SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
--------------------------------------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-20793
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 identification number)
incorporation or organization)
2031 Quail Avenue
Fort Dodge, Iowa 50501
(515) 576-7418
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
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 the filing
requirements for at least the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (August 8, 1997).
Class A Common Stock, $.01 par value: 3,999,857 shares
Class B Common Stock, $.01 par value: 1,000,000 shares
Exhibit Index is on Page 15.
Page 1 of 18
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
Item 1. Financial Statements..................................... 3
Condensed Consolidated Balance Sheets as of
December 31, 1996 and June 30, 1997 (unaudited)........ 3
Condensed Consolidated Statements of Earnings for the
three and six months ended June 30, 1996 and 1997
(unaudited).......................................... 5
Condensed Consolidated Statements of Stockholders'
Equity for the year ended December 31, 1996, and the
six months ended June 30, 1997(unaudited)............. 6
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1997 (unaudited)... 7
Notes to Condensed Consolidated Financial Statements
(unaudited)........................................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings........................................ 15
Item 2. Changes in Securities.................................... 15
Item 3. Defaults Upon Senior Securities.......................... 15
Item 4. Submission of Matters to a Vote of Security Holders...... 15
Item 5. Other Information........................................ 15
Item 6. Exhibits and Reports on Form 8-K......................... 15
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements in paragraphs that are marked
with an asterisk. Statements by the Company in press releases, public filings,
and stockholder reports, as well as oral public statements by Company
representatives, also may contain certain forward-looking information. Forward-
looking information is subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected. Without
limitation, these risks and uncertainties include economic factors such as
recessions, downturns in customers' business cycles, surplus inventories,
inflation, higher interest rates, and fuel price increases; the resale value of
the Company's used revenue equipment; the availability and compensation of
qualified drivers and owner-operators; competition from trucking, rail, and
intermodal competitors; and the availability of desirable target companies and
financing for acquisitions. Readers should review and consider the various
disclosures made by the Company in its press releases, stockholder reports, and
public filings, as well as the factors explained in greater detail in the
Company's annual report on Form 10-K.
Page 2 of 18
PART I
FINANCIAL INFORMATION
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, June 30,
1996 1997
--------------- --------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents............$ 940 $ 447
Receivables:
Trade.............................. 9,676 12,695
Other.............................. 985 1,111
Recoverable income taxes........... 211 -
Inventories............................ 713 770
Deposits, primarily with insurers...... 921 918
Prepaid expenses....................... 846 1,298
Deferred income taxes.................. 282 282
--------------- --------------
Total current assets........... 14,574 17,521
--------------- --------------
Property and equipment:
Land................................. 531 531
Buildings and improvements........... 4,375 4,624
Tractors............................. 28,245 31,474
Trailers............................. 19,514 24,056
Other equipment...................... 3,543 3,880
--------------- --------------
56,208 64,565
Less accumulated depreciation........ 17,038 20,892
--------------- --------------
Net property and equipment..... 39,170 43,673
--------------- --------------
Other assets........................... 1,586 1,750
--------------- --------------
$ 55,330 $ 62,944
=============== ==============
Page 3 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, June 30,
1996 1997
--------------- --------------
(unaudited)
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit.........................$ 4,490 $ 2,351
Current maturities of long-term debt... 3,260 4,857
Accounts payable....................... 2,211 2,383
Accrued loss reserves.................. 1,267 1,177
Other accrued expenses................. 1,453 1,184
Income taxes payable................... - 517
--------------- --------------
Total current liabilities........ 12,681 12,469
Long-term debt, less current maturities.. 12,644 17,082
Deferred income taxes.................... 5,812 6,713
--------------- --------------
Total liabilities................ 31,137 36,264
--------------- --------------
Stockholders' equity:
Preferred stock........................ - -
Common stock:
Class A.............................. 40 40
Class B.............................. 10 10
Additional paid-in capital............. 11,104 11,104
Retained earnings...................... 13,116 15,603
Reacquired shares, at cost............. (77) (77)
--------------- --------------
Total stockholders' equity....... 24,193 26,680
--------------- --------------
$ 55,330 $ 62,944
=============== ==============
Page 4 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1996 1997 1996 1997
----------- ----------- ---------- -----------
Operating revenue:
Freight.......................................$ 23,212 $ 30,391 $ 43,048 $ 56,990
