-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RmJheHl7IORRqJuM+AX2cN4EKgoknLescDhcVBCd5i0KV5738W4tveGnxjVnEUm3 yyvn9M2MtTaz3QiTX8Kwyw== 0000790372-97-000004.txt : 19970401 0000790372-97-000004.hdr.sgml : 19970401 ACCESSION NUMBER: 0000790372-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MS CARRIERS INC CENTRAL INDEX KEY: 0000790372 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 621014070 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14781 FILM NUMBER: 97571189 BUSINESS ADDRESS: STREET 1: 3171 DIRECTORS ROW STREET 2: P O BOX 30788 CITY: MEMPHIS STATE: TN ZIP: 38131 BUSINESS PHONE: 9013322500 10-K 1 M.S. CARRIERS, INC.'S 10-K FOR 1996 M.S. Carriers, Inc. 3171 Directors Row Memphis, TN 38116 March 28, 1997 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Form 10-K. Sincerely, s/ M.J. Barrow M.J. Barrow, Senior Vice President United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1996 Commission file number 0-14781 M.S. Carriers, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-1014070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3171 Directors Row, Memphis, TN 38116 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (901) 332-2500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 Par Value 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 periods that the registrant was required to filed such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the registrant's $.01 par value common stock held by non-affiliates of the registrant as of March 7, 1997 was $148,255,963 (based on the closing sale price of $17.00 per share on that date, as reported by NASDAQ). As of March 7, 1997, 12,009,633 shares of the registrant's common stock were outstanding. Documents Incorporated by Reference No documents are incorporated by reference. 1 PART I ITEM 1. BUSINESS M.S. Carriers, Inc. is a transportation company primarily engaged in the hauling of truckload shipments of general commodities throughout the United States and the provinces of Quebec and Ontario in Canada. The Company has both common and contract authority, granted by the Interstate Commerce Commission to transport any type of freight (except certain types of explosives, household goods and commodities in bulk) from any point in the continental United States to any other point in any state over any route selected by the Company. The Company has authority in Canada granted by the Quebec Transport Commission and the Ontario Highway Transport Board to haul general commodities from points in the United States to points in Quebec and Ontario and from points in Quebec and Ontario into the United States. The Company also provides interline service to and from Mexico. The Company's primary line-haul traffic flows are between the Middle South and the Southwest, Midwest, Central States, Southeast and Northeast. In addition, the Company operates regional networks which serve the Western, Southeast, Southwest, Middle South, Central States and Northeast. The average length of a trip (one-way) was approximately 534 miles in 1996 and 584 miles in 1995. The principal types of freight transported are packages, retail goods, nonperishable foodstuffs, paper and paper products, household appliances, furniture and packaged petroleum products. Marketing _________ M.S. Carriers, Inc. has targeted the service-sensitive segment of the transportation market rather than that segment which uses price as its primary consideration. The Company has chosen to provide premium services and charge compensating rates rather than to compete solely on the basis of price. The principal elements of the Company's premium service are dependable late-model equipment which allows timely deliveries, multiple and appointment pickups and deliveries, assistance in loading and unloading, the availability of extra trailers which can be placed for the convenience of customers and sufficient equipment to respond promptly to customers' varying requirements. The Company's individualized service requires a strong commitment to marketing. The Company's marketing efforts concentrate on attracting customers that ship multiple loads from numerous locations that complement the Company's existing traffic flows. As shipping patterns of existing customers expand or change, the Company attempts to obtain additional customers to complement the new traffic flows. Thus, the effort to attract new customers varies from time to time depending upon growth or changes in the shipping patterns of existing customers. The Company's major revenue sources are the medium to long line-haul and the regional short-haul segments of the dry van truckload market. In these markets, the Company focuses on customers who value the broad geographic coverage, premium services and flexibility available from a larger carrier. These customers generally prefer to have their freight handled by a few carriers with whom they can establish long-term relationships. The Company also provides dedicated fleet services and logistics services. These services supplement the Company's strengths in its traditional markets and position the Company to meet the anticipated needs of its customers. 