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 September 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 incorp(I.R.S. employer identification number)
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 (October 15, 1997).
Class A Common Stock, $.01 par value: 4,002,753 shares
Class B Common Stock, $.01 par value: 1,000,000 shares
Exhibit Index is on Page 16
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 September 30, 1997 (unaudited)..................... 3
Condensed Consolidated Statements of Earnings for the three
and nine months ended September 30, 1996 and 1997
(unaudited)............................................ 5
Condensed Consolidated Statements of Stockholders' Equity for
the year ended December 31, 1996, and the nine months
ended September 30, 1997 (unaudited)................... 6
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1997 (unaudited)... 7
Notes to Condensed Consolidated Financial Statements
(unaudited) 9.......................................... 9
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................. 10
PART II
OTHER INFORMATION
Item 1Legal Proceedings.............................................. 16
Item 2Changes in Securities.......................................... 16
Item 3Defaults Upon Senior Securities................................ 16
Item 4Submission of Matters to a Vote of Security Holders............ 16
Item 5Other Information.............................................. 16
Item 6Exhibits and Reports on Form 8-K............................... 16
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, September 30,
1996 1997
--------------- --------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents...................$ 940 $ 1,143
Receivables:
Trade..................................... 9,676 13,098
Other..................................... 985 1,599
Recoverable income taxes.................. 211 -
Inventories................................... 713 803
Deposits, primarily with insurers............. 921 735
Prepaid expenses.............................. 846 1,782
Deferred income taxes......................... 282 282
--------------- --------------
Total current assets.................... 14,574 19,442
--------------- --------------
Property and equipment:
Land........................................ 531 531
Buildings and improvements.................. 4,375 4,833
Tractors.................................... 28,245 35,537
Trailers.................................... 19,514 24,631
Other equipment............................. 3,543 4,078
--------------- --------------
56,208 69,610
Less accumulated depreciation............... 17,038 19,891
--------------- --------------
Net property and equipment.............. 39,170 49,719
--------------- --------------
Other assets.................................. 1,586 2,004
--------------- --------------
$ 55,330 $ 71,165
=============== ==============
See accompanying notes to condensed, consolidated financial statements
Page 3 of 18
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, September 30,
1996 1997
------------- -----------
(unaudited)
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit...................................$ 4,490 $ 0
Current maturities of long-term debt............. 3,260 3,575
Accounts payable................................. 2,211 3,017
Accrued loss reserves............................ 1,267 1,177
Other accrued expenses........................... 1,453 1,911
Income taxes payable............................. - 763
------------- -----------
Total current liabilities.................... 12,681 10,443
Long-term debt, less current maturities............ 12,644 24,999
Deferred income taxes.............................. 5,812 7,312
------------- -----------
Total liabilities............................ 31,137 42,754
------------- -----------
Stockholders' equity:
Preferred stock.................................. - -
Common stock:
Class A........................................ 40 40
Class B........................................ 10 10
Additional paid-in capital....................... 11,104 11,141
Retained earnings................................ 13,116 17,297
Reacquired shares, at cost....................... (77) (77)
------------- -----------
Total stockholders' equity................... 24,193 28,411
------------- -----------
$ 55,330 $ 71,165
============= ===========
See accompanying notes to condensed, consolidated financial statements
Page 4 of 18
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine months ended
September 30, September 30,
------------------ --------------------
1996 1997 1996 1997
--------- --------- --------- ---------
Operating revenue:
Freight..............................$ 24,845 $ 31,739 $ 68,048 $ 89,106
