSTOMERS AND MARKETING
The Company has approximately 3,800 regular customers with an average
monthly revenue billing of $1,000 or more. The Company's customers are not
concentrated in any one area or industry and no one customer accounts for over
4% of total revenues.
The Company has positioned itself in the high service end of the regional
LTL market. The Company targets prospective customers that require high levels
of customized service and are not inclined to select a carrier solely on the
basis of price. The Company emphasizes its ability to provide specialized or
customized services to shippers, including (i) highly flexible scheduling, (ii)
consistent and expedited transit commitments, (iii) strong management
information systems and electronic data interchange capabilities, (iv)
commitment to customer service and responsiveness and (v) a willingness to
provide transportation programs outside the scope of the traditional LTL
industry.
The Company has written contracts with most of its large customers. These
contracts specify rate levels and eliminate the need to negotiate rates for
individual shipments. The Company's contracts typically do not provide for
guaranteed volumes. Although the Company's contracts typically run for a
specified term of one year, they generally may be terminated by either party
upon 30 days' notice. The Company has pricing agreements with substantially all
of its customers that are not covered by contracts. These pricing agreements
specify rate levels but do not require minimum tonnage commitments on the part
of the customer.
The Company's senior management is actively involved in the Company's sales
and marketing activities. In order to attract new customers, the Company relies
on its ability to provide quality service and on selective targeting of
potential accounts. The Company's account executives are managed by three
regional directors of sales. The account executives are responsible for
developing new business and maintaining relations with existing customers. The
Company also employs four corporate account managers. These corporate account
managers solicit business from corporate level decision-makers who are
responsible for freight shipments to locations within the Company's service
region.
5
The Company has designed and implemented a sales force automation system,
which provides for improved contact and opportunity management, improved sales
forecasting and simplified reporting. The Company maintains comprehensive
customer base profiles of existing and prospective customers. Using this
database, key strategic and account development information is updated daily by
the Company's sales force using automated processes. The Company utilizes this
resource to track emerging opportunities and direct highly targeted and
precisely timed marketing messages to existing and prospective customers.
DRIVERS, INDEPENDENT CONTRACTORS AND OTHER PERSONNEL
At December 31, 2000, the Company employed 1,726 persons in the following
categories:
CATEGORY NO. OF EMPLOYEES
-------- ----------------
Full time drivers 632
Part time drivers and dock workers 557
Salaried and clerical 394
Warehousemen 10
Mechanics and Maintenance 82
Sales and sales management 51
At December 31, 2000, the Company employed 192 linehaul drivers and 493
pick-up and delivery drivers. The Company selects its drivers based upon
experience and driving records. Pursuant to DOT regulations, drivers are
required to pass drug tests prior to employment and periodically thereafter. The
trucking industry experiences driver shortages from time to time; however, the
Company has maintained an adequate and qualified driver force. The Company
compensates linehaul drivers on a per-mile basis. Pick-up and delivery drivers
are compensated on an hourly basis.
In addition to its employee drivers, the Company utilized approximately 67
linehaul drivers as of December 31, 2000, pursuant to an agreement with FHF
Transportation, Inc. ("FHF"). These drivers operate tractors owned by the
Company but are not employees of the Company. The Company makes payments to FHF
based upon mileage.
The Company supplements its linehaul fleet with the use of approximately 16
independent contractors. Because independent contractors provide their own
tractors, independent contractors provide the Company with an alternative method
of obtaining the use of additional revenue equipment with reduced capital
investment. This approach reduces costs and maximizes flexibility by quickly
providing additional linehaul capacity during periods of peak demand. Further,
because independent contractors are compensated at a contracted rate per mile,
the use of independent contractors helps the Company reduce fixed overhead and
improve asset utilization. Independent contractors also allow the Company to
better adjust to seasonal fluctuations in shipping volumes.
Approximately 11% of the Company's employees are covered by two separate
collective bargaining agreements relating to employees at the Company's North
Salt Lake, Utah and Reno, Nevada service centers. Although these agreements
cover most of the employees at these two facilities, less than half of these
employees are actually members of unions. These unions are affiliated with the
International Brotherhood of Teamsters, but the contracts are not tied to the
Teamsters National Master Contract. The Company's agreement with North Salt Lake
employees expires on November 30, 2002, and the Company's Agreement with Reno
employees expires on November 30, 2003. Both agreements provide for automatic
renewal from year to year after expiration, subject to the right of either party
to cancel or terminate the agreement upon at least 60 days' notice prior to the
date of expiration.
6
SAFETY AND INSURANCE
The Company emphasizes safety in all aspects of its operations. The Company
employs a Director of Safety and Compliance who has over 25 years of
safety-related experience with the Company. Each of the Company's terminals
conducts its own safety program and all tractors in use are inspected daily by
Company personnel. The Company has also established guidelines for hauling
hazardous materials. The Company earned the highest DOT safety and fitness
rating of "satisfactory" during its last audit.
The Company currently maintains liability insurance for bodily injury and
property damage in the amount of $30 million, with a self retention amount of
$250,000 per incident, and cargo insurance in the amount of $1 million, with a
self retention amount of $100,000, per incident. An aggregate self retention
amount of $250,000 per incident applies to incidents involving both liability
and cargo claims. The Company maintains various insurance coverage on buildings
and contents and is self-insured with respect to physical damage to other
properties and equipment. The Company also maintains workers' compensation
insurance in all states in which the Company operates. At December 31, 2000,
there was no deductible in any state except Nevada, which has a $250,000
deductible. Subsequent to December 31, 2000, the Company modified the terms of
its workers' compensation insurance to establish a deductible of $250,000 in all
states other than Washington, which has no deductible.
REVENUE EQUIPMENT
At December 31, 2000, the Company operated a fleet of 644 tractors and
trucks and 2,526 trailers. The Company uses new linehaul tractors in linehaul
operations for approximately five years. After five years of use, the Company
trades in used linehaul tractors and purchases new linehaul tractors. The table
below reflects, as of December 31, 2000, the average age of the type of
equipment, and the number of respective units:
NUMBER AVERAGE
TYPE OF EQUIPMENT (CATEGORIZED BY PRIMARY USE) OF UNITS AGE
---------------------------------------------- -------- -------
Linehaul tractors 225 2.3
Pick-up and delivery tractors 360 3.8
Pick-up and delivery trucks 59 6.2
Trailers 2,526 6.5
The Company lowers its cost structure through the use of 28 foot trailers
in doubles combinations and, where permitted by state regulations, triples
combinations in its linehaul operations. These 28 foot trailers allow for more
direct loading and minimize handling costs and exposure. In addition, the
Company improves linehaul trailer utilization and reduces potential damages and
cargo claims expenses by using logistic deck trailers and pallet decks. This
specialized equipment minimizes damage and maximizes trailer utilization.
The Company maintains its revenue equipment through the use of its own
maintenance facilities as well as outside vendors. The Company's service centers
in Pico Rivera, Las Vegas, Reno, Denver, Phoenix, Portland and North Salt Lake
have maintenance facilities. In addition to scheduled maintenance on its
equipment, the Company also performs occasional equipment modifications designed
to improve operating performance and reduce operating costs of equipment. All
data regarding equipment costs, depreciation, mileage and maintenance are
recorded on the Company's computer system, allowing management to access
equipment records quickly and plan scheduled maintenance efficiently.
FUEL AVAILABILITY AND COST
Fuel, excluding fuel taxes, comprised approximately 5.2% of the Company's
total operating expenses during the year 2000. Generally, in order to obtain
lower fuel costs and greater flexibility in fueling its fleet, the Company
purchases its own fuel in bulk and requires its drivers to fuel at Company
terminals. The Company emphasizes fuel economy through the use of modern,
fuel-efficient equipment, driver and mechanic training programs and aerodynamic
improvements. Although fuel constitutes a much lower percentage of costs to the
Company than it would to a full truckload carrier, increases in fuel prices or
fuel taxes, shortages of fuel or rationing of petroleum products could have a
material adverse effect on the operations and profitability of the Company.
7
Generally, in times of sharp fuel price increases, the Company implements
fuel surcharges. Because of the highly competitive nature of the market for LTL
services, the Company generally must wait for larger carriers to implement fuel
surcharges before the Company can effectively implement fuel surcharges. The
Company presently has a sliding scale fuel surcharge based on a fuel price index
for the west coast. Due to increased fuel costs first occurring during the third
quarter of 1999, the Company implemented a fuel surcharge in accordance with the
fuel price index in order to limit the impact of fuel costs in future periods.
The fuel surcharge remained in effect throughout the year 2000. The Company will
respond to any further increases in fuel costs with corresponding increases in
the fuel surcharge in accordance with the fuel price index. Although the fuel
surcharge reduces the impact of rising fuel costs, increased fuel prices can
nevertheless have an adverse effect on the operations and profitability of the
Company due to the difficulty of imposing and collecting the surcharge.
COMPETITION
The transportation industry is highly competitive on the basis of both
price and service. The Company competes with regional, interregional and
national LTL carriers and, to a lesser extent, with truckload carriers,
railroads and overnight delivery companies. Several large LTL carriers operate
within the Company's core service region. Some of the Company's competitors are
divisions or subsidiaries of larger trucking companies, railroad companies or
air delivery companies. Many of the Company's competitors have greater financial
resources, more equipment and greater freight capacity than the Company. Certain
carriers occasionally experience periods of overcapacity during which these
carriers reduce prices in order to increase utilization of revenue equipment.
The Company believes that it is able to compete effectively in its markets by
providing high quality customized service at competitive prices.
REGULATION
The Motor Carrier Act of 1980 significantly deregulated the trucking
industry and increased competition among motor carriers. Following enactment of
the Motor Carrier Act, applicants have obtained operating authority more easily,
and interstate motor carriers such as the Company are able to change their rates
and services with less regulatory oversight and delay. The Motor Carrier Act
also removed many route and commodity restrictions affecting transportation of
freight.