2 The Company had revenues of $31.1 million in 1996 and $28.3 million in 1995 from freight shipments having either a point of origin or a point of destination in Mexico. These shipments represented approximately 9.1% and 8.4%, respectively, of total revenues for 1996 and 1995. The largest 25, 10 and 5 customers accounted for approximately 65%, 48% and 36%, respectively, of the Company's revenues during 1996. Most of these customers are large, publicly-held companies. One customer, Sears, accounted for approximately 17% of the Company's revenues during 1996 and 18% in 1995. No other customer accounted for more than 10% of the Company's revenues during 1996 or 1995. Operations __________ The Company's operations are designed to maximize efficiency while maintaining the emphasis placed on providing premium service to customers. Through the use of the Company's information and satellite tracking systems, the location of all shipments and equipment is continuously monitored to coordinate routes and increase equipment utilization. The Company's usual hauling method requires the unit carrying the shipment to proceed directly from origin to destination with no delay enroute occasioned by a change of drivers, relays or circuitous routing. The Company's customer service department maintains constant customer contact regarding overall service requirements and specific freight movements and also attempts to produce backhauls for each unit. Because the average trip has been approximately 550 miles, most of the Company's shipments are hauled by one driver rather than two. The relatively short trips ordinarily run by the Company make this method of operation preferable to team operations. Each of the Company's over-the-road tractors is equipped with a sleeper cab so that the driver can comply with the Department of Transportation's hours of service guidelines. Competition ___________ The entire transportation industry, including the trucking industry, is highly competitive. The Company competes primarily with other truckload carriers. Competition for the freight transported by the Company is based, in the long-term, primarily on service and efficiency and, to a lesser degree, on freight rates. However, in recent years the Company has experienced an increased focus on freight rates in certain of the markets served by the Company. Several other truckload carriers have substantially greater financial resources, own more equipment or carry a larger volume of freight than the Company. Regulation __________ The Company is a motor carrier regulated by the United States Department of Transportation. Additionally, such matters as weight and dimensions of equipment are subject to federal, state and international regulations. The Company believes that it is in substantial compliance with all licensing and regulatory requirements in each jurisdiction in which it operates. 3 Seasonality ___________ In the trucking industry generally, results of operations tend to show a seasonal pattern as some customers reduce shipments during and after the winter holiday season and during the summer months due to temporary plant closings for vacations. Revenues can also be affected by bad weather and holidays, since revenue is directly related to available working days. Furthermore, operating expenses historically have been higher in the winter months due primarily to decreased fuel efficiency and increased maintenance costs of revenue equipment in cold weather. Fuel ____ Shortages of fuel or increases in fuel prices could have a materially adverse effect on the operations and profitability of the Company. Fuel prices in 1996 rose substantially as compared to 1995. The Company maintains fuel storage tanks at certain of its terminals. Leakage or damage to these tanks could subject the Company to environmental clean-up costs. Drivers and Employees _____________________ The Company recognizes the importance of maintaining a professional driver work force. The Company has established several programs to increase driver loyalty and to give drivers a stake in the Company. The drivers are compensated on the basis of miles driven and other services such as loading and unloading and number of deliveries. Base pay for miles driven increases with a driver's length of employment with the Company. The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code for drivers and all other employees. The Company matches 50% of the employee's contribution, but limited to a maximum of 3% of the employee's compensation. The Company also grants to each driver and other employees, after the completion of six months of service, an option to purchase 500 shares of the Company's Common Stock at the market price on the date of grant. The option is exercisable five years from the date of grant provided the driver or employee continues employment with the Company. Drivers are selected in accordance with specific Company guidelines relating primarily to safety records, driving experience and personal evaluations. Once selected, a driver is trained in all phases of Company policies and operations as well as safety techniques and fuel efficient operation of equipment. In addition, all new drivers must pass a road test prior to assignment to a vehicle. Recognizing the importance of driver contact while on the road for extended periods, the Company maintains an electronic mailbox system which allows the drivers to transmit and receive messages 24 hours a day, equips each of its tractors with a mobile two-way satellite communication system and maintains regular telephonic contact between dispatchers and drivers. The Company also recognizes that