UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934: FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
COMMISSION FILE NUMBER: 000-20793
SMITHWAY MOTOR XPRESS CORP.
(Exact name of registrant as specified in its charter)
NEVADA 42-1433844
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2031 QUAIL AVENUE
FORT DODGE, IOWA 50501
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (515) 576-7418
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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
As of May 4, 2007, the registrant had 3,993,124 shares of Class A Common Stock
and 1,000,000 shares of Class B Common Stock outstanding.
PAGE
NUMBER
------
PART I
FINANCIAL INFORMATION
Item 1 Financial Statements........................................... 3
Condensed Consolidated Balance Sheets as of December 31, 2006
and March 31, 2007 (unaudited).............................. 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2006 and 2007 (unaudited)............ 5
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2006 and 2007 (unaudited)............ 6
Notes to Condensed Consolidated Financial Statements
(unaudited)................................................. 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk..... 17
Item 4 Controls and Procedures........................................ 17
PART II
OTHER INFORMATION
Item 1 Legal Proceedings.............................................. 18
Item 1A Risk Factors................................................... 18
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.... 18
Item 3 Defaults Upon Senior Securities................................ 18
Item 4 Submission of Matters to a Vote of Security Holders............ 18
Item 5 Other Information.............................................. 18
Item 6 Exhibits....................................................... 18
Signatures............................................................. 19
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
DECEMBER 31, MARCH 31,
2006 2007
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .......... $ 2,020 $ 238
Receivables, net:
Trade ........................... 15,916 19,201
Other ........................... 866 2,582
Recoverable income taxes ........ 1,025 224
Inventories ........................ 1,158 1,247
Deposits, primarily with insurers .. 975 3,542
Prepaid expenses ................... 2,474 2,701
Deferred income taxes .............. 2,242 1,906
-------- --------
Total current assets ......... 26,676 31,641
-------- --------
Property and equipment:
Land ............................... 1,137 1,137
Buildings and improvements ......... 7,144 7,144
Tractors ........................... 74,036 75,775
Trailers ........................... 38,724 41,235
Other equipment .................... 4,673 4,652
-------- --------
125,714 129,943
Less accumulated depreciation ...... 52,880 49,795
-------- --------
Net property and equipment ... 72,834 80,148
-------- --------
Goodwill .............................. 1,745 1,745
Other assets .......................... 310 320
-------- --------
$101,565 $113,854
======== ========
See accompanying notes to condensed consolidated financial statements.
3
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
DECEMBER 31, MARCH 31,
2006 2007
------------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt ......................... $ 10,479 $ 11,321
Accounts payable ................ 6,436 7,122
Accrued loss reserves ........... 4,960 4,952
Accrued compensation ............ 2,274 2,715
Other accrued expenses .......... 538 550
-------- --------
Total current liabilities .... 24,687 26,660
Long-term debt, less current
maturities ...................... 28,006 36,965
Line of credit ..................... -- 2,600
Accrued loss reserves, less current
portion ......................... 3,952 3,040
Deferred income taxes .............. 13,001 12,713
-------- --------
Total liabilities ............ 69,646 81,978
-------- --------
Stockholders' equity:
Preferred stock ................. -- --
Common stock:
Class A ...................... 40 40
Class B ...................... 10 10
Additional paid-in capital ...... 11,627 11,647
Retained earnings ............... 20,340 20,277
Reacquired shares, at cost ...... (98) (98)
-------- --------
Total stockholders' equity ... 31,919 31,876
Commitments
-------- --------
$101,565 $113,854
======== ========
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2006 2007
---------- ----------
Operating revenue:
Freight .................................. $ 57,277 $ 52,100
Other .................................... 412 499
---------- ----------
Operating revenue ..................... 57,689 52,599
---------- ----------
Operating expenses:
Purchased transportation ................. 20,553 17,679
Compensation and employee benefits ....... 15,129 14,204
Fuel, supplies, and maintenance .......... 12,758 12,457
Insurance and claims ..................... 1,433 1,120
Taxes and licenses ....................... 954 959
General and administrative ............... 1,866 2,217
Communications and utilities ............. 344 330
Gain on disposal of assets ............... (562) (378)
Depreciation and amortization ............ 2,864 3,375
---------- ----------
Total operating expenses ........... 55,339 51,963
---------- ----------
Earnings from operations .............. 2,350 636
Financial (expense) income
Interest expense ......................... (501) (800)
Interest income .......................... 18 39
---------- ----------
Earnings (loss) before income taxes ... 1,867 (125)
Income tax expense (benefit) ................ 824 (62)
---------- ----------
Net earnings (loss) ................... $ 1,043 $ (63)
========== ==========
Basic earnings (loss) per share ............. $ 0.21 $ (0.01)
========== ==========
Diluted earnings (loss) per share ........... $ 0.21 $ (0.01)
========== ==========
Basic weighted average shares outstanding ... 4,971,624 4,991,124
Effect of dilutive stock options ...... 104,269 91,269
---------- ----------
Diluted weighted average shares
outstanding .............................. 5,075,893 5,082,393
========== ==========
See accompanying notes to condensed consolidated financial statements.