Effective January 1, 1995, Section 601 of the Federal Aviation
Administrative Authorization Act and the Trucking Industry Regulatory Reform Act
("TIRRA") substantially deregulated intrastate operating authority. Prior to
TIRRA, the Company maintained intrastate authority in California, Nevada and
Utah. Subsequent to TIRRA, the Company obtained intrastate authority in
Colorado, Oregon, New Mexico, Washington and Texas.
The Company was regulated by the ICC until the ICC Termination Act of 1995
abolished the ICC effective January 1, 1996. The Surface Transportation Board,
an independent entity within the DOT, assumed many of the responsibilities of
the ICC. The Company is also regulated by various state agencies. These
regulatory authorities have broad powers, generally governing matters such as
authority to engage in motor carrier operations, rates, certain mergers,
consolidations and acquisitions, and periodic financial reporting. The trucking
industry is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing services to, shippers.
Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. The use of triple trailers is
subject to state regulation and is prohibited by several states within the
Company's core service region. The Company is subject to federal, state and
local environmental laws and regulations governing the management of hazardous
wastes, other discharge of pollutants into the air and surface and underground
waters, and the disposal of certain substances. These regulations extend to the
Company's above-ground and underground fuel storage tanks. The Company believes
that all of its fuel storage tanks are in compliance with applicable
regulations. The Company also believes that it is in material compliance with
all other applicable environmental laws and regulations and does not believe
that the cost of future compliance should have a material adverse effect on the
Company's operations or financial condition.
8
ITEM 2. PROPERTIES
The Company owns its executive offices, located in North Salt Lake, Utah,
consisting of a two-story building of approximately 21,377 square feet. Of the
30 service centers used by the Company as of December 31, 2000, 11 were owned,
19 were leased. These facilities range in size according to the markets served.
The Company has not experienced and does not anticipate difficulties in renewing
existing leases on favorable terms or obtaining new facilities as and when
required. The following table shows the location of each service center owned or
leased by the Company as of December 31, 2000.
LOCATION # OF DOORS OWNED OR LEASED LEASE EXPIRATION
-------- ---------- --------------- ----------------
Pico Rivera, CA 102 Leased December 2013
Rialto, CA 78 Owned
North Salt Lake, UT 77 Owned
Denver, CO 81 Owned
Fremont, CA 60 Leased August 2007
Portland, OR 34 Owned
Reno, NV 88 Owned
Sacramento, CA 30 Owned
Kent, WA 30 Owned
Boise, Idaho 20 Leased June 2002
Phoenix, AZ 118 Owned
El Paso, TX 20 Owned
Las Vegas, NV 20 Owned
San Diego, CA 20 Leased May 2001
Fresno, CA 20 Leased October 2001
Albuquerque, NM 12 Leased October 2001
Oxnard, CA 9 Leased Month-to-month
Bakersfield, CA 9 Leased October 2002
Tucson, AZ 28 Leased March 2004
Medford, OR 8 Leased July 2002
Spokane, WA 11 Leased December 2002
Colorado Springs, CO 7 Leased August 2001
Grand Junction, CO 16 Leased May 2003
Twin Falls, ID 6 Owned
Dallas, TX 23 Leased May 2002
Pocatello, ID 2 Leased September 2001
Imperial, CA 2 Leased Month-to-month
Flagstaff, AZ 2 Leased Month-to-month
Redding, CA 3 Leased Month-to-month
Eugene, OR 8 Leased November 2004
The following additional property is owned by the Company but is not
currently being used in its operations.
Location # of Doors Owned or Leased
-------- ---------- ---------------
Denver, CO 36 Owned
The Company also leases a sales office in Chicago pursuant to a lease that
expires in November 2001. The Company's subsidiary, MCDS, leases an aggregate of
108,900 square feet of warehouse space in southern California pursuant to two
leases that expired in January 2001 and February 2001. In addition, MCDS leases
82,300 square feet of warehouse space in York, Pennsylvania, pursuant to a lease
that expires in June 2001, and 7,400 square feet of warehouse space in Las
Vegas, Nevada pursuant to a month-to-month lease.
9
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its business,
primarily involving claims for personal injury or property damage incurred in
the transportation of freight. The Company maintains insurance to cover
liabilities in excess of self-insured amounts. The Company's management is not
aware of any claims or threatened claims that it believes are likely to exceed
insurance limits or have a materially adverse effect upon the Company's
operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
The Company did not submit any matter to a vote of security holders during
the fourth quarter of 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq Stock Market (National
Market) under the symbol "CRGO". At March 8, 2001, there were approximately 450
holders of the common stock, including 36 shareholders of record.
The following table sets forth the high and low sales prices for the
Company's common stock as reported by the Nasdaq National Market System by
quarter, for the years ended December 31, 2000 and 1999.
YEAR ENDED
QUARTER ------------------------------------------
ENDED DECEMBER 31, 2000 DECEMBER 31, 1999
------- ----------------- -----------------
HIGH LOW HIGH LOW
---- ----- ---- -----
3/31 5.375 4.000 $8.500 $4.000
6/30 6.000 4.250 8.906 5.000
9/30 6.125 4.500 8.500 6.125
12/31 7.609 5.000 7.188 3.375
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future.
10
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data have been summarized from the
Company's consolidated financial statements and are qualified in their entirety
by reference to, and should be read in conjunction with, such consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," under Item 7 below.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)
Year ended December 31,
-------------------------------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
STATEMENT OF EARNINGS DATA:
Operating revenues $ 92,310 $ 105,381 $ 114,725 $ 125,310 $ 131,112
Operating expenses
Salaries, wages and benefits 39,666 45,257 51,747 59,502 65,166
Operating supplies and expenses 14,947 15,706 15,974 20,342 21,812
Purchased transportation 14,164 15,389 17,974 15,580 11,870
Operating taxes and licenses 3,531 3,519 3,885 4,731 5,048
Insurance and claims 2,785 4,478 3,651 3,826 3,381
Depreciation and amortization 6,578 6,998 7,928 8,822 8,772
Communications and utilities 1,784 1,896 1,924 2,023 2,176
Building rents 1,540 1,745 2,365 3,043 3,423
Gain on sale of equipment 71 (142) (103) (241) (206)
--------- --------- --------- --------- ---------
Total operating expenses 85,066 94,836 105,345 117,628 121,442
--------- --------- --------- --------- ---------
Operating income 7,244 10,545 9,380 7,682 9,670
Other income (expense)
Interest expense (1,430) (1,051) (154) (139) (158)
Other, net (39) (79) 223 110 988
--------- --------- --------- --------- ---------
Earnings before income taxes 5,853 9,573 9,449 7,653 10,500
Income taxes 2,118 3,805 3,660 3,000 4,080
--------- --------- --------- --------- ---------
Net earnings $ 3,735 $ 5,768 $ 5,789 $ 4,653 $ 6,420
========= ========= ========= ========= =========
Earnings per common share - basic and diluted $ .83 $ .67 $ .95
Weighted-average shares outstanding - diluted 6,992 6,941 6,739
Pro forma (1)
Earnings before income taxes $ 5,853 $ 9,573
Income taxes 2,256 3,952
--------- ---------
Net earnings $ 3,597 $ 5,621
========= =========
Earnings per common share - basic $ 0.63 $ 0.95
========= =========
Weighted-average shares outstanding - basic 5,820 5,939
========= =========
Earnings per common share - diluted $ 0.62 $ 0.95
========= =========
Weighted-average shares outstanding - diluted 5,820 5,939
========= =========
December 31,
-------------------------------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Current assets $ 23,197 $ 26,965 $ 26,775 $ 27,090 $ 29,642
Current liabilities 15,752 11,597 10,741 11,641 12,327
Total assets 63,834 68,069 72,660 80,570 85,365
Long-term obligations, less current maturities 16,820 6,492 5,390 8,021 8,015
Total liabilities 37,794 24,618 23,386 26,929 27,864
Stockholders' equity 26,040 43,451 49,275 53,641 57,501
(1) Effective August 28, 1997, the Company acquired the membership interests of
Ute, a Utah limited liability company. A limited liability company passes
through to its members essentially all taxable earnings and losses and pays
no tax at the company level. Accordingly, for comparative purposes, a pro
forma provision for income taxes using an effective income tax rate of
approximately 38% has been determined assuming Ute had been taxed as a C
corporation for all periods presented.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's
consolidated financial condition, liquidity and capital resources and results of
operations. This analysis should be read in conjunction with the consolidated
financial statements and related notes which appear elsewhere in this report.
This section contains certain forward-looking statements that involve risks and
uncertainties, including statements regarding the Company's plans, objectives,
goals, strategies and financial performance. The Company's actual results could
differ materially from the results anticipated in these forward-looking
statements as a result of factors set forth under "Cautionary Statement for
Forward-Looking Information" below and elsewhere in this report.
OVERVIEW
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
Year ended December 31,
--------------------------------
1998 1999 2000
------ ------ ------
Operating revenues 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and benefits 45.1 47.5 49.7
Operating supplies and expenses 13.9 16.2 16.6
Purchased transportation 15.7 12.5 9.0
Depreciation and amortization 6.9 7.0 6.7
Insurance and claims 3.2 3.1 2.6
Operating taxes and licenses 3.4 3.8 3.9
Communications and utilities 1.7 1.6 1.7
Building rents 2.0 2.4 2.6
Gain on sale of equipment (0.1) (0.2) (0.2)
----- ----- -----
Total operating expenses 91.8 93.9 92.6
----- ----- -----
Operating income 8.2 6.1 7.4
Other income (expense)
Interest expense (0.1) (0.1) (0.1)
Other, net 0.2 0.1 0.7
----- ----- -----
Earnings before income taxes 8.3 6.1 8.0
Income taxes 3.2 2.4 3.1
----- ----- -----
Net earnings 5.1% 3.7% 4.9%
===== ===== =====
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Operating revenues increased 4.6% in 2000 to $131.1 million from $125.3
million in 1999. The increase was primarily attributable to an improved yield on
freight hauled, the benefit from a fuel surcharge and a reduction in lower-yield
freight as a percentage of total tonnage as a result of the Company's account
rationalization program.