owner-operators provide the Company with another source of drivers to support its operations. Owner-operators are independent contractors who supply their own tractors and drivers, and are responsible for their operating expenses in return for a negotiated fee based upon number of miles driven and accessorial services provided. While the Company's primary benefit from owner-operators is the acquisition of the services of a qualified driver, an additional benefit is the Company requires 4 less capital for growth as owner-operators provide their own tractors. The Company intends to continue its emphasis on recruiting owner-operators. Since competition for qualified drivers is intense, the Company emphasizes the importance of attracting and retaining qualified drivers. The Company employs eight full-time driver recruiters and three full-time owner-operator recruiters. The driver compensation programs, together with the Company's late-model equipment and relatively short trips, provide important incentives to attract and retain qualified drivers. Despite these incentives, the Company experiences difficulty from time to time in attracting and retaining qualified drivers. At December 31, 1996, the Company employed 2,886 persons, of whom 2,124 were drivers, 238 were mechanics and other equipment maintenance personnel, and 524 were support personnel including management and administration. The Company also leased 419 tractors with qualified drivers from owner-operators. None of the Company's employees are represented by a collective bargaining unit, and management considers the Company's relationship with its employees to be excellent. ITEM 2. PROPERTIES Office and Terminal Facilities ______________________________ The Company's executive offices and principal terminal are located in Memphis, Tennessee on 3-acre and 48-acre tracts of land, respectively, both of which are owned by the Company. The executive offices have 57,000 square feet of office space. The principal terminal consists of 52,000 square feet of office space and 41,000 square feet of maintenance facilities. The Company owns office and maintenance facilities of 34,500 square feet in Columbus, Ohio, 16,500 square feet in Laredo, Texas, 16,500 square feet in Martinsburg, West Virginia and 45,500 square feet in Atlanta, Georgia. Additionally, the Company owns a 3,000 square foot office and terminal on a 4-acre tract of land in Tupelo, Mississippi. The Company leases several small offices and/or trailer parking yards throughout the country. Revenue Equipment _________________ The Company has a policy of purchasing standardized tractors and trailers manufactured to the Company's specifications. At December 31, 1996, the Company owned and operated 2,070 Company- owned tractors and leased 419 tractors owned by owner-operators. The Company's tractors include 2,046 over-the-road and 24 local tractors. The Company owns 7,156 van trailers, of which 429 are 48 feet long and 6,727 are 53 feet long; all trailers are 102 inches wide with a minimum of 109.5 inches of inside height. Most of the tractors are manufactured by Freightliner and most of the trailers are manufactured by Lufkin or Great Dane. Standardization enables the Company to simplify driver training, control the cost of spare parts inventory and enhance its preventive maintenance program. The Company adheres to a comprehensive maintenance program, based on the amount of use of the tractor, designed to minimize equipment down-time and enhance the resale value of all of its equipment. During 1996, the Company 5 reduced its replacement cycle on tractors from 4 years to 3 years. The Company constantly monitors the fuel efficiency of its power equipment. The miles-per-gallon average of the entire fleet was approximately 5.58 in 1996. The following table shows the type and age of equipment operated by the Company at December 31, 1996:
Model Year Over-the-Road 48-Foot 53-Foot Tractors Trailers Trailers _______________________________________________________ 1997 515 243 1996 451 1,200 1995 635 2,084 1994 320 201 923 1993 121 134 1,015 1992 3 11 306 1991 225 1990 498 1989 1 35 69 1988 9 164 1987 27 1986 10 1985 2 ___________________________________________ 2,046 429 6,727 ___________________________________________ ___________________________________________
ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. The Company believes adverse results in one or more of these cases would not have a material adverse effect on its financial position or its results of operations. The Company self-insures for liability of $1,500,000 for the largest occurrence per policy year, $1,250,000 for the second largest occurrence per policy year, and $1,000,000 for each other occurence involving bodily injury and property damage. The Company maintains insurance which covers liability in excess of the self-insured amounts at coverage levels that management considers adequate. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1996. 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Price Range of Common Stock ___________________________ The Company's Common Stock is traded in the over-the-counter market under the symbol MSCA. The following table sets forth, for the calendar periods indicated, the high and low sales prices for the Company's Common Stock as reported by the National Association of Securities Dealers Automated Quotations System (NASDAQ).