Other................................ 92 95 161 250
--------- --------- --------- ---------
Operating revenue................ 24,937 31,834 68,209 89,356
--------- --------- --------- ---------
Operating expenses:
Purchased transportation............. 10,066 12,716 27,264 35,022
Compensation and employee benefits... 5,464 7,082 15,053 19,943
Fuel, supplies, and maintenance...... 3,211 3,951 8,880 11,837
Insurance and claims................. 483 585 1,279 1,599
Taxes and licenses................... 415 616 1,210 1,699
General and administrative........... 1,051 1,351 2,964 4,043
Communication and utilities.......... 207 343 688 1,037
Depreciation and amortization........ 1,506 1,821 4,517 5,746
---------- -------- --------- ---------
Total operating expenses......... 22,403 28,465 61,855 80,926
---------- -------- --------- ---------
Earnings from operations......... 2,534 3,369 6,354 8,430
Interest expense, net................ (240) (470) (1,206) (1,243)
---------- -------- --------- ---------
Earnings before income taxes..... 2,294 2,899 5,148 7,187
Income taxes......................... (964) (1,204) (2,150) (3,006)
--------- --------- --------- ---------
Net earnings.....................$ 1,330 $ 1,695 $ 2,998 $ 4,181
========= ========= ========= =========
Net earnings per common share..........$ 0.27 $ 0.34 $ 0.75 $ 0.84
========= ========= ========= =========
Weighted average common shares
outstanding........................4,999,293 5,015,810 4,000,090 5,006,141
========= ========= ========= =========
See accompanying notes to condensed, consolidated financial statements
Page 5 of 18
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 stockholde
stock capital earnings shares debt equity
--------- ---------- -------- ---------- --------- ----------
Balance at December 31, 1995 $ 28 $ - $ 8,138 $ (52) $ (24$) $ 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............. 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
Issuance of 3,460 common
shares.................... - 37 - - - 37
Net earnings................ - - 4,181 - - 4,181
--------- --------- -------- ---------- --------- ----------
Balance at September 30,
1997..................... $ 50 $ 11,141 $ 17,297 $ (77) $ $ 28,411
========= ========= ======== ========== ========= =========
See accompanying notes to condensed, consolidated financial statements
Page 6 of 18
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine months ended
September 30,
-------------------
1996 1997
--------- ---------
Cash flows from operating activities:
Net earnings.............................................$ 2,998 $ 4,181
--------- ---------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.......................... 4,517 5,746
Deferred income taxes.................................. 846 1,500
Issuance of common shares under incentive plans........ - 37
Changes in:
Trade receivables.................................... (3,125) (3,422)
Other receivables.................................... (204) (614)
Inventory............................................ - (65)
Deposits, primarily with insurers.................... (102) 186
Prepaid expenses..................................... (447) (886)
Accounts payable..................................... 122 806
Accrued loss reserves................................ 200 (90)
Other accrued expenses............................... (18) 458
Income taxes......................................... 1,180 974
--------- ---------
Total adjustments.............................. 2,969 4,630
--------- ---------
Net cash provided by operating activities............ 5,967 8,811
--------- --------
Cash flows from investing activities:
Payments for acquisitions................................ - (2,533)
Purchase of property and equipment....................... (2,569) (4,376)
Proceeds from sale of property and equipment............. - 6,080
Chance in assets......................................... (150) (128)
Purchase of short-term investments....................... (300) -
Proceeds from short-term investments..................... 500 -
--------- ---------
Net cash used in investing activities................ (2,519) (957)
--------- ---------
Cash flows from financing activities:
Borrowings on long-term debt............................. - 14,300
Principal payments on long-term debt..................... (14,914) (17,461)
Borrowings on line of credit agreement................... 65,092 95,017
Payments on line of credit agreement..................... (65,092) (99,507)
Payments for reacquired shares........................... (26) -
Other.................................................... (620) -
--------- ---------
Net cash used in financing activities......... (3,702) (7,651)
========= =========
Net (decrease) increase in cash and cash equivalents. (254) 203