5
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2007
------- --------
Cash flows from operating activities:
Net earnings (loss) ...................... $ 1,043 $ (63)
------- -------
Adjustments to reconcile net earnings
to cash provided by (used in)
operating activities:
Depreciation and amortization ......... 2,864 3,375
Gain on disposal of assets ............ (562) (378)
Deferred income tax (benefit)
expense ............................ (12) 48
Change in:
Receivables ........................ (1,408) (4,200)
Inventories ........................ (55) (89)
Deposits, primarily with
insurers ........................ (100) --
Prepaid expenses ................... (551) (227)
Accounts payable and other
accrued liabilities ............. 1,873 219
------- -------
Net cash provided by (used
in) operating
activities ................... 3,092 (1,315)
------- -------
Cash flows from investing activities:
Purchase of property and equipment ....... (1,598) (1,135)
Proceeds from sale of property and
equipment ............................. 1,577 608
Other .................................... (1) (10)
------- -------
Net cash used in investing
activities ................... (22) (537)
------- -------
Cash flows from financing activities:
Net (repayment) borrowings on line of
credit ................................ (760) 2,600
Principal payments on long-term
debt .................................. (2,411) (2,550)
Other .................................... 12 20
------- -------
Net cash (used in) provided
by financing activities ...... (2,892) 70
------- -------
Net increase (decrease) in
cash and cash
equivalents .................. 178 (1,782)
Cash and cash equivalents at beginning
of period ................................ 168 2,020
------- -------
Cash and cash equivalents at end of
period ................................... $ 346 $ 238
======= =======
Supplemental disclosure of cash flow
information:
Cash paid (received) during period
for:
Interest ........................ $ 504 $ 748
Income taxes .................... 288 (912)
======= =======
Supplemental schedules of noncash
investing and financing activities:
Fair market value of revenue
equipment traded ...................... $ 225 $ 2,709
Notes payable issued for tractors and
trailers .............................. 2,186 12,493
Notes payable issued as equipment
purchase deposit ...................... -- 2,567
======= =======
See accompanying notes to condensed consolidated financial statements.
6
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Smithway Motor Xpress Corp., a Nevada holding company, and its four wholly
owned subsidiaries ("we," "us," or "our"). All significant intercompany
balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements have been prepared, without
audit, in accordance with U.S. generally accepted accounting principles,
pursuant to the published rules and regulations of the Securities and
Exchange Commission. The accompanying condensed consolidated financial
statements include all adjustments that are necessary for a fair
presentation of the results for the interim periods presented, such
adjustments being of a normal recurring nature. Certain information and
footnote disclosures have been condensed or omitted pursuant to such rules
and regulations. The December 31, 2006, Condensed Consolidated Balance
Sheet was derived from our audited balance sheet for the year then ended.
These condensed consolidated financial statements and notes thereto should
be read in conjunction with the consolidated financial statements and notes
thereto included in our annual report on Form 10-K for the year ended
December 31, 2006. Results of operations in interim periods are not
necessarily indicative of results to be expected for a full year.
NOTE 2. NET EARNINGS PER COMMON SHARE
Basic earnings per share have been computed by dividing net earnings by the
weighted-average outstanding Class A and Class B common shares during each
of the quarters. Diluted earnings per share have been calculated by also
including in the computation the effect of employee stock options,
nonvested stock, and similar equity instruments granted to employees and
directors as potential common shares. The dilutive effect of stock options
excludes 30,000 and 32,000 shares for the three months ending on March 31,
2006 and 2007, respectively, as the exercise prices of the underlying
options were out of the money and the effect was anti-dilutive. Stock
options outstanding at March 31, 2006 and 2007, totaled 205,350 and
149,350, respectively.
NOTE 3. STOCK OPTION PLANS
We have two active stock-based compensation plans:
(1) We have reserved 400,000 shares of Class A common stock for
issuance pursuant to an employee incentive stock plan adopted during
2001. Any shares subject to awards which expire unexercised or are
forfeited become available again for issuance under this plan. Under
this plan, no award of incentive stock options may be made after
August 6, 2011.
(2) We have reserved 500,000 shares of Class A common stock for
issuance pursuant to an omnibus stock plan adopted on May 13, 2005.
Any shares subject to awards which expire unexercised or are forfeited
become available again for issuance under this plan. This plan expires
on May 13, 2015.
Options granted under these plans vest in installments from 12 to 60 months
after the date of grant. The options are exercisable over a period not to
exceed ten years from the date of grant. At March 31, 2007, 822,500 shares
were available for granting additional awards under these plans.
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment" ("No.
123R"), using a modified version of the prospective transition method.
Under this transition method, compensation cost is recognized on or after
the required effective date for the portion of outstanding awards for which
the requisite service has not yet been rendered, based on the grant-date
fair value of those awards calculated under SFAS No. 123 for either
recognition or pro forma disclosures. Stock-based employee compensation
expense for the three months ended March 31, 2006 and 2007 was $12 and $20,
respectively, and is included as an expense within the consolidated
statements of operations. The total income tax benefit recognized in the
income statement for stock-based compensation arrangements was $3 and $6
for the three months ended March 31, 2006 and 2007, respectively. As of
March 31, 2007, the total compensation cost related to non-vested awards
not yet
7
recognized was $43 and the weighted-average period over which it is
expected to be recognized was one year. There was no cumulative effect of
initially adopting No. 123R.
The following table summarizes stock option activity for the three months
ended March 31, 2007:
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL INTRINSIC
OPTIONS PRICE TERM (YEARS) VALUE
--------- -------- ------------ ---------
Outstanding at beginning of period 197,850 $5.02
Options granted -- --
Options exercised -- --
Options forfeited (23,500) 6.68
Options expired (25,000) 8.88
------- ----- ---- ----
Outstanding at end of period 149,350 $4.12 4.78 $919
======= ===== ==== ====
Options exercisable at end of
period 116,850 $3.60 4.37 $779
No stock options vested, were exercised, or granted during the three-month
periods ended March 31, 2007 and 2006. The fair value of stock option
grants are estimated using a Black-Scholes valuation model.