Other......................................... 199 223 225 532
----------- ----------- ---------- -----------
Operating revenue....................... 23,411 30,614 43,273 57,522
----------- ----------- ---------- -----------
Operating expenses:
Purchased transportation...................... 9,406 11,769 17,198 22,306
Compensation and employee benefits............ 5,035 6,813 9,613 12,867
Fuel, supplies, and maintenance............... 2,870 4,053 5,669 7,886
Insurance and claims.......................... 402 542 771 1,007
Taxes and licenses............................ 401 554 794 1,082
General and administrative.................... 1,005 1,422 1,914 2,692
Communication and utilities................... 262 331 481 694
Depreciation and amortization................. 1,506 2,023 3,011 3,926
----------- ----------- ---------- -----------
Total operating expenses................ 20,887 27,507 39,451 52,460
----------- ----------- ---------- -----------
Earnings from operations................ 2,524 3,107 3,822 5,062
Interest expense (net)........................ (552) (457) (967) (773)
----------- ----------- ---------- -----------
Earnings before income taxes............ 1,972 2,650 2,855 4,289
Income taxes.................................. (818) (1,114) (1,187) (1,802)
----------- ----------- ---------- -----------
Net earnings............................$ 1,154 $ 1,536 $ 1,668 $ 2,487
=========== =========== ========== ===========
Net earnings per common share...................$ 0.33 $ 0.31 $ 0.48 $ 0.50
=========== =========== ========== ===========
Weighted average common shares outstanding...... 3,499,293 5,002,706 3,500,487 5,001,292
=========== =========== ========== ===========
Page 5 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Equity
reduction
Additional for Total
Common paid-in Retained Reacquired ESOP stockholders'
stock capital earnings shares debt equity
---------- --------- --------- --------- -------- -----------
Balance at December 31, 1995.... 28 - 8,138 (52) (243) 7,871
Net earnings.................... - - 3,950 - - 3,950
Reduction of ESOP debt.......... - - - - 243 243
Acquisition of common shares.... - - - (25) - (25)
Shares sold for cash, net of
cost issuance of.............. 15 10,727 - - - 10,742
Change in value and number of
redeemable common shares...... 7 377 1,028 - - 1,412
---------- --------- --------- --------- -------- -----------
Balance at December 31, 1996.... 50 11,104 13,116 (77) - 24,193
Net earnings.................... - - 2,487 - - 2,487
---------- --------- --------- --------- -------- -----------
Balance at June 30, 1997........ $ 50 $ 11,104 $ 15,603 $ (77)$ - $ 26,680
========== ========= ========= ========= ======== ===========
Page 6 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
------------------------
1996 1997
------------ -----------
Cash flows from operating activities:
Net earnings.................................... $ 1,668 $ 2,487
------------ -----------
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................. 3,011 3,926
Deferred income taxes......................... 460 901
Changes in:
Trade receivables........................... (2,488) (3,019)
Other receivables........................... (115) (126)
Inventories................................. - (57)
Deposits, primarily with insurers........... 70 3
Prepaid expenses............................ (153) (452)
Accounts payable............................ (184) 303
Accrued loss reserves....................... 29 (90)
Other accrued expenses...................... (193) (269)
Income taxes................................ 601 728
------------ -----------
Total adjustments..................... 1,038 1,848
------------ -----------
Net cash provided by operating activities. 2,706 4,335
Cash flows from investing activities:
Purchase of property and equipment.............. (1,737) (2,204)
Borrowings on the sale of property and equipment - 3,040
Change in other assets.......................... (134) (237)
Purchase of short-term investments.............. (300) -
Proceeds from short-term investments............ 500 -
------------ -----------
Net cash (used in) provided by investing
activities................................ (1,671) 599
Cash flows from financing activities:
Proceeds from long-term debt..................... - 3,000
Principal payments on long-term debt............. (2,862) (6,258)
Borrowings on line of credit agreement........... 41,347 67,938
Payments on line of credit agreement............. (41,347) (70,107)
Payments for reacquired shares................... (26) -
Other............................................ (230) -
------------ -----------
Net cash used in financing activities.... (3,118) (5,427)
------------ -----------
Net decrease in cash and cash equivalents.. (2,083) (493)
Cash and cash equivalents at beginning of period... 2,976 940
------------ -----------
Cash and cash equivalents at end of period.........$ 893 447
============ ===========
Page 7 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
(Dollars in thousands)
Six months ended
June 30,
------------------------
1996 1997
---------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest................................... $ 1,030 $ 775
Income taxes............................... 121 2
Supplemental schedules of noncash investing
and financing activities:
Notes payable:
Tractors and trailers........................ 7,129 9,193
Tires on above:
Prepaid at end of period................... 27 91
Expensed................................... 232 116
Principal payments made by ESOP.................. 28 -
Page 8 of 18
See accompanying notes to condensed consolidated financial statements.