Average revenue per shipment increased 8.3% to $131.95 in 2000 compared to
$121.82 in 1999. Revenue per hundredweight increased to $11.55 in 2000 from
$11.02 for 1999. The number of shipments during 2000 decreased by 3.8% to
961,630, compared to 999,563 for 1999. Tonnage decreased by 0.6% to $549,285 in
2000, compared to 552,412 in 1999.
The Company's warehouse and distribution management company, MCDS,
contributed $4.7 million of the $131.1 million in operating revenues for the
year ended December 31, 2000, compared to $4.1 million for the year ended
December 31, 1999. The increase was due primarily to increased revenue from
existing accounts as well as the addition of some smaller new accounts.
12
As a percentage of operating revenues, salaries, wages, and benefits
increased to 49.7% for the year ended December 31, 2000 from 47.5% for 1999. The
increase was due primarily to the use of more Company line drivers instead of
purchased transportation. The average number of full time line drivers employed
by the Company increased approximately 29% to 161 during 2000, compared to 125
in 1999. At December 31, 2000, there were 187 full time line drivers compared to
145 on December 31, 1999. Salaries and wage rates increased approximately 4% in
2000 compared to 1999.
Operating supplies and expenses increased to 16.6% of operating revenue in
2000 compared to 16.2% in 1999. Contributing to this increase were the costs of
fuel, parts, tires and repairs associated with the increased use of Company
owned vehicles instead of purchased transportation during 2000. In addition, the
price of fuel averaged approximately $0.36 more per gallon during 2000 over
1999. Higher fuel prices resulted in additional costs of approximately $2.3
million, or 1.75% of operating revenues in 2000 compared to 1999. Other costs
including agent commissions were reduced in 2000 compared to 1999. This was
partially the result of converting two agencies to Company-owned facilities
during the second half of 1999 and the conversion of two additional agencies in
the second half of 2000.
Purchased transportation decreased to 9.0% of operating revenues in 2000
from 12.5% in 1999. The Company reduced the miles driven by purchased
transportation, while increasing the miles driven by Company owned vehicles and
employee line drivers. As mentioned above, cost for wages, fuel, parts and
repairs related to the increased Company driven miles partially offset the
reduction in purchased transportation.
Depreciation expense has been reduced to 6.7% of operating revenue in 2000
from 7.0% in 1999. While depreciation expense increased in buildings and
furnishings resulting from the completion of the new terminal facilities in
Phoenix and Reno, depreciation expense for revenue equipment was reduced by
improved utilization of tractors used both on the line during the night and in
pick-up and delivery service in the city during the day.
Insurance and claims decreased to 2.6 % of operating revenues in 2000 from
3.1% in 1999. Claims expense for damaged freight was reduced by slightly less
than 0.5% of revenue in 2000 compared to 1999. Also, fewer accidents occurred
and claim settlement amounts were smaller during 2000 compared to 1999.
Frequency of accidents per million miles decreased to 4.8 during 2000 from 6.4
in 1999.
Building rents increased to 2.6% of operating revenues in 2000 compared to
2.4% in 1999. This was due primarily to lease payments for additional facilities
in Fremont, California and Boise, Idaho, as well as continuing lease payments on
unused facilities in Chicago, Illinois, Benicia, California and Boise, Idaho for
the majority of the year. All leases on unused facilities expired prior to the
end of the year 2000.
Total operating expense decreased to 92.6% of operating revenues for 2000,
compared to 93.9% for 1999.
Net earnings increased 38% to 6.4 million for year 2000, compared to 4.7
million for 1999. Excluding unusual items, consisting primarily of a gain from
the sale of the Newark terminal facility, net earnings increased 26% to 5.9
million. Earnings per diluted share increased to $0.95 in 2000, compared to
$0.67 in 1999. Excluding unusual items, earnings per diluted share were $0.87
for 2000.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Operating revenues increased 9.2% in 1999 to $125.3 million from $114.7
million in 1998. The increase was attributable to the increased volume of
freight. The number of shipments during 1999 increased by 11.8% to 999,563,
compared to 893,957 for 1998. Revenue per hundredweight increased to $11.02 in
1999 from $10.92 for 1998.
The Company's warehousing and distribution management company, MCDS,
contributed $4.1 million of the $125.3 million in operating revenues for the
year ended December 31, 1999 compared to $3.1 million for the year ended
December 31, 1998. This increase was due primarily to the expansion of a
contract with one customer and the addition of several smaller customers.
13
Tonnage increased by 7.7% to 552,412 in 1999, compared to 512,705 in 1998.
Average revenue per bill decreased 2.8% to $121.82 in 1999 compared to $125.31
in 1998. Fourth quarter average revenue per bill increased to $127.87, however,
as a result of adjustments to pricing on freight that was not producing
sufficient yield.
As a percentage of operating revenues, salaries, wages, and benefits
increased to 47.5% for the year ended December 31, 1999 from 45.1% for 1998.
Salaries and wage rates increased approximately 4% in 1999 compared to 1998. The
increase was due primarily to reduced yield in revenue as evidenced by the
reduction in average revenue per bill and increased staffing of full time
employees with their associated benefits. Additional line drivers were employed
allowing a reduction in the use of purchased transportation.
Operating supplies and expenses, which include agent commissions, tires,
parts, repairs and fuel and other general operating expenses, increased in 1999
to 16.2% of operating revenue, compared to 13.9% for 1998. The increase was
primarily attributable to increased expenses, such as fuel, parts, tires and
repairs, associated with the shift from using purchased transportation to using
more Company trailers and drivers.
Purchased transportation decreased to 12.5% of operating revenues in 1999
from 15.7% for 1998. The decrease was caused by the shifting of costs from
purchased transportation to other expense categories, such as payroll, operating
supplies and expense, operating taxes and licenses, and depreciation, associated
with having approximately 30 more line drivers during 1999 compared to 1998. The
Company has increased its staff employee drivers in order to provide more
reliable and consistent service.
Interest expense was slightly less during 1999 compared to 1998. At
December 31, 1999, total long-term obligations were $8.1 million compared to
$5.5 million at December 31, 1998.
Building rents increased to 2.4% of operating revenue for 1999 as compared
to 2.0% for 1998. This increase was due primarily to lease payments for
additional facilities in Fremont, California and Boise, Idaho as well as
continuing lease payments on unused facilities in Chicago, Illinois, Benicia,
California, and Boise, Idaho.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been funds provided by
operations and bank borrowings. Net cash provided by operating activities was
approximately $12.6 million, $11.7 million and $15.3 million in 1998, 1999 and
2000, respectively. Net cash provided by operating activities is primarily
attributable to the Company's earnings before depreciation and amortization
expense.
Capital expenditures net of disposed property totaled approximately $12.6
million, $16.0 million and $11.2 million during 1998, 1999 and 2000,
respectively. The majority of the Company's capital expenditures net of
disposition is financed with cash provided by operating activities and long-term
debt. The Company's budget for total capital expenditures net of disposed
property is approximately $12.5 million for 2001. These capital expenditures
will consist primarily of the construction and acquisition of terminal
facilities and the acquisition of revenue equipment.
Net cash used in financing activities was $1.1 million in 1998 and $2.3
million was provided by financing activities in 1999. In 2000, net cash of $2.6
million was used by financing activities. At December 31, 2000, the Company had
outstanding long-term obligations (including current maturities) consisting of
approximately $8.1 million, most of which comprised obligations for purchase of
revenue equipment. See Note F to the Company's Consolidated Financial
Statements.
The Company leases a small portion of the revenue equipment used in its
operations. At December 31, 2000, the Company's future minimum lease payments
under operating leases relating to equipment amounted to $8.4 million. See Note
D to the Company's Consolidated Financial Statements.
The Company is a party to a loan agreement with Zions First National Bank
("Zions"). The loan agreement provides for a revolving line of credit in an
amount not exceeding $5 million. The loan agreement provides for the issuance of
letters of credit and may be used for this purpose, as well as to fund the
working capital needs of the Company. As of December 31, 2000, there was no
outstanding balance under this revolving line of credit.
14
Zions has also provided a second revolving line of credit to the Company in
an amount not to exceed $20 million. The Company intends to use amounts
available under this credit facility, if necessary, primarily to purchase
equipment used in operations. As of December 31, 2000, the Company had $6.9
million in loans outstanding under this facility.
All amounts outstanding under the two loan facilities described above
accrue interest at a variable rate established from time to time by Zions. The
Company does have the option, however, to request that specific advances accrue
interest at a fixed rate quoted by Zions, subject to certain prepayment
restrictions. All amounts outstanding under the two loan facilities are
collateralized by the Company's inventory, chattel paper, accounts receivable
and equipment now owned or hereafter acquired by the Company.
In 1999, the Company announced a share repurchase program whereby the Board
of Directors of the Company authorized the repurchase of up to 700,000 shares.
As of December 31, 2000, a total of 511,500 shares had been repurchased by the
Company for approximately $2.9 million.