Although we do not have a formal policy for issuing shares upon exercise of
stock options, these shares are generally issued from treasury stock. Based
on current treasury stock levels, we do not expect to repurchase additional
shares specifically for stock option exercises during 2007.
NOTE 4. INCOME TAXES
We adopted the provisions of FASB Interpretation No. 48 ("FIN 48"),
Accounting for Uncertainty in Income Taxes, on January 1, 2007. There were
no adjustments recorded as a result of the adoption of FIN 48. We had a
total gross liability for unrecognized tax benefits of $117 as of the
adoption date, which is included as a reduction to recoverable income
taxes. If recognized, the unrecognized tax benefits would not materially
impact our effective tax rate. Interest of $11 and penalties of $8 have
been reflected as a component of the total liability. It is our policy to
recognize as additional income tax expense interest and penalties directly
related to income taxes.
For the three month period ended March 31, 2007, there were no material
changes to the total amount of unrecognized tax benefits. We do not expect
any significant increases or decreases for uncertain tax positions during
the next 12 months.
We file income tax returns in the U.S. and various states. Tax returns
filed during 2003 through 2007 are subject to examination.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Except for the historical information contained herein, the discussion in
this quarterly report on Form 10-Q contains forward-looking statements that
involve risk, assumptions, and uncertainties that are difficult to predict.
Words such as "anticipates," "believes," "estimates," "projects," "plans,"
"expects," "may," "could," "likely," variations of these words, and similar
expressions, are intended to identify such forward-looking statements. These
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements are based upon the
current beliefs and expectations of our management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in forward-looking statements. The following factors, among others, could
cause actual results to differ materially from those in forward-looking
statements: economic recessions or downturns in customers' business cycles;
excessive increases in capacity within truckload markets; surplus inventories;
decreased demand for transportation services offered by us; increases or rapid
fluctuations in inflation, interest rates, fuel prices, and fuel hedging; the
availability and costs of attracting and retaining qualified drivers and
owner-operators; failure to sustain profitability, which could result in
violation of bank covenants and acceleration of indebtedness at several
financial institutions; the ability to obtain financing on acceptable terms;
increases in insurance premiums and deductible amounts, or changes in excess
coverage, relating to accident, cargo, workers' compensation, health, and other
claims; the resale value of used equipment and prices of new equipment; seasonal
factors such as harsh weather conditions that increase operating costs;
regulatory requirements that increase costs and decrease efficiency, including
new emissions standards and hours-of-service regulations; changes in management;
and the ability to negotiate, consummate, and integrate acquisitions. Readers
should review and consider the various disclosures made by us in our press
releases, stockholder reports, and public filings, as well as the factors
explained in greater detail under "Risk Factors" and elsewhere in our annual
report on Form 10-K.
BUSINESS OVERVIEW
We are a truckload carrier that provides nationwide transportation of
diversified freight, concentrating primarily on the flatbed segment of the
truckload market. We offer comprehensive truckload transportation services to
shippers located predominantly between the Rocky Mountains in the West and the
Appalachian Mountains in the East, and in the southern provinces of Canada. Our
fiscal year ends on December 31 of each year. Thus, this report discusses the
first quarter of our 2006 and 2007 fiscal years.
RECENT DEVELOPMENT
On March 22, 2007, we entered into a merger agreement with Western Express,
Inc. and Western Express Acquisition Corporation, providing for the merger of
Western Express Acquisition with and into our company with our company surviving
as a wholly-owned subsidiary of Western Express. Pursuant to the merger
agreement, at the effective time of the merger, each outstanding share of our
common stock will be converted into and represent the right to receive $10.63 in
cash. The merger agreement has been approved by our board of directors, as well
as Western Express' board of directors. The transactions contemplated by the
merger agreement are subject to the approval of our stockholders and other
customary closing conditions and are expected to close in the summer of 2007.
REVENUES AND EXPENSES
We generate substantially all of our revenue by transporting freight for
our customers. Generally, we are paid by the mile for our services. We also
derive revenue from fuel surcharges, loading and unloading activities, equipment
detention, and other accessorial services. The main factors that affect our
revenue are the revenue per mile we receive from our customers, the percentage
of miles for which we are compensated, and the number of miles we generate with
our equipment. These factors relate, among other things, to the United States
economy, inventory levels, the level of capacity in the trucking industry,
specific customer demand, and driver availability.
9
We monitor our revenue production primarily through average revenue per
tractor per week (excluding fuel surcharge, brokerage, and other revenues). We
exclude fuel surcharge, brokerage and other more volatile revenues in this
measurement because we believe the analysis of tractor productivity is more
meaningful if these revenues are excluded from the computation, providing useful
information to investors regarding business trends relating to our financial
condition and results of ongoing operations.
Several industry-wide issues caused downward trends in our revenues during
the first quarter of 2007, including softer freight demand, particularly for the
transportation of building materials; a challenging driver retention and
recruiting market; and volatile fuel prices, which have worked to drive some
independent contractors out of business. During the first quarter of 2007, our
average revenue per tractor per week (excluding fuel surcharge, brokerage, and
other revenues) decreased to $2,645 from $2,816 in the first quarter of 2006.