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 wholly owned subsidiary, Smithway Motor
Xpress, Inc. Unless otherwise indicated, the companies named in
this paragraph are collectively referred to as the "Company." All
significant intercompany balances and transactions have been
eliminated in consolidation.
The condensed consolidated financial statements have been
prepared, without audit, in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of
management, the accompanying condensed consolidated financial
statements include all adjustments which 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. Results of
operations in interim periods are not necessarily indicative of
results to be expected for a full year.
Note 2. Initial Public Offering
On July 2, 1996, the Company sold 1,500,000 shares of its
Class A common stock in an initial public offering (the "IPO").
The shares were sold at $8.50 per share for a total consideration
of $12,750,000, before underwriting discounts and offering
expenses. In addition, certain stockholders sold 650,000 shares
in the IPO.
The Company's proceeds of approximately $10.7 million, net
of underwriting discounts and offering expenses, were used to
repay the Company's line of credit and reduce long-term debt.
Page 9 of 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's fiscal year ends on December 31 of each year. Thus, this
report discusses the second quarter and first six months of the Company's 1996
and 1997 fiscal years, respectively. The Company closed its initial public
offering of 2,150,000 shares of Class A Common Stock on July 2, 1996, 1,500,000
shares of Class A Common Stock being sold by the Company and 650,0000 being sold
by certain stockholders.
Results of Operations
The following table sets forth the percentage relationship of certain items
to operating revenue for the three and six months ended June 30, 1996 and 1997:
Three Months Ended Six Months Ended
June 30, June 30,
1996 1997 1996 1997
----------- ----------- ---------- -----------
Operating revenue................ 100.0% 100.0% 100.0% 100.0%
Purchased transportation....... 40.2 38.4 39.7 38.8
Compensation and employee
benefits.................... 21.5 22.3 22.2 22.4
Fuel, supplies, and maintenance 12.3 13.2 13.1 13.7
Insurance and claims........... 1.7 1.8 1.8 1.8
Taxes and licenses............. 1.7 1.8 1.8 1.9
General and administrative..... 4.3 4.6 4.4 4.7
Communications and utilities... 1.1 1.1 1.1 1.2
Depreciation and amortization 6.4 6.6 7.0 6.8
----------- ----------- ---------- -----------
Total operating expenses. 89.2 89.9 91.2 91.2
----------- ----------- ---------- -----------
Earnings from operations......... 10.8 10.1 8.8 8.8
Interest expense (net)........... (2.4) (1.5) (2.2) (1.3)
----------- ----------- ---------- -----------
Earnings before income taxes..... 8.4 8.7 6.6 7.5
Income taxes..................... (3.5) (3.6) (2.7) (3.1)
----------- ----------- ---------- -----------
Net earnings..................... 4.9% 5.0% 3.9% 4.3%
=========== =========== ========== ===========
Comparison of three months ended June 30, 1997, with three months ended
June 30, 1996
Operating revenue increased $7.2 million (30.8%) to $30.6 million during
the 1997 quarter from $23.4 million during the 1996 quarter. The increase was
attributable to a 20.1% increase in weighted average tractors, to 878 during the
1997 quarter from 731 during the 1996 quarter and a 12.3% increase in revenue
equipment utilization as the average billed miles per tractor per week increased
to 1827 in the 1997 quarter from 1627 in the 1996 quarter. These factors were
offset by a decrease in revenue per loaded mile to $1.36 in the 1997 quarter
from $1.38 in the 1996 quarter (excluding a fuel surcharge of approximately $.01
per mile in both quarters). Revenue per tractor per week improved 8.8%, to
$2,473 in the 1997 quarter from $2,274 in the 1996 quarter.