INFLATION
Inflation has had a minimal effect upon the Company's profitability in
recent years. Most of the Company's operating expenses are inflation sensitive,
with inflation generally producing increased costs of operation. Although the
Company historically has been able to pass through most increases in fuel prices
and taxes to customers in the form of fuel surcharges or higher rates, the
Company generally must wait for larger carriers to implement fuel surcharges
before the Company can effectively implement fuel surcharges. Fuel prices
increased significantly during the third quarter of 1999. Accordingly, the
Company implemented a fuel surcharge in mid-August of 1999 to limit the impact
of fuel costs in future periods. The fuel surcharge remained in effect
throughout the year 2000. Although the fuel surcharge reduces the impact of
rising fuel costs, increased fuel prices can nevertheless have an adverse effect
on the operations and profitability of the Company due to the difficulty of
imposing and collecting the surcharge. See Item 1 "Business-Fuel Availability
and Cost." The Company expects that inflation will affect its costs no more than
it affects those of other regional LTL carriers.
SEASONALITY
The Company experiences some seasonal fluctuations in freight volume.
Historically, the Company's shipments decrease during the winter months. In
addition, the Company's operating expenses historically have been higher in the
winter months due to decreased fuel efficiency and increased maintenance costs
for revenue equipment in colder weather. The Company's operating revenue and net
earnings may vary as a result of seasonal factors, and accordingly, results of
operations are subject to fluctuation, and results in any period should not be
considered indicative of the results to be expected for any future period.
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain information set forth in this Annual Report on Form 10-K contains
"forward-looking statements" within the meaning of federal securities laws.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events, future revenues or performance, capital
expenditures, financing needs, plans or intentions relating to acquisitions by
the Company and other information that is not historical information. When used
in this report, the words "estimates," "expects," "anticipates," "forecasts,"
"plans," "intends," "believes" and variations of such words or similar
expressions are intended to identify forward-looking statements. Additional
forward-looking statements may be made by the Company from time to time. All
such subsequent forward-looking statements, whether written or oral and whether
made by or on behalf of the Company, are also expressly qualified by these
cautionary statements.
The Company's forward-looking statements are based upon the Company's
current expectations and various assumptions. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in the Company's
records and other data available from third parties, but there can
15
be no assurance that management's expectations, beliefs and projections will
result or be achieved or accomplished. The Company's forward-looking statements
apply only as of the date made. The Company undertakes no obligation to publicly
update or revise forward-looking statements which may be made to reflect events
or circumstances after the date made or to reflect the occurrence of
unanticipated events.
There are a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in, contemplated by or
underlying the forward-looking statements contained in this report. In addition
to the other factors and matters discussed elsewhere in this report, the
following factors are among the factors that could cause actual results to
differ materially from the forward-looking statements. Any forward-looking
statements made by or on behalf of the Company should be considered in light of
these factors.
ECONOMIC FACTORS AND FUEL PRICE FLUCTUATIONS
The availability and price of fuel, insurance costs, interest rates,
fluctuations in customers' business cycles and national and regional economic
conditions are economic factors over which the Company has little or no control.
Significant increases in fuel prices, interest rates or increases in insurance
costs, to the extent not offset by increases in freight rates, or disruptions in
fuel supply, would adversely affect the Company's results of operations. A
significant downturn in customers' businesses, temporary inventory imbalances
(resulting from a recession or otherwise), or decreased demand for LTL carrier
services could also have a materially adverse effect on the Company.
AVAILABILITY OF EMPLOYEE DRIVERS AND INDEPENDENT CONTRACTORS
The Company utilizes the services of both employee drivers and independent
contractors. Competition for employee drivers and independent contractors is
intense in the trucking industry, and the Company occasionally experiences
difficulty attracting or retaining enough qualified employee drivers and
independent contractors. There can be no assurance that the Company will not be
affected by a shortage of qualified employee drivers or independent contractors
in the future, which could result in temporary underutilization of revenue
equipment, difficulty in meeting shipper demands and increased compensation
levels. Prolonged difficulty in attracting or retaining qualified employee
drivers or independent contractors could have a materially adverse effect on the
Company's operations.
CAPITAL REQUIREMENTS
The trucking industry is very capital intensive. If in the future the
Company were unable to borrow sufficient funds, enter into acceptable operating
lease arrangements, or raise additional equity, the resulting capital shortage
would impair the Company's ability to acquire additional revenue equipment and
adversely affect the Company's growth and profitability.
CLAIMS EXPOSURE AND INSURANCE COSTS
Trucking companies, including the Company, face multiple claims for
personal injury and property damage relating to accidents, cargo damage and
workers' compensation. To the extent that the Company experiences a material
increase in the frequency or severity of accidents or workers' compensation
claims, or an unfavorable development on existing claims, the Company's
operating results and financial condition could be materially adversely
affected. Significant increases in the Company's claims and insurance costs, to
the extent not offset by rate increases, would reduce the Company's
profitability.
16
COMPETITION
The trucking industry is highly competitive and fragmented. Competition for
freight transported by the Company is based primarily on service, efficiency and
on freight rates. The Company competes with regional, interregional and national
LTL carriers of varying sizes and, to a lesser extent with truckload carriers,
railroads and overnight delivery companies. Some of the Company's competitors
are divisions or subsidiaries of larger trucking companies. Many of the
Company's competitors have greater financial resources, more equipment and
greater freight capacity than the Company.
ENVIRONMENTAL HAZARDS
The Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal,
and handling of hazardous materials and hazardous wastes, discharge of
stormwater, and underground fuel storage tanks. The Company transports certain
commodities that are or may be deemed hazardous substances. The Company also
currently maintains above-ground and underground fuel storage tanks on several
of its properties. The Company is not aware of any fuel spills or hazardous
substance contamination on its properties that would have a material adverse
effect on the Company, and the Company believes that its operations are in
material compliance with existing environmental laws and regulations. If,
however, the Company should be involved in a fuel spill, or a spill or other
accident involving hazardous substances, if any such substances were found on
the Company's properties, or if the Company were found to be in violation of
applicable laws and regulations, the Company could be responsible for clean-up
costs, property damage, and fines or other penalties, any one of which could
have a materially adverse effect on the Company.
OTHER FACTORS
In addition to the factors described above, the Company may be adversely
affected by a number of other matters and uncertainties, including: (i) changes
in demand for LTL carrier services; (ii) potential legislation and regulatory
changes; (iii) changes in competitive conditions in the Company's service
region; and (iv) increases in the cost of compliance with regulations, including
environmental regulations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use financial instruments for trading purposes and is
not a party to any derivative financial instruments or derivative commodity
instruments. The Company is exposed to a variety of market risks, including the
effects of changes in interest rates and fuel prices. The Company's short-term
and long-term financing is generally at variable rates; however, these
obligations may be repaid or converted to a fixed rate at the Company's option.
For more information regarding the Company's debt obligations see Note F to the
Company's consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data required by this Item 8 are set
forth at the pages indicated in Item 14(a) below.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information to be included under the caption "Election of Directors" in
the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A of the Exchange Act in connection with the 2001
Annual Meeting of Shareholders of the Company (the "Proxy Statement") is
incorporated herein by reference.
17
ITEM 11. EXECUTIVE COMPENSATION
The information to be included under the caption "Executive Compensation"
in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information to be included under the caption "Present Beneficial
Ownership of Common Stock" in the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information to be included under the caption "Executive
Compensation--Certain Relationships and Related Transactions" in the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
(a)(1) Consolidated Financial Statements
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets at December 31, 2000 and 1999 F-2
Consolidated Statements of Earnings for the years ended
December 31, 2000, 1999 and 1998 F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-8
(a)(2) Schedules are omitted because they are not required or are not
applicable or the required information is shown in the
financial statements or notes thereto
(a)(3) The following exhibits are filed herewith or incorporated by reference:
Exhibit
Number Exhibit
- ------- -------
3.1 Articles of Incorporation of the Company (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).
10.1 Loan Agreement, dated November 25, 1998, between the Company, Motor
Cargo and Zions First National Bank (filed as Exhibit 10.1 to the
Company's Annual Report for 1998 on Form 10-K and incorporated herein
by reference).
18
10.2 $20,000,000 Promissory Note, dated September 22, 2000, to the order of
Zions First National Bank.*
10.3 $5,000,000 Promissory Note, dated September 22, 2000, to the order of
Zions First National Bank.*
10.4 1997 Stock Option Plan (filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.5 1999 Stock Option Plan for Non-Employee Directors (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference).(1)
10.6 Pension Plan of Employees of Motor Cargo and Trust Agreement (filed as
Exhibit 10.3 to the Company's Registration Statement on Form S-1 (File
No. 333-37211) and incorporated herein by reference).(1)
10.7 Restricted Stock Agreement, dated October 2, 1997, between the Company
and Louis V. Holdener (filed as Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.8 Form of Salary Continuation Agreement (filed as Exhibit 10.12 to the
Company's Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.9 Management Agreement between the Company and FHF Transportation, Inc.
(filed as Exhibit 10.18 to the Company's Registration Statement on
Form S-1 (file No. 333-37211 and incorporated herein by reference).
10.10 Master Truck Agreement 2000-2003, between Motor Cargo, Reno, Nevada
and Teamsters, Chauffeurs, Warehousemen & Helpers and Professional
Clerical, Public and Miscellaneous Employees, Local Union No. 533,
affiliated with the International Brotherhood of Teamsters.*
10.11 Master Truck Agreement between Motor Cargo, Salt Lake City, Utah and
the International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, Local Union No. 222 (filed as Exhibit 10.16 to
the Company's Annual Report for 1999 on Form 10-K and incorporated
herein by reference).
21 Subsidiaries of the Company (filed as Exhibit 21 to the Company's
Registration Statement on Form S-1 (file No. 333-37211) and
incorporated herein by reference).
23 Consent of Grant Thornton LLP.*
- -------------------
(1) Management contracts and compensatory plans and arrangements identified
pursuant to Item 14(a)(3) of Form 10-K.
* Filed with this report.