Our operating revenue decreased $5.1 million (8.8%), to $52.6 million in the
2007 quarter from $57.7 million in the 2006 quarter, reflecting the decrease in
average revenue per tractor per week (excluding fuel surcharge, brokerage, and
other revenues) and lower weighted average tractors, which decreased 1.4% to
1,250 in the 2007 quarter from 1,268 in the 2006 quarter. Our ending fleet size
decreased to 1,235 units at March 31, 2007 compared to 1,269 units at March 31,
2006. The reduction in our fleet came predominantly from a decrease in
independent-contractors.
The main factors that impact our profitability on the expense side are the
variable costs of transporting freight for our customers. These costs include
fuel expense, driver-related expenses, such as wages, benefits, training, and
recruitment, and independent contractor costs, which are recorded under
purchased transportation. Expenses that have both fixed and variable components
include maintenance and tire expense and our total cost of insurance and claims.
These expenses generally vary with the miles we travel, but also have a
controllable component based on safety, fleet age, efficiency, and other
factors. Our main fixed costs are the acquisition and financing of long-term
assets, such as revenue equipment, and the compensation of non-driver personnel.
Effectively controlling our expenses has been a key component of our profit
improvement plan.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to revenue for the three months ended March 31, 2006 and 2007:
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2007
----- -----
Operating revenue ......................... 100.0% 100.0%
Operating expenses:
Purchased transportation ............... 35.6 33.6
Compensation and employee benefits ..... 26.2 27.0
Fuel, supplies, and maintenance ........ 22.1 23.7
Insurance and claims ................... 2.5 2.1
Taxes and licenses ..................... 1.7 1.8
General and administrative ............. 3.2 4.2
Communication and utilities ............ 0.6 0.6
Gain from disposal of assets ........... (1.0) (0.7)
Depreciation and amortization .......... 5.0 6.4
----- -----
Total operating expenses ............... 95.9 98.8
----- -----
Earnings from operations .................. 4.1 1.2
Interest expense, net ..................... (0.9) (1.4)
----- -----
Earnings (loss) before income taxes ....... 3.2 (0.2)
Income tax expense (benefit) .............. 1.4 (0.1)
----- -----
Net earnings (loss) ....................... 1.8% (0.1)%
===== =====
10
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2007 WITH THREE MONTHS ENDED MARCH
31, 2006.
Operating revenue decreased $5.1 million (8.8%) to $52.6 million in the
2007 quarter from $57.7 million in the 2006 quarter. The decrease in operating
revenue resulted from decreased average operating revenue per tractor per week
and a decrease in our weighted average tractors to 1,250 in the 2007 quarter
from 1,268 in the 2006 quarter. The components of operating revenue are as
follows:
THREE MONTHS ENDED
(Dollars in thousands) MARCH 31,
------------------
2006 2007
------- -------
Trucking revenue $46,419 $42,986
Brokerage revenue 2,661 2,050
Fuel surcharge revenue 8,197 7,064
------- -------
Total freight revenue 57,277 52,100
Other revenue 412 499
------- -------
Operating revenue $57,689 $52,599
======= =======
Average operating revenue per tractor per week decreased to $3,237 in the
2007 quarter from $3,500 in the 2006 quarter. Operating revenue includes revenue
from operating our trucks as well as other, more volatile revenue items,
including fuel surcharge, brokerage, and other revenue. We believe the analysis
of tractor productivity is more meaningful if fuel surcharge, brokerage, and
other revenue are excluded from the computation as this provides useful
information to investors regarding business trends relating to our financial
condition and results of ongoing operations. Average revenue per tractor per
week (excluding fuel surcharge, brokerage, and other revenue) decreased to
$2,645 in the 2007 quarter from $2,816 in the 2006 quarter, primarily due to
decreased freight demand which caused a reduction in weekly miles per tractor
per week to 1,687 in the 2007 quarter from 1,791 in the 2006 quarter. Revenue
per loaded mile (excluding fuel surcharge, brokerage, and other revenue)
remained constant at $1.61 in both the 2007 quarter and the 2006 quarter. Fuel
surcharge revenue decreased $1.1 million to $7.1 million in the 2007 quarter
from $8.2 million in the 2006 quarter. During the first quarter of 2007 and
2006, approximately $4.1 million and $4.7 million, respectively, of the fuel
surcharge revenue collected helped to offset our fuel costs. The remainder was
passed through to independent contractors.
Purchased transportation consists primarily of payments to independent
contractor providers of revenue equipment, expenses related to brokerage
activities, and payments under operating leases of revenue equipment. Purchased
transportation decreased $2.9 million (14.0%) to $17.7 million in the 2007
quarter from $20.6 million in the 2006 quarter. As a percentage of revenue,
purchased transportation decreased to 33.6% in the 2007 quarter from 35.6% in
the 2006 quarter. The changes reflect a decrease in the percentage of our fleet
supplied by independent contractors. The percentage of total operating revenue
provided by independent contractors decreased to 35.4% in the 2007 quarter from
37.1% in the 2006 quarter.
Compensation and employee benefits decreased $925,000 (6.1%) to $14.2
million in the 2007 quarter from $15.1 million in the 2006 quarter reflecting
lower health claims and worker's compensation expense and fewer compensable
miles per tractor per week, partially offset by increased mileage pay rates
compared to the 2006 quarter. As a percentage of revenue, compensation and
employee benefits increased to 27.0% in the 2007 quarter from 26.2% in the 2006
quarter, reflecting the factors discussed above and an increase in the
percentage of our fleet supplied by company trucks. The percentage of total
operating revenue provided by company trucks increased to 59.1% in the 2007
quarter from 56.9% in the 2006 quarter. Our ratio of tractors to non-driver
employees, a key measure of administrative efficiency, decreased to 5.06 during
the 2007 quarter compared to 5.13 in the 2006 quarter. The market for recruiting
drivers continues to be challenging. Driver pay has not been increased since
April 2006. Increases may be necessary to continue to recruit and retain
qualified drivers. Future increases in driver pay will negatively impact our
results of operations to the extent that corresponding freight rate increases
are not obtained.