Cash and cash equivalents at beginning of period........... 2,976 940
--------- ---------
Cash and cash equivalents at end of period.................$ 2,722 $ 1,143
========= =========
See accompanying notes to condensed, consolidated financial statements
Page 7 of 18
SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
(Dollars in thousands)
Nine months ended
September 30,
-------------------
1996 1997
-------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.............................................$ 1,331 $ 1,251
Income taxes......................................... 1,866 543
======== =========
Supplemental schedules of noncash investing and financing
activities:
Notes payable:
Tractors and trailers..................................$ 7,196 $ 15,831
Tires on above:
Prepaid at end of period............................. 24 544
Expensed............................................. 307 301
Principal payments made by ESOP............................ 243 -
Issuance of common shares under incentive plans............ - 37
======== =========
Cash payments for acquisitions:
Revenue equipment......................................$ - $ 1,990
Intangible assets...................................... - 406
Inventories............................................ - 25
Prepaid expenses....................................... - 50
Other assets........................................... - 62
======== =========
See accompanying notes to condensed, consolidated financial statements
Page 8 of 18
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 proceeds of approximately $11.3 million, net of underwriting
discounts and offering expenses not previously paid, 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 third quarter and first nine 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 nine months ended September 30, 1996 and
1997:
Three Months Ended Nine months ended
September 30, September 30,
1996 1997 1996 1997
--------- --------- --------- --------
Operating revenue....................... 100.0% 100.0% 100.0% 100.0%
Purchased transportation.............. 40.4 39.9 40.0 39.2
Compensation and employee benefits.... 21.9 22.2 22.1 22.3
Fuel, supplies, and maintenance....... 12.9 12.4 13.0 13.2
Insurance and claims.................. 1.9 1.8 1.9 1.8
Taxes and licenses.................... 1.7 1.9 1.8 1.9
General and administrative............ 4.2 4.2 4.3 4.5
Communications and utilities.......... 0.8 1.1 1.0 1.2
Depreciation and amortization......... 0.6 5.7 6.6 6.4
--------- --------- --------- --------
Total operating expenses.......... 89.8 89.4 90.7 90.6
--------- --------- --------- --------
Earnings from operations................ 10.2 10.6 9.3 9.4
Interest expense, net................... (1.0) (1.5) (1.8) (1.4)
--------- --------- --------- --------
Earnings before income taxes............ 9.2 9.1 7.5 8.0
Income taxes............................ (3.9) (3.8) (3.2) (3.4)
--------- --------- --------- --------
Net earnings............................ 5.3% 5.3% 4.4% 4.7%
========= ========= ========= ========
Comparison of three months ended September 30, 1997, with three months ended
September 30, 1996
Operating revenue increased $6.9 million (27.7%), to $31.8 million during
the 1997 quarter from $24.9 million during the 1996 quarter. The increase was
attributable to a 21.6% increase in weighted average tractors, to 919 during the
1997 quarter from 756 during the 1996 quarter as a result of internal growth and
the Company's acquisitions of Marquardt Transportation, Inc. ("Marquardt") and
Royal Transport, Inc. ("Royal") since the 1996 quarter. Revenue equipment
utilization increased 6.6% as the average billed miles per tractor per week
increased to 1,797 in the 1997 quarter from 1,685 in the 1996 quarter, while
average revenue per loaded mile remained constant at $1.37 in each quarter.
Page 10 of 18
Purchased transportation, consisting primarily of payments to independent
contractor providers of revenue equipment, expenses related to brokerage
activities, and payments under operating leases of revenue equipment, increased
$2.7 million (26.3%), to $12.7 million in the 1997 quarter from $10.1 million in
the 1996 quarter. The increase was attributable to expansion of the Company's
business, as the Company contracted with more independent contractor providers
of revenue equipment. As a percentage of revenue, purchased transportation
decreased to 39.9% of revenue in the 1997 quarter from 40.4% in the 1996 quarter
as brokerage revenue comprised a smaller portion of the Company's overall
revenue, reducing the corresponding expense, and tractors and trailers leased
from independent contractors and under operating leases comprised a smaller
percentage of the Company's overall fleet.