(b) REPORTS ON FORM 8-K
Not Applicable.
19
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.
MOTOR CARGO INDUSTRIES, INC.
Date: March 22, 2001 By /s/ Lynn H. Wheeler
----------------------------------
Lynn H. Wheeler
Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 22, 2001 By /s/ Harold R. Tate
----------------------------------
Harold R. Tate, Director and
Chairman of the Board
Date: March 22, 2001 By /s/ Marshall R. Rate
----------------------------------
Marshall L. Tate, Director
(Principal Executive Officer)
Date: March 22, 2001 By /s/ Lynn H. Wheeler
----------------------------------
Lynn H. Wheeler, Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: March 22, 2001 By /s/ Marvin L. Friedland
----------------------------------
Marvin L. Friedland, Director
Date: March 22, 2001 By /s/ Robert Anderson
----------------------------------
Robert Anderson, Director
Date: March 22, 2001 By /s/ James Clayburn La Force, Jr.
----------------------------------
James Clayburn La Force, Jr., Director
20
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Motor Cargo Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Motor Cargo
Industries, Inc. and Subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 consolidated financial position of Motor
Cargo Industries, Inc. and Subsidiaries as of December 31, 2000 and 1999, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Grant Thornton LLP
Salt Lake City, Utah
January 25, 2001
F-1
Motor Cargo Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
2000 1999
------------ ------------
CURRENT ASSETS
Cash and cash equivalents (Note E) $ 7,033,681 $ 5,508,809
Receivables (Notes B, E and L) 18,124,930 16,570,062
Prepaid expenses 2,112,198 2,720,084
Supplies inventory (Note E) 637,289 568,430
Deferred income taxes (Note G) 1,734,000 1,723,000
------------ ------------
Total current assets 29,642,098 27,090,385
PROPERTY AND EQUIPMENT, AT COST
(Notes C, F and L) 106,185,662 99,459,949
Less accumulated depreciation
and amortization 51,851,119 46,644,471
------------ ------------
54,334,543 52,815,478
Other assets
Advances for purchase of real property (Note L) 787,695 --
Other, net 600,552 664,321
------------ ------------
1,388,247 664,321
------------ ------------
$ 85,364,888 $ 80,570,184
============ ============
The accompanying notes are an integral part of these statements.
F-2
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
----------- -----------
CURRENT LIABILITIES
Current maturities of long-term obligations (Note F) $ 119,152 $ 109,151
Accounts payable 2,854,290 3,361,660
Accrued liabilities (Note N) 7,477,843 6,323,095
Accrued claims (Note O) 1,440,438 1,727,391
Income taxes payable 435,366 119,931
----------- -----------
Total current liabilities 12,327,089 11,641,228
LONG-TERM OBLIGATIONS, less current
maturities (Notes E and F) 8,015,125 8,020,523
DEFERRED INCOME TAXES (Note G) 7,522,000 7,267,000
COMMITMENTS AND CONTINGENCIES
(Notes D, E, F, H, I, K, and L) -- --
STOCKHOLDERS' EQUITY (Notes F, I and M)
Preferred stock, no par value; Authorized -
25,000,000 shares - none issued -- --
Common stock, no par value; Authorized -
100,000,000 shares - issued and outstanding
6,474,140 shares in 2000 and 6,925,040 shares in 1999 9,288,785 11,849,600
Retained earnings 48,211,889 41,791,833
----------- -----------
57,500,674 53,641,433
----------- -----------
$85,364,888 $80,570,184
=========== ===========
F-3
Motor Cargo Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31,
2000 1999 1998
------------- ------------- -------------
Operating revenues $ 131,111,694 $ 125,309,633 $ 114,724,798
------------- ------------- -------------
Operating expenses
Salaries, wages and benefits 65,165,617 59,502,114 51,746,567
Operating supplies and expenses 21,811,961 20,341,773 15,973,557
Purchased transportation 11,870,030 15,580,049 17,975,515
Operating taxes and licenses 5,047,912 4,730,417 3,884,923
Insurance and claims 3,381,287 3,826,130 3,651,217
Depreciation and amortization 8,772,064 8,822,260 7,927,663
Communications and utilities 2,175,548 2,022,974 1,923,707
Building and equipment rents 3,423,529 3,043,136 2,365,006
Gain on sale of equipment (206,060) (241,084) (103,110)
------------- ------------- -------------
Total operating expenses 121,441,888 117,627,769 105,345,045
------------- ------------- -------------
Operating income 9,669,806 7,681,864 9,379,753
Other income (expense)
Interest expense (157,880) (138,810) (153,673)
Other, net (Note L) 988,130 110,029 222,781
------------- ------------- -------------
830,250 (28,781) 69,108
------------- ------------- -------------
Earnings before income taxes 10,500,056 7,653,083 9,448,861
Income taxes (Note G) 4,080,000 3,000,000 3,660,000
------------- ------------- -------------
Net earnings $ 6,420,056 $ 4,653,083 $ 5,788,861
============= ============= =============
Earnings per common share - basic $ 0.95 $ 0.67 $ 0.83
============= ============= =============
Weighted-average shares outstanding - basic 6,734,734 6,938,365 6,987,820
============= ============= =============
Earnings per common share - diluted $ 0.95 $ 0.67 $ 0.83
============= ============= =============
Weighted-average shares outstanding - diluted 6,738,766 6,940,656 6,991,820
============= ============= =============
The accompanying notes are an integral part of these statements.
F-4
Motor Cargo Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
Preferred Stock Common Stock
--------------------- -------------------------
Number Number Retained
of shares Amount of shares Amount earnings Total
--------- ------- --------- ------------ ------------ ------------
Balance, January 1, 1998 -- $ -- 6,990,000 $ 12,101,298 $ 31,349,889 $ 43,451,187
Vesting of 5,000 shares pursuant to
Restricted Stock Agreement
(Note M) -- -- -- 60,625 -- 60,625
Cashless repurchase of shares for
income tax withholding (Note M) -- -- (2,180) (26,433) -- (26,433)
Net earnings for the year -- -- -- -- 5,788,861 5,788,861
---- ------ ---------- ------------ ------------ ------------
Balance, December 31, 1998 -- -- 6,987,820 12,135,490 37,138,750 49,274,240
Vesting of 5,000 shares pursuant to
Restricted Stock Agreement
(Note M) -- -- -- 40,000 -- 40,000
Cashless repurchase of shares for
income tax withholding (Note M) -- -- (2,180) (17,440) -- (17,440)
Repurchase of shares (Note M) -- -- (60,600) (308,450) -- (308,450)
Net earnings for the year -- -- -- -- 4,653,083 4,653,083
---- ------ ---------- ------------ ------------ ------------
Balance, December 31, 1999 -- -- 6,925,040 11,849,600 41,791,833 53,641,433
Vesting of 5,000 shares pursuant to
Restricted Stock Agreement
(Note M) -- -- -- 23,750 -- 23,750
Repurchase of shares (Note M) -- -- (450,900) (2,584,565) -- (2,584,565)
Net earnings for the year -- -- -- -- 6,420,056 6,420,056
---- ------ ---------- ------------ ------------ ------------
Balance, December 31, 2000 -- $ -- 6,474,140 $ 9,288,785 $ 48,211,889 $ 57,500,674
==== ====== ========== ============ ============ ============
The accompanying notes are an integral part of this statement.
F-5
Motor Cargo Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2000 1999 1998
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 6,420,056 $ 4,653,083 $ 5,788,861
------------ ------------ ------------
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 8,772,064 8,822,260 7,927,663
Provision for losses on receivables 314,000 282,100 217,500
Gain on disposition of property
and equipment (1,345,307) (241,084) (103,110)
Amortization of unrecognized
pension obligation 5,790 5,790 5,790
Provision for claims 2,150,171 2,635,771 4,703,340
Deferred income taxes 244,000 (346,000) 942,000
Charge associated with stock
issuance to an officer 23,750 40,000 60,625
Changes in assets and liabilities
Receivables (365,301) (2,669,188) (1,228,754)
Prepaid expenses 607,886 (89,668) (220,892)
Supplies inventory (68,859) (108,719) 43,787
Other assets 52,100 (179,789) (52,044)
Accounts payable (507,370) 403,289 939,194
Accrued liabilities and claims (1,282,376) (2,285,240) (6,535,214)
Income taxes 315,435 742,579 60,385
------------ ------------ ------------
Total adjustments 8,915,983 7,012,101 6,760,270
------------ ------------ ------------
Net cash provided by
operating activities 15,336,039 11,665,184 12,549,131
------------ ------------ ------------
Cash flows from investing activities
Purchase of property and equipment (12,180,324) (16,764,220) (13,720,140)
Proceeds from disposition of property
and equipment 3,240,381 761,809 1,160,558
Advances for purchase of real property (2,291,262) -- --
------------ ------------ ------------
Net cash used in
investing activities (11,231,205) (16,002,411) (12,559,582)
------------ ------------ ------------
(Continued)
F-6
Motor Cargo Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
2000 1999 1998
------------ ------------ ------------
Cash flows from financing activities
Repurchase of common stock (2,584,565) (308,450) --
Proceeds from issuance of long-term
obligations 113,755 2,742,822 --
Principal payments on long-term
obligations (109,152) (102,990) (1,091,597)
------------ ------------ ------------
Net cash provided by (used in)
financing activities (2,579,962) 2,331,382 (1,091,597)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 1,524,872 (2,005,845) (1,102,048)
Cash and cash equivalents at beginning of year 5,508,809 7,514,654 8,616,702
------------ ------------ ------------
Cash and cash equivalents at end of year $ 7,033,681 $ 5,508,809 $ 7,514,654
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 158,677 $ 137,953 $ 154,751
Income taxes 3,425,000 2,593,128 2,537,933
NONCASH INVESTING AND FINANCING ACTIVITIES
During 2000, in connection with the 5,000 shares issued per the restricted stock
agreement, the Company recognized compensation expense of $23,750.