Purchased transportation increased $2.4 million (25.1%) to $11.8 million in
the 1997 quarter from $9.4 million in the 1996 quarter as the Company's business
expanded and the Company contracted with more independent contractor providers
of revenue equipment. As a percentage of revenue, purchased transportation
decreased to 38.4% of revenue in the 1997 quarter from 40.2% in the 1996 quarter
as
Page 10 of 18
brokerage revenue comprised a smaller portion of the Company's overall revenue,
reducing the corresponding expense.
Compensation and employee benefits increased $1.8 million (35.3%) to
$6.8 million in the 1997 quarter from $5.0 million in the 1996 quarter. As a
percentage of revenue, compensation and employee benefits increased to 22.3% of
revenue in the 1997 quarter from 21.5% in the 1996 quarter as a result of
increased wages resulting from the Marquardt Transportation, Inc. acquisition
during the fourth quarter of 1996 and an increased number of Company driver
trainees.
Fuel, supplies, and maintenance increased $1.2 million (41.2%) to
$4.0 million in the 1997 quarter from $2.9 million in the 1996 quarter. As a
percentage of revenue, fuel, supplies, and maintenance increased to 13.2% of
revenue for the 1997 quarter compared with 12.3% for the 1996 quarter as a
result of higher average fuel prices of $1.18 in the 1997 quarter compared with
$1.15 in the 1996 quarter. Due to a decrease in fuel costs in the third quarter
of 1997 it is unlikely the Company will be able to continue to implement fuel
surcharges and has already seen a reduction in the number of customers accepting
surcharges and the amount of such surcharges. The Company expects that lower
fuel prices will largely offset decreased surcharges revenue.(*)
Insurance and claims increased $140,000 (34.8%) to $542,000 in the 1997
quarter from $402,000 in the 1996 quarter. As a percentage of revenue, insurance
and claims remained essentially constant at 1.8% of revenue in the 1997 quarter
and 1.7% in the 1996 quarter.
Taxes and licenses increased $153,000 (38.2%) to $554,000 in the 1997
quarter from $401,000 in the 1996 quarter. As a percentage of revenue, taxes and
licenses remained relatively constant at 1.8% of revenue in the 1997 quarter
compared with 1.7% in the 1996 quarter.
General and administrative expenses increased $417,000 (41.5%) to
$1.4 million in the 1997 quarter from $1.0 million in the 1996 quarter. As a
percentage of revenue, general and administrative expenses increased to 4.6% for
the 1997 quarter from 4.3% for the 1996 quarter, principally as a result of
advertising, agent commissions, professional fees, and fees incurred for the
transfer of the Company's 401(k) plan to a new administrator.
Communications and utilities increased $69,000 (26.3%) to $331,000 in the
1997 quarter from $262,000 in the 1996 quarter. As a percentage of revenue,
communications and utilities remained constant at 1.1% of revenue in both
quarters.
Depreciation and amortization increased $517,000 (34.3%) to $2.0 million in
the 1997 quarter from $1.5 million in the 1996 quarter. As a percentage of
revenue, depreciation and amortization increased slightly to 6.6% of revenue in
the 1997 quarter from 6.4% in the 1996 quarter. The higher cost of a newer
tractor fleet and the installation of satellite-based tracking and communication
units more than offset higher revenue per tractor per week.
As a result of the foregoing, the Company's operating ratio increased to
89.9% during the 1997 quarter from 89.2% during the 1996 quarter.
Interest expense (net) decreased $95,000 (20.8%) to $457,000 in the 1997
quarter from $552,000 in the 1996 quarter. As a percentage of revenue, interest
expense (net) decreased to 1.5% of revenue in the 1997 quarter from 2.4% in the
1996 quarter, due to lower average debt balances ($25.1 million in the
- --------
(*) May contain "forward-looking" statements.
Page 11 of 18
1997 quarter compared with $27.7 million in the 1996 quarter) attributable
to reducing debt with the approximately $10.7 million net proceeds of the
Company's initial public offering and lower average interest rates.
The Company's effective tax rate was 42.0% in the 1997 quarter (3.6% of
revenue) compared with 41.5% in the 1996 quarter (3.5% of revenue) in each case
including the cost of nondeductible driver per diem expense absorbed by the
Company.
Primarily as a result of the factors described above, net earnings
increased $382,000 (33.1%) to $1.5 million (5.0% of revenue) in the 1997 quarter
from $1.2 million (4.9% of revenue) in the 1996 quarter.