Fuel, supplies, and maintenance decreased $301,000 (2.4%) to $12.5 million
in the 2007 quarter from $12.8 million in the 2006 quarter. As a percentage of
revenue, fuel, supplies, and maintenance increased to 23.7% of revenue in the
2007 quarter compared with 22.1% in the 2006 quarter. This reflects higher fuel
prices and an increase in the percentage of our fleet supplied by company trucks
as previously discussed. As expected, maintenance costs have decreased as we
continue to update our fleet with new equipment. Fuel prices increased
approximately 1.6% to an average of $2.43 per gallon in the 2007 quarter from
$2.39 per gallon in the 2006 quarter. Despite the increase in fuel prices, our
fuel surcharge revenue per gallon decreased $0.10 due to soft freight demand.
The resulting $0.14 increase in net fuel price per gallon negatively impacted on
our fuel, supplies, and maintenance expense by $615,000.
11
Insurance and claims decreased $313,000 (21.8%) to $1.1 million in the 2007
quarter from $1.4 million in the 2006 quarter. As a percentage of revenue,
insurance and claims decreased to 2.1% of revenue in the 2007 quarter compared
with 2.5% in the 2006 quarter. This reflects an increase in auto liability
claims, partially offset by a reduction in both primary and excess insurance
premiums, as well as lower physical damage and cargo claims. The insurance
policies are expected to be renewed on July 1, 2007 with no material change in
coverage.
Taxes and licenses increased $5,000 (0.5%) to $959,000 in the 2007 quarter
from $954,000 in the 2006 quarter As a percentage of revenue, taxes and licenses
increased to 1.8% of revenue in the 2007 quarter compared with 1.7% of revenue
in the 2006 quarter.
General and administrative expenses increased $351,000 (18.8%) to $2.2
million in the 2007 quarter from $1.9 million in the 2006 quarter, reflecting
increases in advertising and driver orientation expenses related to driver
recruiting. As a percentage of revenue, general and administrative expenses
increased to 4.2% of revenue in the 2007 quarter compared with 3.2% of revenue
in the 2006 quarter, reflecting the items noted above.
Communications and utilities decreased $14,000 (4.1%) to $330,000 in the
2007 quarter from $344,000 in the 2006 quarter. As a percentage of revenue,
communications and utilities remained constant at 0.6% of revenue in the 2007
and 2006 quarters.
Gains on the disposal of assets decreased $184,000 (32.7%) to $378,000 in
the 2007 quarter from $562,000 in the 2006 quarter, primarily due to the nature
of the assets being disposed. As a percentage of revenue, gains on the disposal
of assets decreased to 0.7% of revenue in the 2006 quarter compared to 1.0% of
revenue in the 2005 quarter.
Depreciation and amortization increased $511,000 (17.8%) to $3.4 million in
the 2007 quarter from $2.9 million in the 2006 quarter reflecting the
acquisition of new tractors and trailers to replace older equipment which in
many cases was no longer being depreciated. As a percentage of revenue,
depreciation and amortization increased to 6.4% of revenue in the 2007 quarter
compared with 5.0% in the 2006 quarter reflecting the changes described above.
As we continue to upgrade our equipment fleet, we expect depreciation expense to
increase.
Interest expense, net of interest income, increased $278,000 (57.6%) to
$761,000 in the 2007 quarter from $483,000 in the 2006 quarter. This increase
was attributable to higher average debt outstanding and higher interest rates.
As a percentage of revenue, interest expense, net, increased to 1.4% of revenue
in the 2007 quarter from 0.9% of revenue in the 2006 quarter.
As a result of the foregoing, our pre-tax margin decreased to (0.2%) in the
2007 quarter from 3.2% in the 2006 quarter.
Our income tax benefit in the 2007 quarter was $62,000, or 49.6% of loss
before income taxes. Our income tax expense in the 2006 quarter was $824,000, or
44.1% of earnings before income taxes. In both quarters, the effective tax rate
was different from the expected combined tax rate for a company headquartered in
Iowa because a portion of the cost of driver per diem expense is not deductible.
The impact of paying per diem travel expenses varies depending upon the ratio of
drivers to independent contractors and the level of our pre-tax earnings or
loss.
As a result of the factors described above, net loss was $63,000 in the
2007 quarter (0.1% of revenue), compared with net earnings of $1.0 million in
the 2006 quarter (1.8% of revenue). In addition, our operating ratio (operating
expenses as a percentage of operating revenue) was 98.8% during the 2007 quarter
as compared with 95.9% during the 2007 quarter. Our adjusted operating ratio
(operating expenses minus fuel surcharge revenue as a percentage of operating
revenue excluding fuel surcharge revenue) was 98.6% during the 2007 quarter as
compared with 95.3% during the 2006 quarter.
12
LIQUIDITY AND CAPITAL RESOURCES
USES AND SOURCES OF CASH
We require cash to fund working capital requirements and to service our
debt. We have historically financed acquisitions of new equipment with
borrowings under installment notes payable to commercial lending institutions
and equipment manufacturers, borrowings under lines of credit, cash flow from
operations, and equipment leases from third-party lessors. We also have obtained
a portion of our revenue equipment fleet from independent contractors who own
and operate the equipment, which reduces overall capital expenditure
requirements compared with providing a fleet of entirely company-owned
equipment.