During 1999, in connection with the 5,000 shares issued per the restricted stock
agreement, the Company recognized compensation expense of $40,000 and redeemed
2,180 shares valued at $17,440 as tax withholdings.
During 1998, in connection with the 5,000 shares issued per the restricted stock
agreement, the Company recognized compensation expense of $60,625 and redeemed
2,180 shares valued at $26,433 as tax withholdings.
The accompanying notes are an integral part of these statements.
F-7
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. BUSINESS ACTIVITY
The Company is a regional less-than-truckload carrier that provides
transportation and logistics services to shippers within its core service
region.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Motor Cargo
Industries, Inc. (MCI) and its wholly-owned subsidiary, Motor Cargo and its
wholly-owned subsidiaries, MC Leasing, Inc., MC Distribution Services, Inc.
and ICC, Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation.
3. FINANCIAL STATEMENT PRESENTATION
In preparing the Company's financial statements, in accordance with
accounting principles generally accepted in the United States, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure 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 significantly from those estimates. Significant
estimates include accrued claims and allowance for doubtful accounts.
4. CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
5. SUPPLIES INVENTORY
Supplies inventory consists primarily of fuel and equipment parts and is
stated at the lower of cost (first-in, first-out method) or market.
F-8
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
6. DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is provided on the straight-line
method over the estimated useful lives of the assets. Accelerated methods
of depreciation of property and equipment are used for income tax purposes.
Leasehold improvements are amortized over the lesser of the useful life of
the asset or term of the lease.
Maintenance, repairs, and renewals which neither materially add to the
value of the property nor appreciably prolong its life are charged to
expense as incurred. Gains or losses on dispositions of property and
equipment are included in earnings.
7. INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax
bases of assets and liabilities as measured by the currently enacted tax
rates in effect for the years in which these differences are expected to
reverse. Deferred tax expense or benefit is the result of changes in
deferred tax assets and liabilities.
8. INSURANCE COVERAGE AND ACCRUED CLAIMS
The Company is self-insured for health costs, cargo damage claims, and
automobile and general liability claims up to $70,000, $100,000 and
$250,000, respectively, per single occurrence. The Company also maintains
workers' compensation insurance, with no deductible except for the state of
Nevada, which deductible is $250,000 per occurrence.
The Company estimates and accrues a liability for its share of final
settlements using all available information including the services of a
third-party insurance risk claims administrator to assist in establishing
reserve levels for each occurrence based on the facts and circumstances of
the incident coupled with the Company's history of such claims. The Company
accrues for workers' compensation and automobile liabilities when reported,
usually the same day as the occurrence. Additionally, the Company accrues
an estimated liability for incurred but not reported claims. Expense
depends upon actual loss experience and changes in estimates of settlement
amounts for open claims which have not been fully resolved. The Company
provides for adverse loss developments in the period when new information
becomes available.
F-9
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
9. REVENUE RECOGNITION
Freight charges are generally recognized as revenue in the period when the
shipment is complete or the services are rendered. Revenue from in-transit
freight is recognized on a percentage-of-completion basis, based on the
average transit time for that period. Expenses associated with the
operating revenue are recognized when incurred.
10. PREPAID TIRES
The Company capitalizes tires purchased with new equipment and depreciates
them over the estimated useful life of the equipment (5-10 years).
Replacement tires are expensed upon placement into service.
11. EARNINGS PER SHARE
The Company follows the provisions of Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128
requires the presentation of basic and diluted EPS. Basic EPS are
calculated by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding during each period.
Diluted EPS are similarly calculated, except that the weighted-average
number of common shares outstanding includes common shares that may be
issued subject to existing rights with dilutive potential.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash and cash equivalents, receivables,
accounts payable and accrued liabilities approximate carrying value due to
the short-term maturity of the instruments. The fair value of long-term
obligations approximate carrying value based on their effective interest
rates compared to current market prices.
13. CERTAIN RECLASSIFICATIONS
Certain nonmaterial reclassifications have been made to the 1999 and 1998
financial statements to conform to the 2000 presentation.
F-10
NOTE B - RECEIVABLES
Receivables consist of the following:
2000 1999
------------ ------------
Trade receivables $ 16,441,275 $ 17,004,970
Advances for purchase of real property (Note L) 1,503,567 --
Other receivables 719,791 210,707
------------ ------------
18,664,633 17,215,677
Allowance for doubtful accounts (539,703) (645,615)
------------ ------------
$ 18,124,930 $ 16,570,062
============ ============
The history of the allowance for doubtful accounts is as follows:
2000 1999 1998
--------- --------- ---------
Balance, beginning of year $ 645,615 $ 641,264 $ 572,801
Provisions for losses 314,000 282,100 217,500
Write-offs, net (419,912) (277,749) (149,037)
--------- --------- ---------
Balance, end of year $ 539,703 $ 645,615 $ 641,264
========= ========= =========
NOTE C - PROPERTY AND EQUIPMENT
Cost of property and equipment and estimated useful lives are as follows:
2000 1999 Years
------------ ------------ -------------
Land $ 6,430,385 $ 7,130,385 --
Buildings 17,599,772 18,492,100 20-45
Revenue equipment 57,549,237 56,850,948 5-10
Service cars and equipment 727,155 697,909 3-10
Shop and garage equipment 282,030 264,075 3-10
Office furniture and fixtures 2,831,581 2,670,329 3-10
Other property and equipment 10,731,472 9,904,137 3-10
Leasehold improvements 4,088,859 3,450,066 Life of lease
Construction in progress (Note L) 5,945,171 -- --
------------ ------------
$106,185,662 $ 99,459,949
============ ============
F-11
NOTE D - LEASES
The Company leases buildings and revenue equipment under operating lease
agreements. The following is a schedule of future minimum lease payments
under operating leases at December 31, 2000:
Total
Year ending December 31, Buildings Equipment leases
------------------------ ----------- ----------- -----------
2001 $ 1,867,800 $ 1,663,958 $ 3,531,758
2002 1,198,525 1,470,307 2,668,832
2003 1,076,972 1,450,420 2,527,392
2004 1,013,926 1,154,301 2,168,227
2005 955,615 1,137,271 2,092,886
Thereafter 5,624,692 1,533,516 7,158,208
----------- ----------- -----------
Total minimum lease payments $11,737,530 $ 8,409,773 $20,147,303
=========== =========== ===========
The leases generally provide that property taxes, insurance, and
maintenance expenses are obligations of the Company. It is expected that in
the normal course of business, operating leases that expire will be renewed
or replaced by leases on other properties or equipment. The total rent
expense for the years ended December 31, 2000, 1999, and 1998, was
approximately $4,270,000, $3,043,000 and $2,365,000, respectively.
NOTE E - REVOLVING BANK LOAN
The Company has a revolving bank loan. Under the loan agreement, borrowings
are limited to the lesser of 70 percent of allowable trade receivables, or
$5,000,000. Any outstanding amounts accrue interest at .25 percentage
points below the lending institution's prime rate, and are payable monthly.
No principal payments are required until maturity (April 2002) as long as
the loan does not exceed the required limits. The agreement is
collateralized by cash and cash equivalents, receivables, supplies
inventory, and all documents, instruments, and chattel paper now owned or
hereafter acquired by the Company. At December 31, 2000 and 1999, there
were no draws against the loan.
The Company has an additional line of credit with a limit of $20,000,000 as
of December 31, 2000 and 1999. This line is collateralized by revenue
equipment. As of December 31, 2000 and 1999, there was $6,853,577 and
$6,739,822, respectively, drawn against the line (Note F).
F-12
NOTE F - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
2000 1999
----------- -----------
Prime less .25% (9.5% at December 31, 2000) note payable on a revolving
loan (up to $20,000,000) to a bank, due in 2002, interest payments due
monthly and unpaid balance of principal due in 2002, collateralized by
revenue equipment (Note E) $ 6,853,577 $ 6,739,822
8.75-8.85% notes payable to a corporation, due in 2003, payable in monthly
installments of $18,964, including interest, balloon payment of $971,258
due at maturity, collateralized by land and buildings 1,280,700 1,389,852
----------- -----------
8,134,277 8,129,674
Less current maturities 119,152 109,151
----------- -----------
$ 8,015,125 $ 8,020,523
=========== ===========
Maturities of long-term obligations at December 31, 2000 are as follows:
Year ending December 31,
------------------------
2001 $ 119,152
2002 6,983,647
2003 1,031,478
Thereafter --
-----------
$ 8,134,277
===========
The revolving bank loan agreements contain various restrictive covenants
including provisions relating to the maintenance of net worth, earnings to
debt ratio, and liability insurance coverage. As of December 31, 2000, the
Company was in compliance with all covenants under the revolving bank loan
agreements.