Comparison of six months ended June 30, 1997, with six months ended
June 30, 1996.
Operating revenue increased $14.2 million (32.9%) to $57.5 million during
the 1997 period from $43.3 million during the 1996 period. The revenue increase
resulted primarily from a 20.5% increase in weighted average tractors to 876
during the 1997 period from 727 during the 1996 period and a 12.2% increase in
revenue equipment utilization as the average billed miles per tractor per week
increased to 1724 in the 1997 period from 1537 in the 1996 period, which more
than offset a decrease in revenue per loaded mile to $1.36 in the 1997 period
from $1.37 in the 1996 period (excluding a fuel surcharge of approximately $.01
per mile in both periods). Revenue per tractor per week improved 5.9%, to $2,328
in the 1997 period from $2,198 in the 1996 period.
Purchased transportation increased $5.1 million (29.7%) to $22.3 million in
the 1997 period from $17.2 million in the 1996 period. As a percentage of
revenue, purchased transportation decreased to 38.8% of revenue in the 1997
period from 39.7% in the 1996 period as the Company operated fewer tractors
under operating leases.
Compensation and employee benefits increased $3.3 million (33.9%) to
$12.9 million in the 1997 period from $9.6 million in the 1996 period. As a
percentage of revenue, compensation and employee benefits increased slightly to
22.4% of revenue in the 1997 period from 22.2% in the 1996 period as a result of
increased wages resulting from the Marquartdt Transportation, Inc. acquisition
during the fourth quarter of 1996, an increase in the number of Company driver
trainees, and a decrease in workers' compensation and health insurance costs.
Fuel, supplies, and maintenance increased $2.2 million (39.1%) to
$7.9 million in the 1997 period from $5.7 million in the 1996 period. As a
percentage of revenue, fuel, supplies, and maintenance increased to 13.7% of
revenue for the 1997 period compared with 13.1% for the 1996 period as a result
of higher average fuel prices of $1.20 in the 1997 period compared with $1.14 in
the 1996 period. Due to a decrease in fuel costs in the third quarter of 1997 it
is unlikely the Company will be able to continue to implement fuel surcharges
and has already seen a reduction in the number of customers accepting surcharges
and amount of such surcharges. The Company expects that lower fuel prices will
largely offset decreased surcharge revenue.(*)
Insurance and claims increased $236,000 (30.6%) to $1.0 million in the 1997
period from $771,000 in the 1996 period. As a percentage of revenue, insurance
and claims remained constant at 1.8% of revenue in both the 1997 and 1996
periods.
- -----------------------------
(*) May contain "forward-looking" statements.
Page 12 of 18
Taxes and licenses increased $288,000 (36.3%) to $1.1 million in the 1997
period from $794,000 in the 1996 period. As a percentage of revenue, taxes and
licenses remained essentially constant at 1.9% of revenue in the 1997 period
compared with 1.8% in the 1996 period.
General and administrative expenses increased $778,000 (40.7%) to
$2.7 million in the 1997 period from $1.9 million in the 1996 period. As a
percentage of revenue, general and administrative expenses increased to 4.7% for
the 1997 period from 4.4% for the 1996 period primarily as a result of agent
commissions and advertising.
Communications and utilities increased $213,000 (44.3%) to $694,000 in the
1997 period from $481,000 in the 1996 period. As a percentage of revenue,
communications and utilities remained essentially constant at 1.2% of revenue in
the 1997 period and 1.1% in the 1996 period.
Depreciation and amortization increased $915,000 (30.4%) to $3.9 million in
the 1997 period from $3.0 million in the 1996 period. As a percentage of
revenue, depreciation and amortization decreased to 6.8% of revenue in the 1997
period from 7.0% in the 1996 period principally as a result of increased revenue
per tractor per week, which more efficiently spread this fixed cost over higher
revenue.
As a result of the foregoing, the Company's operating ratio remained
constant at 91.2% during both the 1997 and 1996 periods.
Interest expense (net) decreased $194,000 (25.1%) to $773,000 in the 1997
period from $967,000 in the 1996 period. As a percentage of revenue, interest
expense (net) decreased to 1.3% of revenue in the 1997 period from 2.2% in the
1996 period, due to lower average debt balances ($25.2 in the 1997 period
compared with $26.4 in the 1996 period, lower average interest rates, and higher
revenue per tractor.