High Low __________________ 1996 1st Quarter 20 15 1/4 2nd Quarter 21 1/4 17 3/4 3rd Quarter 22 1/8 19 4th Quarter 19 3/4 15 1/2 1995 1st Quarter 25 1/4 21 2nd Quarter 25 16 5/8 3rd Quarter 20 3/4 15 3/4 4th Quarter 20 1/4 15 1/4
As of March 7, 1997, the Company's common stock was held by approximately 3,000 stockholders of record or through nominee or street name accounts with brokers. Dividend Policy _______________ The Company has never paid a cash dividend on its Common Stock. It is the current intention of the Company's Board of Directors to continue to retain earnings to finance the growth of the Company's business rather than to pay dividends. Future payment of cash dividends will depend upon the financial condition, results of operations and capital commitments of the Company as well as other factors deemed relevant by the Board of Directors. 7 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
Year ended December 31 1996 1995 1994 1993 1992 ___________________________________________________________ (In thousands, except per share amounts) Statement of income data: Operating revenues $340,236 $333,070 $292,883 $224,716 $181,303 Operating expenses: Salaries, wages and benefits 127,237 126,176 111,493 84,820 66,568 Operations and maintenance 66,224 66,961 64,498 60,880 52,077 Taxes and licenses 8,973 10,024 8,746 6,901 6,040 Insurance and claims 18,777 15,666 14,471 9,545 8,035 Communications and utilities 5,209 6,081 4,698 4,135 3,279 Depreciation and amortization 37,010 39,143 33,694 27,360 21,866 Gain on disposals of revenue equipment (2,397) Rent and purchased transportation 53,014 41,946 23,564 4,246 1,358 Other 2,362 2,435 2,058 1,792 1,706 ___________________________________________________________ Total operating expenses 316,409 308,432 263,222 199,679 160,929 ___________________________________________________________ Operating income 23,827 24,638 29,661 25,037 20,374 Interest expense (4,844) (5,525) (1,802) (2,041) (2,463) Interest income 92 1,449 Other (expense) income 395 (25) 147 118 68 ___________________________________________________________ Income before income taxes and cumulative effect of change in accounting for income taxes 19,470 20,537 28,006 23,114 17,979 Income taxes 7,031 7,386 10,856 9,512 7,405 ___________________________________________________________ Income before cumulative effect of accounting change 12,439 13,151 17,150 13,602 10,574 Cumulative effect as of January 1, 1993 of change in accounting for income taxes 500 ___________________________________________________________ Net income $12,439 $13,151 $17,150 $14,102 $10,574 ___________________________________________________________ ___________________________________________________________ Earnings per share: Income before cumulative effect of accounting change $1.02 $1.01 $1.31 $1.13 $0.97 Cumulative effect of accounting change 0.04 ___________________________________________________________ Net income $1.02 $1.01 $1.31 $1.17 $0.97 ___________________________________________________________ ___________________________________________________________
8
December 31 1996 1995 1994 1993 1992 __________________________________________________________ (In thousands) Balance sheet data: Total assets $290,662 $279,934 $276,073 $198,960 $150,842 Long-term obligations 45,373 47,377 51,187 17,985 32,693 Stockholders' equity 154,211 152,524 147,924 131,939 71,969
The following tables set forth data regarding the freight revenues, operations, revenue equipment and employees of the Company.