F-13
NOTE G - INCOME TAXES
Income tax expense consists of the following:
2000 1999 1998
----------- ----------- -----------
Current
Federal $ 3,203,871 $ 2,825,541 $ 2,280,862
State 632,129 520,459 437,138
----------- ----------- -----------
3,836,000 3,346,000 2,718,000
----------- ----------- -----------
Deferred
Federal 202,856 (287,744) 781,860
State 41,144 (58,256) 160,140
----------- ----------- -----------
244,000 (346,000) 942,000
----------- ----------- -----------
$ 4,080,000 $ 3,000,000 $ 3,660,000
=========== =========== ===========
The income tax provision reconciled to the tax computed at the federal
statutory rate of 34 percent is as follows:
2000 1999 1998
---------- ---------- ----------
Federal income taxes at statutory rate $3,570,000 $2,602,000 $3,212,000
State income taxes, net of federal tax benefit 452,000 332,000 392,000
All other 58,000 66,000 56,000
---------- ---------- ----------
$4,080,000 $3,000,000 $3,660,000
========== ========== ==========
Deferred tax assets and liabilities consist of the following:
2000 1999
---------- ----------
Current deferred tax assets
Allowance for doubtful accounts $ 206,000 $ 247,000
Vacation accrual 640,000 572,000
Accrued claims 582,000 609,000
Deferred revenue 306,000 295,000
---------- ----------
Net current deferred tax assets $1,734,000 $1,723,000
========== ==========
F-14
NOTE G - INCOME TAXES - CONTINUED
2000 1999
----------- -----------
Long-term deferred tax assets (liabilities)
Unfunded pension $ -- $ (35,000)
Accrued compensation 203,000 111,000
Equipment temporary differences (7,725,000) (7,343,000)
----------- -----------
Net long-term deferred tax liability $(7,522,000) $(7,267,000)
=========== ===========
The Company's deferred tax assets result from temporary timing differences
between financial and tax reporting standards. For accrued expenses, the
deferred tax assets are expected to reverse in the period the Company pays
the expenses. For the allowance for doubtful accounts, the deferred tax
asset reverses when the accounts are written off. Finally, the deferred tax
asset for deferred revenue reverses when the Company recognizes the revenue
for financial reporting purposes. Considering the Company's history of
positive earnings, no valuation allowance against the deferred tax assets
is considered necessary.
NOTE H - EMPLOYEE BENEFIT PLANS
1. PENSION PLAN
The Company participates in a defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of
service and hours of service in the current year. A participant is fully
vested after five years. Contributions are intended to provide not only for
benefits attributed to service to date, but also for those expected
benefits to be earned in the future. Information pertaining to the activity
in the plan is as follows:
Pension Benefits
------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Change in benefit obligation
Benefit obligation at beginning of year $ 5,689,892 $ 5,449,623 $ 4,413,501
Service cost 321,147 407,540 268,884
Interest cost 419,407 348,756 346,433
Actuarial loss (gain) (366,697) (347,746) 586,993
Benefits paid (195,598) (168,281) (166,188)
----------- ----------- -----------
Benefit obligation at end of year $ 5,868,151 $ 5,689,892 $ 5,449,623
=========== =========== ===========
F-15
NOTE H - EMPLOYEE BENEFIT PLANS - CONTINUED
Pension Benefits
------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Change in plan assets
Fair value of plan assets at beginning of year $ 6,236,581 $ 5,328,226 $ 4,929,225
Actual return on plan assets (337,970) 837,636 440,189
Employer contribution 328,000 239,000 125,000
Benefits paid (195,598) (168,281) (166,188)
----------- ----------- -----------
Fair value of plan assets at end of year $ 6,031,013 $ 6,236,581 $ 5,328,226
=========== =========== ===========
Funded status
Plan assets over (under) benefit obligation $ 162,862 $ 546,669 $ (121,397)
Unrecognized net actuarial gain (393,798) (950,210) (206,611)
Unrecognized net transition amount 52,281 58,071 63,861
----------- ----------- -----------
Accrued pension cost $ (178,655) $ (345,470) $ (264,147)
=========== =========== ===========
The components of net periodic pension cost are as follows:
Service cost $ 321,147 $ 407,540 $ 268,884
Interest cost 419,407 348,756 346,433
Expected return on plan assets (585,159) (441,763) (440,189)
Amortization of prior service cost 5,790 5,790 4,588
----------- ----------- -----------
Net periodic pension cost $ 161,185 $ 320,323 $ 179,716
=========== =========== ===========
Weighted-average assumptions as of December 31,
Discount rate 7.50% 7.50% 6.50%
Expected return on plan assets 8.00 8.00 6.50
Rate of compensation increase -- -- --
F-16
NOTE H - EMPLOYEE BENEFIT PLANS - CONTINUED
2. 401(k) PROFIT-SHARING PLAN
The Company has a qualified 401(k) profit-sharing plan (the Plan) for its
employees. All employees who have completed one year of service with the
Company are eligible to participate in the Plan. Under the Plan, employees
are allowed to make contributions of between 1 percent and 15 percent of
their annual compensation. The Company matches certain percentages of
employee contributions up to 6 percent of the employee's annual
compensation, depending on the Company's operating ratio. All amounts
contributed by a participant are fully vested at all times. A participant
becomes vested over time and is fully vested in any Company matching
contributions after 7 years of service. Expenses for Company contributions
approximated $495,000, $421,000 and $475,000, for the years ended December
31, 2000, 1999 and 1998, respectively.
NOTE I - STOCK OPTIONS
In January of 1999, the Company's Board of Directors and stockholders
adopted the Motor Cargo Industries, Inc. 1999 Stock Option Plan for
non-employee Directors (the 1999 Option Plan). The Company reserved 100,000
shares of common stock under the 1999 Option Plan. Accordingly, the Board
of Directors has approved the granting of options under the Option Plan as
follows:
Non-employee Directors have been granted options to acquire 35,000 shares
of common stock. The options were granted at $7.50 per share, which was the
market price of the Company's common shares on the day of grant. The
options vest periodically through January 2003 and expire in 2010.
In October 1997, the Company's Board of Directors and stockholders adopted
the Motor Cargo Industries, Inc. 1997 Stock Option Plan (the 1997 Option
Plan). The Company reserved 500,000 shares of common stock under the 1997
Option Plan. Accordingly, the Board of Directors has approved the granting
of options under the Option Plan as follows:
Directors, officers and key employees have been granted options to acquire
365,000 shares of common stock. The options were originally granted at
$12.00 to $12.50 per share, which was the market price of the Company's
common shares on the date granted. The options vest periodically through
January of 2003. The options expire upon the earlier of an expiration date
fixed by the committee responsible for the administering of the Plan or 10
years from the date of the grant.
F-17
NOTE I - STOCK OPTIONS - CONTINUED
During 1999, all original stock option agreements under the 1997 Option
Plan were canceled and new options were granted at an exercise price of
$7.50 per share, which was the market price of the Company's common stock
on the date reissued. Because of the immediate reissuance of the new
options at a reduced exercise price, the reissued options are accounted for
as variable stock options under APB Opinion No. 25. Variable stock options
require compensation cost to be adjusted at the end of each reporting
period based on the change in the intrinsic value of the variable stock
options. As of December 31, 2000, no adjustment to compensation cost is
necessary.
During 2000, the Company granted an additional 41,300 options under the
1997 Option Plan. These options were granted at an exercise price of $4.69,
which was the market price of the Company's common shares on the date
granted. The options vest periodically through February of 2004. The
options expire upon the earlier of an expiration date fixed by the
committee responsible for administering the Plan or 10 years from the date
of the grant.
Changes to the Company's stock options are as follows:
Exercise price Weighted-average
Stock options per share exercise price
------------- --------------- ----------------
Outstanding at
January 1, 1998 249,500 $ 12.00 $12.00
Granted 42,000 12.50 12.50
Exercised -- -- --
Canceled/expired -- -- --
---------
Outstanding at
December 31, 1998 291,500 12.00 to 12.50 12.07
Granted 400,000 7.50 7.50
Exercised -- -- --
Canceled/expired (291,500) 12.00 to 12.50 12.07
---------
Outstanding at
December 31, 1999 400,000 7.50 7.50
Granted 41,300 4.69 4.69
Exercised -- -- --
Canceled/expired (85,000) 4.69 to 7.50 7.37
---------
Outstanding at
December 31, 2000 356,300 $ 4.69 to 7.50 $ 7.21
========= ============== ======
Exercisable at
December 31, 2000 79,750 $ 7.50 $ 7.50
========= ============== ======
No stock options were exercisable at December 31, 1999. 62,375 stock
options were exercisable at $12.00 per share at December 31, 1998.
F-18
NOTE I - STOCK OPTIONS - CONTINUED
Additional information about stock options outstanding and exercisable at
December 31, 2000 is as follows:
OPTIONS OUTSTANDING
Weighted-average
Number Weighted-average remaining contractual
Exercise price outstanding exercise price life (years)
-------------- ----------- --------------- ---------------------
$4.69 41,300 $ 4.69 9.1
$7.50 315,000 $ 7.50 8.1
-------
356,300
=======
OPTIONS EXERCISABLE
Number Weighted-average
Exercise price exercisable exercise price
-------------- ----------- ----------------
$7.50 79,750 $ 7.50
FAIR MARKET VALUE OF OPTIONS GRANTED
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
(FAS 123). Therefore, the Company accounts for stock based compensation
under Accounting Principles Board Opinion No. 25, under which no
significant compensation cost has been recognized. Had the compensation
cost for the stock based compensation been determined based upon the fair
value of the options at the grant date consistent with the methodology
prescribed by FAS 123, the Company's net earnings and earnings per share
would have been reduced to the following pro forma amounts:
2000 1999 1998
----------- ----------- -----------
Net earnings
As reported $ 6,420,056 $ 4,653,083 $ 5,788,861
Pro forma 6,122,235 4,326,056 5,337,141
Net earnings per common share - basic
Net earnings $ 0.95 $ 0.67 $ 0.83
Pro forma 0.91 0.62 0.76
Net earnings per common share - diluted
Net earnings $ 0.95 $ 0.67 $ 0.83
Pro forma 0.91 0.62 0.76
F-19
NOTE I - STOCK OPTIONS - CONTINUED
FAIR MARKET VALUE OF OPTIONS GRANTED - CONTINUED
The fair value of these options was estimated at the date of grant using
the Black-Scholes American option-pricing model with the following
weighted-average assumptions for 2000, 1999 and 1998, respectively:
expected volatility of 78, 79 and 67 percent; risk-free interest rate of
6.68, 5.03 and 5.65 percent; and expected life of 7.5 for each of the three
years. The weighted-average fair value of options granted was $3.65, $5.79
and $8.90 in 2000, 1999 and 1998, respectively.