The Company's effective tax rate was 42.0% in the 1997 period (3.1% of
revenue) compared with 41.6% in the 1996 period (2.7% of revenue) in each case
including the cost of nondeductible driver per diem expense absorbed by the
Company.
Primarily as a result of the factors described above, net earnings
increased $819,000 (49.1%) to $2.5 million (4.3% of revenue) in the 1997 period
from $1.7 million (3.9% of revenue) in the 1996 period.
Liquidity and Capital Resources
The growth of the Company's business has required significant investment in
new revenue equipment that the Company historically has financed with borrowings
under installment notes payable to commercial lending institutions and equipment
manufacturers, borrowings under a $10 million line of credit, cash flow from
operations, equipment leases from third-party lessors, proceeds of the Company's
initial public offering, and through the use of independent contractors. The
Company's primary sources of liquidity currently are funds provided by
operations and borrowings under credit agreements with financial institutions
and equipment manufacturers.
Net cash provided by operating activities was $4.3 million for the six
months ended June 30, 1997. The Company's principal use of cash from operations
is to service debt and internally finance accounts receivable associated with
growth in the business. Customer accounts receivable increased $3.0 million for
the six months ended June 30, 1997. The average age of the Company's accounts
receivable was approximately 37.1 days for the 1997 quarter.
Page 13 of 18
Net cash provided by investing activities of $599,000 in the six months
ended June 30, 1997. related primarily to purchases, sales, and trades of
revenue equipment. The Company expects capital expenditures (primarily for
revenue equipment and satellite communications units), net of revenue equipment
trade-ins, to be approximately $6.4 million during the remaining six months of
1997. The Company has options to purchase additional new tractors and trailers
and has authorized an additional $4.5 million in capital expenditures for such
purpose during the remaining six months of 1997 if customer demand requires
additional equipment. Such projected capital expenditures will be funded with
cash flow from operations, borrowings, or operating leases. In prior periods,
substantially all revenue equipment additions were financed through borrowing or
leasing transactions and proceeds of the Company's initial public offering.(*)
Net cash used in financing activities of $5.4 million for the six months
ended June 30, 1997, consisted primarily of net payments of $3.3 million of
principal under the Company's long-term debt agreements and net payments of
$2.2 million under the Company's line of credit.
The maximum amount available under the Company's primary line of credit at
June 30, 1997, was $10 million, on which the Company had an outstanding balance
of $2.4 million. The interest rate on the line of credit is 125 basis points
over the Federal Funds Rate. The line of credit is collateralized by accounts
receivable. At June 30, 1997, the Company had outstanding long-term debt
(including current maturities) consisting of approximately $21.9 million, most
of which was comprised of obligations for the purchase of revenue equipment.
Interest rates on this debt range from 5.7% to 7.9%, and the principal amounts
mature at various dates through June, 2002.
- -----------------------------
(*) May contain "forward-looking" statements.
Page 14 of 18
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No reportable events or material changes occurred during the
quarter for which this report is filed.
Item 2. Changes in Securities.
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 and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
1 Form of Underwriting Agreement, filed as Exhibit 1 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
2.1 Asset Purchase Agreement dated January 10, 1996, among Smithway Motor
Xpress, Inc., an Iowa corporation, Smith Trucking Company, a Kansas
corporation, and Delmar Smith, filed as Exhibit 2.4 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
2.2 Asset Purchase Agreement dated October 4, 1996, among Smithway Motor
Xpress, Inc., an Iowa corporation, Smithway Motor Xpress Corp., a
Nevada corporation, Marquardt Transportation, Inc., a South Dakota
corporation, and Ralph and Lucille Marquardt, filed as Exhibit 2.5 to
the Company's Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
Page 15 of 18
Exhibit
Number Description
2.3 First Amendment to Asset Purchase Agreement dated as of
October 24, 1996, among Smithway Motor Xpress, Inc., an Iowa
corporation, Smithway Motor Xpress Corp., a Nevada corporation,
Marquardt Transportation, Inc., a South Dakota corporation, and Ralph
and Lucille Marquardt, filed as Exhibit 2.6 to the Company's Form 10-K
for the year ended December 31, 1996, and incorporated herein by
reference.