Compensation and employee benefits increased $1.6 million (29.6%), to $7.1
million in the 1997 quarter from $5.5 million in the 1996 quarter. As a
percentage of revenue, compensation and employee benefits increased to 22.2% of
revenue in the 1997 quarter from 21.9% in the 1996 quarter as the percentage of
the Company's revenue equipment fleet operated by employee drivers increased.
Fuel, supplies, and maintenance increased $740,000 (23.0%), to $4.0 million
in the 1997 quarter from $3.2 million in the 1996 quarter. As a percentage of
revenue, fuel, supplies, and maintenance decreased to 12.4% of revenue for the
1997 quarter compared with 12.9% for the 1996 quarter as a result of lower
average fuel prices of $1.15 per gallon in the 1997 quarter compared with $1.20
in the 1996 quarter. A portion of the decrease as a percentage of revenue was
offset by an increase in the percentage of the Company's fleet comprised of
Company-owned tractors, for which the Company bears fuel costs. A continuation
of the decrease in per-gallon fuel prices would make it unlikely that the
Company could continue to implement fuel surcharges, and the Company has already
seen a reduction in the number of customers accepting surcharges and the amount
of such surcharges.(*)
Insurance and claims increased $102,000 (21.1%), to $585,000 in the 1997
quarter from $483,000 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 1.9% in the 1996 quarter.
Taxes and licenses increased $201,000 (48.4%), to $616,000 in the 1997
quarter from $415,000 in the 1996 quarter. As a percentage of revenue, taxes and
licenses increased to 1.9% of revenue in the 1997 quarter compared with 1.7% in
the 1996 quarter as the percentage of the Company's fleet comprised of
Company-owned equipment increased and the Company experienced an increase of
miles operated in states with mileage taxes.
General and administrative expenses increased $300,000 (28.5%), to $1.4
million in the 1997 quarter from $1.1 million in the 1996 quarter. As a
percentage of revenue, general and administrative expenses remained constant at
4.2% of revenue.
Communications and utilities increased $136,000 (65.7%), to $343,000 in the
1997 quarter from $207,000 in the 1996 quarter. As a percentage of revenue,
communications and utilities increased to 1.1% of revenue in the 1997 quarter
from 0.8% in the 1996 quarter reflecting an increase in the number of
Company-owned terminals.
- ------------------------
(*) May contain "forward-looking " statements.
Page 11 of 18
Depreciation and amortization increased $315,000 (20.9%), to $1.8 million
in the 1997 quarter from $1.5 million in the 1996 quarter. As a percentage of
revenue, depreciation and amortization decreased to 5.7% of revenue in the 1997
quarter from 6.0% in the 1996 quarter as a result of higher revenue per tractor
per week, which more efficiently spread this fixed cost over higher revenue. The
increased productivity more than offset the increased cost of new equipment and
satellite communication units, an increase in the percentage of the Company's
fleet comprised of Company- owned equipment, and goodwill amortization from the
Marquardt and Royal acquisitions.
As a result of the foregoing, the Company's operating ratio decreased to
89.4% during the 1997 quarter from 89.8% during the 1996 quarter.
Interest expense, net increased $230,000 (95.8%), to $470,000 in the 1997
quarter from $240,000 in the 1996 quarter. As a percentage of revenue, interest
expense, net increased to 1.5% of revenue in the 1997 quarter from 1.0% in the
1996 quarter, due to higher average debt balances ($24.1 million in the 1997
quarter compared with $15.3 million in the 1996 quarter) resulting from an
increase in Company- owned revenue equipment and the Marquardt and Royal
acquisitions.
The Company's effective tax rate was 41.5% in the 1997 quarter (3.8% of
revenue) compared with 42.0% in the 1996 quarter (3.9% 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 $365,000 (30.8%), to $1.7 million (5.3% of revenue) in the 1997
quarter from $1.3 million (5.3% of revenue) in the 1996 quarter.
Comparison of nine months ended September 30, 1997, with nine months ended
September 30, 1996.