Our primary sources of liquidity have been funds provided by operations and
borrowings under credit arrangements with commercial lending institutions and
equipment manufacturers. At March 31, 2007, we had $238,000 in cash and adequate
borrowing availability on our line of credit to finance any near-term needs for
working capital. During the first three months of 2007, we purchased 105 new
tractors and 175 new trailers for $13.3 million, which was financed, in part,
with $12.5 million of new long term debt. We plan to purchase approximately 45
new tractors and 225 new trailers throughout the remainder of 2007, allowing for
the replacement of older, high mileage tractors and trailers.
At March 31, 2007, we had positive working capital of $5.0 million compared
to positive working capital of $4.3 million at March 31, 2006. Working capital,
defined as current assets minus current liabilities, is not always fully
representative of our liquidity position because cash and trade receivables
account for a large portion of our current assets. Our trade accounts receivable
are generally collected within 31 days. Alternatively, current maturities of
long term debt, a large portion of our current liabilities, are paid over one
year.
Our ability to fund cash requirements in future periods will depend on our
ability to comply with covenants contained in financing arrangements and the
availability of other financing options, as well as our financial condition and
results of operations. Our financial condition and results of operations will
depend on insurance and claims experience, general shipping demand by our
customers, fuel prices, the availability of drivers and independent contractors,
and other factors.
Although there can be no assurance, we believe that cash generated by
operations and available sources of financing for acquisitions of revenue
equipment will be adequate to meet our currently anticipated working capital
requirements and other cash needs through March 2008. We will require additional
sources of financing over the long-term to upgrade our tractor and trailer
fleets. To the extent that actual results or events differ from our financial
projections or business plans, our liquidity may be adversely affected and we
may be unable to meet our financial covenants. Specifically, our short- and
long-term liquidity may be adversely affected by one or more of the following
factors: costs associated with insurance and claims; weak freight demand or a
loss in customer relationships or volume; the impact of new hours-of-service
regulations on asset productivity; the impact of stricter emissions standards;
the ability to attract and retain sufficient numbers of qualified drivers and
independent contractors; elevated fuel prices and the ability to collect fuel
surcharges; inability to maintain compliance with, or negotiate amendments to,
loan covenants; the ability to finance the tractors and trailers delivered and
scheduled for delivery; and the possibility of shortened payment terms by our
suppliers and vendors worried about our ability to meet payment obligations.
Based upon our profitability, anticipated future cash flows, current
availability under the financing arrangement with LaSalle Bank, and sources of
equipment financing that are available, we do not expect to experience
significant liquidity constraints in the foreseeable future. To the extent that
actual results or events differ from our financial projections or business
plans, our liquidity may be adversely affected and we may be unable to meet our
financial covenants. In such event, we believe we could renegotiate the terms of
our debt or that alternative financing would be available, although this cannot
be assured.
Net cash used by operating activities was $1.3 million for the three months
ended March 31, 2007, compared to net cash provided of $3.1 million for the
three months ended March 31, 2006. Historically, our principal use of cash
generated from operations is to service debt and to internally finance
acquisitions of revenue equipment. Total receivables increased $4.2 million for
the three months ended March 31, 2007. The average age of our trade accounts
receivable remained constant at 30.9 days in the 2007 and 2006 period.
Net cash used in investing activities was $537,000 for the three months
ended March 31, 2007. This related primarily to the use of cash to purchase
property and equipment offset by proceeds from the sale of revenue equipment.
Net cash provided by financing activities was $70,000 for the three months
ended March 31, 2007, consisting of
13
borrowing on our line of credit offset by net payments of principal under our
long-term debt agreements.
We have a financing arrangement with LaSalle Bank, which expires on October
31, 2010, and provides for automatic month-to-month renewals under certain
conditions after that date. LaSalle Bank may terminate the arrangement prior to
October 31, 2010, in the event of default, and may terminate at the end of any
renewal term. The agreement provides for a revolving line of credit which allows
for borrowings at up to 85% of eligible receivables. At March 31, 2007, there
was $2.6 million owed under our revolving line of credit.
The LaSalle Bank financing arrangement also includes financing for letters
of credit. At March 31, 2007, we had outstanding letters of credit totaling $8.5
million for self-insured amounts under our insurance programs. We are required
to pay an annual fee of 1.25% of the outstanding letters of credit. These
letters of credit directly reduce the amount of potential borrowings available
under the financing arrangement discussed above. Any increase in self-insured
retention, as well as increases in claim reserves, may require additional
letters of credit to be posted, which would negatively affect our liquidity.
The combination of borrowings under the line of credit and outstanding
letters of credit with LaSalle Bank cannot exceed the lower of $15 million or a
specified borrowing base, which at March 31, 2007 was $15.0 million, leaving
$3.9 million in remaining availability at such date. We are required to pay a
facility fee on the LaSalle Bank financing arrangement of .25% of the unused
loan limit. Borrowings under the arrangement are secured by accounts receivable.
The interest rate on outstanding borrowings under the arrangement is equal to a
spread on LaSalle Bank's prime rate or LIBOR, at our option. The spread is
determined by our ratio of funded debt to earnings before interest, taxes,
depreciation, amortization and rent, or EBITDAR, as defined under the agreement.
At March 31, 2007 the applicable interest rate under the arrangement was equal
to the prime rate minus 50 basis points.