2.4 Second Amendment to Asset Purchase Agreement dated as of
December 27, 1996, among Smithway Motor Xpress, Inc., an Iowa
corporation, Smithway Motor Xpress Corp., a Nevada corporation,
Marquardt Transportation, Inc., a South Dakota corporation, and Ralph
and Lucille Marquardt, filed as Exhibit 2.7 to the Company's Form 10-K
for the year ended December 31, 1996, and incorporated herein by
reference.
3.1 Articles of Incorporation, filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
3.2 Bylaws, filed as Exhibit 3.2 to the Company's Registration Statement
on Form S-1, Registration No. 33-90356, effective June 27, 1996, and
incorporated herein by reference.
4.1 Articles of Incorporation, filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
4.2 Bylaws, filed as Exhibit 3.2 to the Company's Registration Statement
on Form S-1, Registration No.33-90356, effective June 27, 1996, and
incorporated herein by reference.
10.1 Outside Director Stock Plan dated March 1, 1995, filed as Exhibit 10.2
to the Company's Registration Statement on Form S-1, Registration
No. 33-90356, effective June 27, 1996, and incorporated herein by
reference.
10.2 Incentive Stock Plan, adopted March 1, 1995, filed as Exhibit 10.3 to
the Company's Registration Statement on Form S-1, Registration
No. 33-90356, effective June 27, 1996, and incorporated herein by
reference.
10.3 401(k) Plan, adopted August 14, 1992, as amended, filed as
Exhibit 10.4 to the Company's Registration Statement on Form S-1,
Registration No. 33-90356, effective June 27, 1996, and incorporated
herein by reference.
10.4 Form of Agency Agreement between Smithway Motor Xpress, Inc. and its
independent commission agents, filed as Exhibit 10.10 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
10.5 Memorandum of officer incentive compensation policy, filed as
Exhibit 10.12 to the Company's Registration Statement on Form S-1,
Registration No. 33-90356, effective June 27, 1996, and incorporated
herein by reference.
Page 16 of 18
Exhibit
Number Description
10.6 Form of Independent Contractor Agreement between Smithway Motor
Xpress, Inc. and its independent contractor providers of tractors,
filed as Exhibit 10.14 to the Company's Registration Statement on
Form S-1, Registration No. 33-90356, effective June 27, 1996, and
incorporated herein by reference.
10.7 Acquisition Agreement dated January 10, 1996, among Smithway Motor
Xpress, Inc., an Iowa corporation, Smith Trucking Company, a Kansas
corporation, and Delmar Smith, filed as Exhibit 2.4 to the Company's
Registration Statement on Form S-1, Registration No. 33-90356,
effective June 27, 1996, and incorporated herein by reference.
10.8 Asset Purchase Agreement dated October 4, 1996, among Smithway Motor
Xpress, Inc., an Iowa corporation, Smithway Motor Xpress Corp., a
Nevada corporation, Marquardt Transportation, Inc., a South Dakota
corporation, and Ralph and Lucille Marquardt, filed as Exhibit 2.5 to
the Company's Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10.9 First Amendment to Asset Purchase Agreement dated as of
October 24, 1996, among Smithway Motor Xpress, Inc., an Iowa
corporation, Smithway Motor Xpress Corp., a Nevada corporation,
Marquardt Transportation, Inc., a South Dakota corporation, and Ralph
and Lucille Marquardt, filed as Exhibit 2.6 to the Company's Form 10-K
for the year ended December 31, 1996, and incorporated herein by
reference.
10.10 Second Amendment to Asset Purchase Agreement dated as of
December 27, 1996, among Smithway Motor Xpress, Inc., an Iowa
corporation, Smithway Motor Xpress Corp., a Nevada corporation,
Marquardt Transportation, Inc., a South Dakota corporation, and Ralph
and Lucille Marquardt, filed as Exhibit 2.7 to the Company's Form 10-K
for the year ended December 31, 1996, and incorporated herein by
reference.
11 *Statement Regarding Computation of Per Share Earnings.
27 *Financial Data Schedule.
* Filed herewith.
(b) Reports on Form 8-K.
None.
Page 17 of 18
SIGNATURE
Pursuant to the requirements of the Securities and Exchange 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., a Nevada
corporation
Date: August 14, 1997 By: /s/ Michael E. Olseson
Michael E. Olseon,
Treasurer and Chief Accounting Officer
Page 18 of 18