1996 1995 1994 1993 1992 _________________________________________________________ For the year ended December 31: _______________________________ Operating ratio (1) 93.0% 92.6% 89.9% 88.9% 88.8% Average number of truckloads per week (2) 9,277 8,265 6,971 5,759 4,300 Average revenues per tractor per week (2) $2,575 $2,569 $2,613 $2,530 $2,575 Average miles per trip (2) 534 584 617 618 693 Average revenue per mile (2) $1.23 $1.25 $1.26 $1.19 $1.17 At December 31: _______________ Total tractors operated Company owned 2,046 2,078 2,106 1,854 1,460 Owner-Operator owned 419 253 207 0 0 Total tractors 2,465 2,331 2,313 1,854 1,460 Total trailers 7,156 7,190 6,481 5,256 3,925 Number of employees 2,886 2,947 3,238 2,705 2,177 (1) Operating expenses as a percentage of operating revenues. (2) Excludes revenues from logistics services which began in September 1993.
9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table sets forth the percentage relationship of revenue and expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues Year ended December 31 1996 1995 1994 ____________________________________ Operating revenues 100.0% 100.0% 100.0% Operating expenses: Salaries, wages and benefits 37.4 37.9 38.1 Operations and maintenance 19.5 20.1 22.0 Taxes and licenses 2.6 3.0 3.0 Insurance and claims 5.5 4.7 5.0 Communications and utilities 1.5 1.8 1.6 Depreciation and amortization 10.9 11.8 11.5 Gain on disposals of revenue equipment (0.7) Rent and purchased transportation 15.6 12.6 8.0 Other 0.7 0.7 0.7 ____________________________________ Total operating expenses 93.0 92.6 89.9 ____________________________________ Operating income 7.0 7.4 10.1 Interest expense 1.4 1.7 0.6 Interest income (0.5) Other (income) expense (0.1) 0.1 (0.1) ____________________________________ Income before income taxes 5.7 6.1 9.6 Income taxes 2.0 2.2 3.7 ____________________________________ Net income 3.7% 3.9% 5.9% ____________________________________ ____________________________________
10 RESULTS OF OPERATIONS 1996 Compared to 1995 Operating revenues increased to $340 million in 1996 from $333 million in 1995. This 2.1% increase in revenue was due primarily to increased revenue from logistics and dedicated fleet services. Total trucking revenues during 1996 increased slightly compared to 1995. Revenues per mile were $1.23 in 1996 compared to $1.25 in 1995, due to a decrease in the average loaded rate per mile experienced by the Company in 1996. Salaries, wages and benefits were 37.4% of revenues in 1996 compared to 37.9% of revenues in 1995. The decrease was due to owner-operator tractors representing a larger percentage of the average number of total tractors in service during 1996 as compared to 1995, which caused a shift in operating expenses as amounts paid to owner-operators are recorded as purchased transportation. Operations and maintenance expenses decreased to 19.5% of revenues in 1996 from 20.1% of revenues in 1995, despite higher fuel costs. This decrease resulted from the larger percentage of owner-operator tractors used in 1996 and an updated fleet of tractors due to a reduction in the disposal cycle of tractors. Taxes and licenses expense was 2.6% of revenues in 1996 compared to 3.0% in 1995. This decrease was due to various unexpected sales and operating tax refunds received from overpayments of taxes in prior years. Insurance and claims expense was 5.5% of revenues in 1996 compared to 4.7% in 1995. This increase was attributable primarily to unfavorable claims experience during the last quarter of 1996. Depreciation and amortization decreased to 10.9% of revenues in 1996 compared to 11.8% of revenues in 1995. This decrease resulted primarily from a change in accounting estimate to increase the estimated salvage value of substantially all of the Company's trailers to more accurately reflect market conditions. See Note 3 of the Notes to Consolidated Financial Statements. The Company reported gains equal to .7% of operating revenues, or approximately $2.4 million, from the disposal of revenue equipment in 1996. Prior to 1996, the Company traded in revenue equipment and reduced the basis of new additions. Rent and purchased transportation increase to 15.6% of revenues in 1996 compared to 12.6% of revenues in 1995. This increase was attributable primarily to the increased use of owner-operators by the Company and increased expenses related to logistics services. Interest expense was $4,844,062 in 1996 compared to $5,524,467 in 1995. This decrease in interest expense was due to the decrease in average outstanding debt during 1996 as compared to 1995. The effective income tax rate increased to 36.1% in 1996 compared to 36.0% in 1995, as described in Note 6 of the Notes to Consolidated Financial Statements. 