The LaSalle Bank financing arrangement requires compliance with certain
financial covenants, including compliance with a minimum tangible net worth,
debt to EBITDAR, and a fixed charge coverage ratio. We were in compliance with
these requirements at March 31, 2007. We believe we will maintain compliance
with all covenants throughout 2007, although there can be no assurance that the
required financial performance will be achieved. In addition, equipment
financing provided by a manufacturer contains a minimum tangible net worth
requirement. We were in compliance with the required minimum tangible net worth
requirement at March 31, 2007 and we expect to remain in compliance for the
foreseeable future. If we fail to maintain compliance with these financial
covenants, or to obtain a waiver of any noncompliance, the lenders will have the
right to declare all sums immediately due and pursue other remedies. In this
event, we believe we could renegotiate the terms of our debt or that alternative
financing would be available, although this cannot be assured. As of the filing
date, we were in compliance with all financial covenants.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following tables set forth our contractual obligations and other
commercial commitments as of March 31, 2007:
PAYMENTS (IN THOUSANDS) DUE BY PERIOD
-----------------------------------------------------
Less than After
Contractual Obligations Total One year 1-3 years 3-5 years 5 years
- ----------------------- ------- --------- --------- --------- -------
Long-term debt $48,286 $11,321 $23,539 $12,920 $506
Line of credit 2,600 -- -- 2,600 --
Operating lease obligations 3,164 1,940 1,185 39 --
Purchase obligations 5,452 5,452 -- -- --
------- ------- ------- ------- ----
Total $59,502 $18,713 $24,724 $15,559 $506
======= ======= ======= ======= ====
We cannot reasonably estimate when the unrecognized tax benefits will be
realized. In our normal course of business we place orders with equipment
manufacturers for future delivery of new tractors and trailers. The orders for
trailers can be cancelled at any time without penalty prior to taking delivery.
The orders for tractors can be cancelled without penalty at any time up to 60
days prior to production of the tractor. If the termination occurs less than 60
days, but more than 45 days prior to production, we retain the right to cancel
subject to a per truck penalty of $500. Orders generally cannot be cancelled
within 45 days prior to production. At March 31, 2007, we had commercial
commitments
14
of approximately $5.5 million, related to tractor and trailer orders that cannot
be cancelled. Financing for these commitments has been prearranged.
Approximately 11% of our long-term debt carries a variable interest rate making
reliable estimates of future interest payments difficult. Using our weighted
average interest rate of 6.59% as of March 31, 2007, the following approximately
represents our expected obligations for future interest payments:
PAYMENTS (IN THOUSANDS) DUE BY PERIOD
-----------------------------------------------------
Less than After
Total One year 1-3 years 3-5 years 5 years
------- --------- --------- --------- -------
Total interest payments $6,878 $ 2,809 $ 3,297 $ 755 $ 17
====== ======= ======= ======= ====
We had no other commercial commitments at March 31, 2007.
OFF-BALANCE SHEET ARRANGEMENTS
Our liquidity is not materially affected by off-balance sheet transactions.
As of March 31, 2007, our fleet included 126 tractors and 11 trailers obtained
under operating leases. The lease payments for these tractors and trailers
increase equipment rent expense, a component of purchased transportation
expense, rather than depreciation and interest expense. These obligations are
included in our schedule of contractual obligations, and exclude potential
Terminal Remainder Adjustment Clause (TRAC) payments or refunds on 116 tractors
amounting to 40% of the original purchase price due at the end of the original
48 month term of the lease. After 48 months, we expect the residual value of the
tractors to be greater than 40% of the original cost, allowing us to return the
tractors without penalty.
15
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires us to make decisions based upon
estimates, assumptions, and factors we consider as relevant to the
circumstances. Such decisions include the selection of applicable accounting
principles and the use of judgment in their application, the results of which
impact reported amounts and disclosures. Changes in future economic conditions
or other business circumstances may affect the outcomes of our estimates and
assumptions. Accordingly, actual results could differ from those anticipated. A
summary of the significant accounting policies followed in preparation of the
financial statements included in this Form 10-Q is contained in Note 1 of the
consolidated financial statements included in our Form 10-K for the year ended
December 31, 2006. Other footnotes in the Form 10-K describe various elements of
the financial statements included in this Form 10-Q and the assumptions on which
specific amounts were determined.
Our critical accounting policies include the following:
REVENUE RECOGNITION
We generally recognize operating revenue when the freight to be transported
has been loaded. We operate primarily in the short-to-medium length haul
category of the trucking industry; therefore, our typical customer delivery is
completed one day after pickup. Accordingly, this method of revenue recognition
is not materially different from recognizing revenue based on completion of
delivery. We recognize operating revenue when the freight is delivered for
longer haul loads where delivery is completed more than one day after pickup.
Amounts payable to independent contractors for purchased transportation, to
company drivers for wages, and other direct expenses are accrued when the
related revenue is recognized.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided by
use of the straight-line and declining-balance methods over lives of 5 to 39
years for buildings and improvements, 5 years for tractors, 7 years for
trailers, and 3 to 10 years for other equipment. Tires purchased as part of
revenue equipment are capitalized as a cost of the equipment. Replacement tires
are expensed when placed in service. Expenditures for maintenance and minor
repairs are charged to operations, and expenditures for major replacements and
betterments are capitalized. The cost and related accumulated depreciation on
property and equipment retired, traded, or sold are eliminated from the property
accounts at the time of retirement, trade, or sale. The gain or loss on
retirement or sale is recognized in accordance with Statement of Financial
Accounting Standards No. 153, "Exchange of Nonmonetary Assets."