Operating revenue increased $21.1 million (31.0%), to $89.4 million during
the 1997 period from $68.2 million during the 1996 period. The revenue increase
resulted primarily from a 24.6% increase in weighted average tractors to 891
during the 1997 period from 715 during the 1996 period as a result of internal
growth and the Company's acquisitions of Marquardt in November 1996 and Royal in
September 1997. Revenue equipment utilization increased 6.9%, as the average
billed miles per tractor per week increased to 1,748 in the 1997 period from
1,636 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.
Purchased transportation, consisting primarily of payments to independent
contractor providers of revenue equipment, expenses related to brokerage
activities, and payments under operating leases of revenue equipment, increased
$7.8 million (28.5%), to $35.0 million in the 1997 period from $27.3 million in
the 1996 quarter. The increase was attributable to expansion of the Company's
business, as the Company contracted with more independent contractor providers
of revenue equipment. As a percentage of revenue, purchased transportation
decreased to 39.2% of revenue in the 1997 period from 40.0% in the 1996 period
as brokerage revenue comprised a smaller portion of the Company's overall
operating revenue, reducing the corresponding expense, and tractors and trailers
leased from independent contractors and under operating leases comprised a
smaller percentage of the Company's overall fleet.
Compensation and employee benefits increased $4.9 million (32.5%), to $19.9
million in the 1997 period from $15.0 million in the 1996 period. As a
percentage of revenue, compensation and
Page 12 of 18
employee benefits increased slightly to 22.3% of revenue in the 1997 period from
22.1% in the 1996 period as the percentage of the Company's revenue equipment
fleet operated by employee drivers increased, which more than offset lower
per-employee workers' compensation and health insurance costs.
Fuel, supplies, and maintenance increased $3.0 million (33.3%), to $11.8
million in the 1997 period from $8.9 million in the 1996 period. As a percentage
of revenue, fuel, supplies, and maintenance increased to 13.2% of revenue for
the 1997 period compared with 13.0% for the 1996 period as a result of an
increase in the percentage of the Company's fleet being comprised of Company-
owned tractors, for which the Company pays fuel costs, which more than offset
decreasing per gallon fuel prices in the third quarter. Due to the decrease in
per gallon fuel prices 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.(*)
Insurance and claims increased $320,000 (25.0%), to $1.6 million in the
1997 period from $1.3 million in the 1996 period. As a percentage of revenue,
insurance and claims remained relatively constant at 1.8% of revenue in the 1997
period and 1.9% in the 1996 period.
Taxes and licenses increased $489,000 (40.4%), to $1.7 million in the 1997
period from $1.2 million 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 $1.1 million (36.4%), to $4.1
million in the 1997 period from $3.0 million in the 1996 period. As a percentage
of revenue, general and administrative expenses increased to 4.5% for the 1997
period from 4.3% for the 1996 period primarily as a result of agent commissions
and advertising.
Communications and utilities increased $349,000 (50.7%), to $1.0 million in
the 1997 period from $688,000 in the 1996 period. As a percentage of revenue,
communications and utilities increased to 1.2% of revenue in the 1997 period
compared with 1.1% in the 1996 period reflecting an increase in the number of
Company terminals.
Depreciation and amortization increased $1.2 million (27.2%), to $5.7
million in the 1997 period from $4.5 million in the 1996 period. As a percentage
of revenue, depreciation and amortization decreased to 6.4% of revenue in the
1997 period from 6.6% in the 1996 period as a result of increased revenue per
tractor per week, which more efficiently spread this fixed cost over higher
revenue and more than offset the increased cost of new equipment and satellite
communication units, an increase in the percentage of the Company's fleet
comprised of Company-owned equipment, and goodwill amortization from the
Marquardt and Royal acquisitions.
As a result of the foregoing, the Company's operating ratio decreased to
90.6% during the 1997 period from 90.7% during the 1996 period.