Option pricing models require the input of highly sensitive assumptions,
including the expected stock price volatility. Also, the Company's stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially
affect the fair value estimate. Management believes the best input
assumptions available were used to value the options and that the resulting
option values are reasonable.
NOTE J - EARNINGS PER COMMON SHARE
2000 1999 1998
---------- ---------- ----------
Common shares outstanding at
beginning of period 6,925,040 6,987,820 6,990,000
Weighted average common shares issued
during the period -- -- --
Weighted average common shares repurchased
during the period (190,306) (49,455) (2,180)
---------- ---------- ----------
Weighted average number of common
shares used in basic EPS 6,734,734 6,938,365 6,987,820
Dilutive effect of stock options 4,032 2,291 4,000
---------- ---------- ----------
Weighted average number of common
shares and dilutive potential common
stock used in diluted EPS 6,738,766 6,940,656 6,991,820
========== ========== ==========
F-20
NOTE K - DEFERRED COMPENSATION
The Company has salary continuation agreements with certain key management
employees. Under the agreements, the Company is obligated to provide for
each such employee or his beneficiaries, during a period of not more than
ten years after the employee's death, disability, or retirement, annual
benefits ranging from $17,000 to $23,000. The Company has purchased
universal life insurance policies on the lives of these participants. These
insurance policies, which remain the sole property of the Company, are
payable to the Company upon the death of the participant or maturity of the
insurance policy.
The Company separately contracts with the participants to pay stated
benefits substantially equivalent to those received or available under the
insurance policies upon retirement, death, or permanent disability. The
expense incurred for the years ended December 31, 2000, 1999 and 1998, was
approximately $64,000, $58,000 and $54,000, respectively.
NOTE L - COMMITMENTS AND CONTINGENCIES
1. PURCHASE OF PROPERTY AND EQUIPMENT
During 2000, the Company made advances toward the purchase of property and
the construction of a new terminal in Denver, Colorado. In December 2000,
the Company sold a vacant terminal in Newark, California, resulting in a
gain of $1,139,247, which is included in other income. To facilitate an
income tax-deferred exchange relating to these two terminals, the Company
placed the proceeds from the sale of the Newark, California terminal in an
escrow account until the completion of construction of the Denver terminal.
At December 31, 2000, the Company included $4,285,650 incurred on the
construction of the Denver terminal in construction in progress. Funds
remaining in escrow at December 31, 2000 total $2,291,262. Of these funds,
$787,695 is committed under the construction contract and is included in
other assets. The remaining $1,503,567 in escrow represents advanced costs
in excess of the amounts committed under the construction contract that
will be returned to the Company and is included in receivables.
At December 31, 2000, the Company has outstanding purchase orders for
revenue equipment totaling approximately $6,143,000.
F-21
NOTE L - COMMITMENTS AND CONTINGENCIES - CONTINUED
2. LETTERS OF CREDIT
At December 31, 2000, the Company had outstanding letters of credit
totaling $1,430,000 ($1,280,000 at December 31, 1999). There were no draws
against these letters of credit during any of the periods presented.
3. LITIGATION
The Company is involved in litigation arising in the normal course of
business. It is not possible to state the ultimate liability, if any, in
these matters. In the opinion of management, such litigation will have no
material effect on the financial position and results of operations of the
Company, in excess of amounts accrued.
NOTE M - CAPITAL TRANSACTIONS
In October 1997, the Company's Board of Directors awarded an officer of the
Company 20,000 shares of the Company's common stock. The award was made
pursuant to a Restricted Stock Agreement which states that 20,000 shares of
the Company's common stock will be issued in the officer's name. The
Company will hold the certificates for the shares, which will be released
in four installments, each consisting of 25 percent of the shares issued
based on the officer's continued employment. In the event the officer
voluntarily ceases his employment with the Company or the Company
terminates his employment for cause, the shares not previously released
will be forfeited. Termination of employment by the Company without cause,
or termination due to disability or death will result in the prompt release
of some or all shares not previously released, depending upon the date of
the relevant event. During 2000, 1999 and 1998, 5,000 shares vested
annually, resulting in compensation expense in the amount of $23,750,
$40,000 and $60,625, respectively. Of the 5,000 shares vested during 1999,
2,180 shares were simultaneously redeemed by the Company. The remaining
2,820 shares were released to the officer's name. All of the 5,000 shares
vested during 2000 were released to the officer's name.
During the first quarter of 1999, the Company announced a share repurchase
program. The Board of Directors of the Company authorized the repurchase of
up to 700,000 shares of outstanding common stock. As of December 31, 2000,
a total of 511,500 shares had been repurchased by the Company for
approximately $2,893,000.
NOTE N - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
2000 1999
---------- ----------
Salaries, wages, and payroll taxes $3,361,440 $2,611,473
Accrued employee benefits 1,471,197 1,353,340
Vacation accrual 1,671,317 1,498,511
All other 973,889 859,771
---------- ----------
$7,477,843 $6,323,095
========== ==========
F-22
NOTE O - ACCRUED CLAIMS
The history of accrued claims is as follows:
2000 1999 1998
----------- ----------- -----------
Balance at beginning of year $ 1,727,391 $ 1,382,085 $ 2,956,911
Provision 2,150,171 2,635,711 4,703,340
Claims (2,437,124) (2,290,405) (6,278,166)
----------- ----------- -----------
Balance at end of year $ 1,440,438 $ 1,727,391 $ 1,382,085
=========== =========== ===========
NOTE P - QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial results for the years ended December 31, 2000 and 1999
are as follows:
Earnings Earnings
per common per common
Operating Operating Net share - share -
2000 revenues income earnings basic (2) diluted (2)
----------------- ------------ ------------ ------------ ---------- -----------
First quarter $ 30,382,899 $ 1,096,810 $ 672,011 $ 0.10 $ 0.10
Second quarter 31,773,871 2,674,895 1,635,128 0.24 0.24
Third quarter 34,097,502 2,789,605 1,715,278 0.26 0.26
Fourth quarter (1) 34,857,422 3,108,496 2,397,639 0.37 0.37
------------ ------------ ------------
$131,111,694 $ 9,669,806 $ 6,420,056 $ 0.95 $ 0.95
============ ============ ============ ======== ========
F-23
NOTE P - QUARTERLY FINANCIAL RESULTS (UNAUDITED) - CONTINUED
Earnings Earnings
per common per common
Operating Operating Net share - share -
1999 revenues income earnings basic (2) diluted (2)
----------------- ------------ ------------ ------------ ---------- -----------
First quarter $ 28,730,830 $ 1,192,608 $ 721,206 $ 0.10 $ 0.10
Second quarter 32,353,017 2,455,998 1,497,638 0.22 0.22
Third quarter 32,614,188 1,852,961 1,120,273 0.16 0.16
Fourth quarter 31,611,598 2,180,297 1,313,966 0.19 0.19
------------ ------------ ------------
$125,309,633 $ 7,681,864 $ 4,653,083 $ 0.67 $ 0.67
============ ============ ============ ======== ========
(1) Fourth quarter 2000 net earnings includes unusual items comprised
primarily of a net gain of approximately $541,000 resulting from the
sale of a terminal during that quarter.
(2) Earnings per common share is computed independently for each of the
quarters presented. Therefore, due to rounding, the sum of the
quarterly earnings per common share do not necessarily equal the total
for the year.
F-24
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBITS
- ------- --------
3.1 Articles of Incorporation of the Company (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).
10.1 Loan Agreement, dated November 25, 1998, between the Company, Motor
Cargo and Zions First National Bank (filed as Exhibit 10.1 to the
Company's Annual Report for 1998 on Form 10-K and incorporated herein
by reference).
10.2 $20,000,000 Promissory Note, dated September 22, 2000, to the order of
Zions First National Bank.*
10.3 $5,000,000 Promissory Note, dated September 22, 2000, to the order of
Zions First National Bank.*
10.4 1997 Stock Option Plan (filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.5 1999 Stock Option Plan for Non-Employee Directors (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference).(1)
10.6 Pension Plan of Employees of Motor Cargo and Trust Agreement (filed as
Exhibit 10.3 to the Company's Registration Statement on Form S-1 (File
No. 333-37211) and incorporated herein by reference).(1)
10.7 Restricted Stock Agreement, dated October 2, 1997, between the Company
and Louis V. Holdener (filed as Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.8 Form of Salary Continuation Agreement (filed as Exhibit 10.12 to the
Company's Registration Statement on Form S-1 (File No. 333-37211) and
incorporated herein by reference).(1)
10.9 Management Agreement between the Company and FHF Transportation, Inc.
(filed as Exhibit 10.18 to the Company's Registration Statement on
Form S-1 (file No. 333-37211) and incorporated herein by reference).
10.10 Master Truck Agreement 2000-2003, between Motor Cargo, Reno, Nevada
and Teamsters, Chauffeurs, Warehousemen & Helpers and Professional
Clerical, Public and Miscellaneous Employees, Local Union No. 533,
affiliated with the International Brotherhood of Teamsters.*
10.11 Master Truck Agreement between Motor Cargo, Salt Lake City, Utah and
the International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, Local Union No. 222 (filed as Exhibit 10.16 to
the Company's Annual Report for 1999 on Form 10-K and incorporated
herein by reference).
21 Subsidiaries of the Company (filed as Exhibit 21 to the Company's
Registration Statement on Form S-1 (file No. 333-37211) and
incorporated herein by reference).
23 Consent of Grant Thornton LLP.*
- -------------------
(1) Management contracts and compensatory plans and arrangements identified
pursuant to Item 14(a)(3) of Form 10-K.
* Filed with this report.