ESTIMATED LIABILITY FOR INSURANCE CLAIMS
Losses resulting from auto liability, physical damage, workers'
compensation, and cargo loss and damage are covered by insurance subject to
certain self-retention levels. Losses resulting from uninsured claims are
recognized when such losses are incurred. We estimate and accrue a liability for
our share of ultimate settlements using all available information. We accrue for
claims reported, as well as for claims incurred but not reported, based upon our
past experience. Expenses depend on actual loss experience and changes in
estimates of settlement amounts for open claims that have not been fully
resolved. However, final settlement of these claims could differ materially from
the amounts we have accrued at year-end. Our judgment concerning the ultimate
cost of claims and modification of initial reserved amounts is an important part
of establishing claims reserves, and is of increasing significance with higher
self-insured retention and lack of excess coverage.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net undiscounted cash
flows expected to be generated by the asset. Our judgment concerning future cash
flows is an important part of this determination. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less the costs to sell.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of market risks, most importantly the effects
of the price and availability of diesel fuel and changes in interest rates.
COMMODITY PRICE RISK
Our operations are heavily dependent upon the use of diesel fuel. The price
and availability of diesel fuel can vary and are subject to political, economic,
and market factors that are beyond our control. Significant increases in diesel
fuel prices could materially and adversely affect our results of operations and
financial condition.
We presently use fuel surcharges to address the risk of increasing fuel
prices. We believe these fuel surcharges are an effective means of mitigating
the risk of increasing fuel prices, although the competitive nature of our
industry prevents us from recovering the full amount of fuel price increases
through the use of these surcharges.
In the past, we have used derivative instruments, including heating oil
price swap agreements, to reduce a portion of our exposure to fuel price
fluctuations. Since 2000, we have had no such agreements in place. We do not
trade in these derivatives with the objective of earning financial gains on
price fluctuations.
INTEREST RATE RISK
We also are exposed to market risks from changes in certain interest rates
on our debt. Our financing arrangement with LaSalle Bank carries a variable
interest rate equal to a spread on LaSalle's prime rate or LIBOR, at our option.
The spread is determined by our ratio of funded debt to EBITDAR, as defined
under the agreement. In addition, approximately $5.4 million of our other debt
carries variable interest rates. This variable interest exposes us to the risk
that interest rates may rise. Assuming borrowing levels at March 31, 2007, a
one-point increase in the prime rate would increase interest expense by
approximately $54,000. The remainder of our other debt carries fixed interest
rates. At March 31, 2007, approximately 11% of our debt carried a variable
interest rate and the remainder was fixed.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we have carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report.
This evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial
Officer. Based upon that evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of March 31, 2007. During our first fiscal quarter, there were no
changes in our internal control over financial reporting that have materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting. We intend to periodically evaluate our
disclosure controls and procedures as required by the Exchange Act rules.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include
controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding
disclosures.
We have confidence in our disclosure controls and procedures and internal
controls and procedures. Nevertheless, our management, including our Chief
Executive Officer and our Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal controls will prevent all
errors or intentional fraud. A disclosure control system and an internal control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of these controls are met. Further,
the design of these control systems must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our company have been detected.
17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------
2 Agreement and Plan of Merger, dated as of March 22, 2007, among
Smithway Motor Xpress Corp., Western Express, Inc., and Western
Express Acquisition Corporation (1)
3.1 Articles of Incorporation (2)
3.2 Bylaws of Smithway Motor Xpress Corp. (as amended and restated
November 3, 2006) (3)
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, by G. Larry Owens,
the Registrant's principal executive officer *
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, by Douglas C.
Sandvig, the Registrant's principal financial officer *
- ----------
(1) Incorporated by reference to exhibit 2.1 to our Current Report on Form 8-K
dated March 22, 2007. Commission File No. 000-20793, filed March 23, 2007.
(2) Incorporated by reference to the same numbered exhibit to our Registration
Statement on Form S-1, Registration No. 33-90356, effective June 27, 1996.
(3) Incorporated by reference to Exhibit 3 to our Current Report on Form 8-K
dated and filed November 3, 2006 (SEC File No. 000-20793).
* Filed herewith.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SMITHWAY MOTOR XPRESS CORP.
Date: May 15, 2007 By: /s/ Douglas C. Sandvig
------------------------------------
Douglas C. Sandvig
Senior Vice President, Treasurer and
Chief Financial Officer
(On behalf of the registrant and as
the registrant's principal financial
and accounting officer)
19
EXHIBIT INDEX
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------- ---------------------------------------------------------- ------------
2 Agreement and Plan of Merger, dated as of March 22, 2007, Incorporated
among Smithway Motor Xpress Corp., Western Express, Inc., by reference
and Western Express Acquisition Corporation
3.1 Articles of Incorporation Incorporated
by reference
3.2 Bylaws of Smithway Motor Xpress Corp. (as amended and Incorporated
restated November 3, 2006) by reference
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Filed
Officer herewith
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Filed
Officer herewith
32.1 Certification pursuant to 18 U.S.C. Section 1350, as Filed
adopted pursuant to Section 906 of the Sarbanes-Oxley Act herewith
of 2002, by G. Larry Owens, the Registrant's principal
executive officer
32.2 Certification pursuant to 18 U.S.C. Section 1350, as Filed
adopted pursuant to Section 906 of the Sarbanes-Oxley Act herewith
of 2002, by Douglas C. Sandvig, the Registrant's principal
financial officer