Interest expense, net remained essentially constant at $1.2 million in both
periods as debt levels that were reduced in July 1996 with proceeds of the IPO
subsequently increased with the Company's growth. As a percentage of revenue,
interest expense, net decreased to 1.4% of revenue in the 1997 period from 1.8%
in the 1996 period, due to the factors described above and increased revenue per
tractor.
- ------------------------
(*) May contain "forward-looking" statements.
Page 13 of 18
The Company's effective tax rate was 41.8% in the 1997 period (3.4% of
revenue) compared with 41.8% in the 1996 period (3.2% 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 $1.2 million (39.5%), to $4.2 million (4.7% of revenue) in the 1997
period from $3.0 million (4.4% 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 borrowing
under installment notes payable to commerical lending institutions and equipment
manufacturers, borrowings under lines of credit, cash flow from operations,
equipment leases from third-party lessors, and proceeds of the Company's initial
public offering. The Company also has obtained a substantial portion of its
revenue equipment fleet from independent contractors who own and operate the
equipment, which reduces overall capital expenditure requirements compared with
prociding a fleet of entirely Company-owned equipment. The Company's primary
sources of liquidity currently are funds provided by operations and borrowings
under credit agreements with financial institutions and equipment manufacturers.
Management believes that its sources of liquidity are adequate to meet its
currently anticipated working capital requirements, capital expenditures, and
other needs.(*)
Net cash provided by operating activities was $8.8 million for the nine
months ended September 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
$3.4 million for the nine months ended September 30, 1997. The average age of
the Company's accounts receivable was approximately 36 days for the 1997 quarter
and 32 days for the 1996 quarter.
Net cash used in investing activities of $957,000 in the 1997 period
related primarily to purchases, net of sales, and trades of revenue equipment.
The Company expects capital expenditures for scheduled deliveries of revenue
equipment and satellite communications units, net of revenue equipment
trade-ins, of approximately $3.3 million during the remaining three months of
1997. The Company has options to purchase additional new tractors and trailers
for up to $3.5 million during the remaining three months of 1997 and has not
determined whether to exercise these options. 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 IPO.(*)
Net cash used in financing activities of $7.7 million for the nine months
ended September 30, 1997, consisted primarily of net payments of $3.2 million of
principal under the Company's long-term debt agreements and net payments of $4.5
million under the Company's line of credit.
- ------------------------
(*) May contain "forward-looking" statements.
Page 14 of 18
At September 30, 1997, the Company had outstanding long-term debt
(including current maturities) consisting of approximately $28.6 million, most
of which was comprised of obligations for the purchase of revenue equipment.
Approximately $17.3 million consisted of borrowing from financial institutions
and equipment manufacturers and $11.3 million represented the amount drawn under
the Company's primary credit agreement. Interest rates on this debt range from
6.7% to 8.8%, and the principal amounts mature at various dates through the year
2002.
On September 3, 1997, the Company entered into a new credit agreement
providing for borrowing of up to $15.0 million, based upon certain accounts
receivable and revenue equipment values. At September 30, 1997, the maximum
available credit was $15.0 million, on which the Company had an outstanding
balance of $11.3 million. The interest rate under the credit agreement is 1%
plus the LIBOR rate for the corresponding period. The credit agreement is
unsecured and contains covenants that limit additional liens, the size of
certain mergers and acquisitions, dividends, and other matters, as well as
impose certain minimum financial ratios. The Company was in compliance with the
credit agreement at September 30, 1997.
Page 15 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 Description
Number
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.
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.
Page 16 of 18
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.
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.
Page 17 of 18
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.
10.11*Credit Agreement dated September 3, 1997, between Smithway Motor
Xpress Corp., as Guarantor, Smithway Motor Xpress, Inc., as Borrower,
and LaSalle National Bank.
11*Statement Regarding Computation of Per Share Earnings.
27*Financial Data Schedule.
*Filed herewith.
(b) Reports on Form 8-K.
None.
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: November 12, 1997 By: /s/ Michael E. Oleson
Michael E. Oleson,
Treasurer and Chief Accounting Officer
Page 18 of 18