11 1995 Compared to 1994 Operating revenues grew 13.7% to $333 million in 1995 from $293 million in 1994. This growth was due to the increase in the average number of tractors in service during the year and increased revenues from logistics services. Revenues per mile were $1.25 in 1995 compared to $1.26 in 1994. There were no material rate increases during 1995. Salaries, wages and benefits were 37.9% of revenues in 1995 compared to 38.1% of revenues in 1994. This decrease was due to owner-operator tractors representing a larger percentage of the average number of total tractors in service during 1995 compared to 1994. Operations and maintenance expenses decreased to 20.1% of revenues in 1995 from 22.0% of revenues in 1994. This decrease resulted from the larger percentage of owner-operator tractors used in 1995. Insurance and claims expense was 4.7% of revenues in 1995 compared to 5.0% in 1994. This decrease was due principally to improvement in claims handling and experience. Depreciation and amortization increased slightly in 1995 to 11.8% of revenues from 11.5% of revenues in 1994. This increase resulted from the Company reducing its trade-in cycle of tractors during 1995, a reduced utilization of tractors in 1995 and the addition of a fleet-wide satellite tracking system which was installed in the latter part of 1994. This was partially offset by an increase in the use of owner-operators and expanded revenues from logistics services. Rent and purchased transportation rose to 12.6% of revenues in 1995 compared to 8.0% of revenues in 1994. The increase was attributable primarily to increased use of owner-operators and expenses incurred related to the Company's logistics services. Interest expense was $5,524,467 in 1995 compared to $1,801,981 in 1994. This increase in interest expense was due to the increase in average outstanding debt during 1995. The effective income tax rate decreased to 36.0% in 1995 from 38.8% in 1994, as described in Note 6 of the Notes to Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The Company's business continues to require significant investments in new revenue equipment and office and terminal facilities. These investments have been financed largely from cash provided by operating activities, secured and unsecured borrowing and unsecured credit facilities during the past three years. Net cash provided by operating activities was approximately $53.7 million in 1996, $55.4 million in 1995, and $55.8 million in 1994. At December 31, 1996, the Company had total outstanding obligations of $60 million related to purchases of revenue equipment. 12 The Company expects to have expenditures, net of sales, of approximately $48 million for additional revenue equipment in 1997. The Company expects to fund these expenditures through cash provided by operating activities, secured borrowings, or existing credit facilities. Prevailing interest rates and the market for used revenue equipment may affect the timing of the Company's purchase of new and replacement revenue equipment. Historically, cash provided by operating activities, secured and unsecured borrowing and existing credit facilities have been sufficient to satisfy substantially all of the Company's working capital and capital expenditure requirements. The Company has separate bank lines of credit providing for borrowings of up to $30 million and $5 million, respectively, with interest at the lower of the bank's prime rate or the 30-day LIBOR rate plus .45%. At December 31, 1996, there was $25.1 million outstanding under these lines of credit. Management expects to maintain these lines of credit for an indefinite period. In 1995, the Company announced a plan to repurchase 1,000,000 of its shares of common stock. The Company repurchased 586,100 of its shares during 1996 and 413,900 of its shares during 1995 at the aggregate costs of approximately $11.5 million and $7.8 million, respectively. Primarily as a result of the repurchase of these shares, the Company's weighted average common shares and common share equivalents have decreased from 13,097,586 in 1994 to 12,244,873 in 1996 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Consolidated Financial Statements and Financial Statement Schedules are included on pages 28 to 46. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages and certain other information about the Company's directors, executive officers and other officers as of March 7, 1997 are set forth below: Name Age Position Michael S. Starnes 52 Chairman of the Board, President, Chief Executive Officer and Director James W. Welch 53 Senior Vice President - Marketing and Director M. J. Barrow 52 Senior Vice President - Finance and Administration, Secretary - Treasurer and Director Mike Reaves 52 Senior Vice President - Driver Services Robert P. Hurt 62 Vice President - Maintenance, Assistant Secretary and Director John W. Hudson 56 Vice President - Human Resources Jerry L. Stairs 55 Vice President - Safety and Risk Management Kenneth B. Stonebrook 35 Vice President - Asset Utilization Carl J. Mungenast 57 Advisor to the Chairman and Director Daniel P. Goodspeed 30 Controller Morris H. Fair 67 Director Jack H. Morris, III 66 Director 14 Michael S. Starnes has served as a director, Chief Executive Officer and President of the Company since 1978. In 1986, Mr. Starnes was named Chairman of the Board. Mr. Starnes is also a director of RFS Hotel Investors, Inc., a real estate investment trust. James W. Welch joined the Company in 1982 as a director and Vice President- Sales. In 1989, Mr. Welch was named Senior Vice President-Marketing of the Company and is an executive officer of the Company. M. J. Barrow joined the Company in 1982 as Controller and Treasurer. Shortly thereafter, he was elected as a director of the Company and named Vice President-Finance. Mr. Barrow was named Secretary-Treasurer of the Company in 1986 and Senior Vice President-Finance of the Company in 1989. In 1996, he was named Senior Vice President - Finance and Administration. Mike Reaves joined the Company on June 20, 1994 and was named Vice President-Driver Services of the Company in 1995. In 1996, he was named Senior Vice President - Driver Services. Prior to joining the Company, Mr. Reaves was employed by Yellow Corporation, the parent company of several less-than-truckload carriers, for more than five years in various sales management positions. Robert P. Hurt joined the Company in 1983 as a director and Vice President- Operations and Maintenance. Mr. Hurt was named Vice President-Maintenance of the Company in 1984. John M. Hudson joined the Company in 1990 and was named Vice President- Human Resources of the Company in 1991 and Vice President-Process and Individual Development of the Company in 1994. In 1996, he resumed the position of Vice President - Human Resources Jerry L. Stairs joined the Company in 1986 and was named Vice President- Safety and Risk Management of the Company in 1993. Kenneth B. Stonebrook joined the Company 1983 and was named Vice President-Human Resources of the Company in 1994. He was named Vice President and General Manager - Southeast Region in 1996 and became Vice President - Asset Utilization in 1997. Carl J. Mungenast joined the Company as Executive Vice President and Chief Operating Officer in April 1994. Mr. Mungenast was elected as a director of the Company in May 1994. In June 1996, for health reasons, Mr. Mungenast's duties were curtailed and he was named Advisor to the Chairman. Mr. Mungenast was employed by Sears Roebuck and Company from 1958 until his retirement in December 1993. At the time of his retirement, he was Senior Vice President for Sears Logistics Services in Itasca, Illinois and responsible for all distribution, transportation and home delivery services for Sears. Daniel P. Goodspeed joined the Company in 1995 and was named Controller of the Company in 1997. Mr. Goodspeed was employed by Deloitte & Touche LLP from October 1991 until he joined the Company. Morris H. Fair has served as a director of the Company since 1986. Mr. Fair has been a Senior Vice President of Union Planters Corporation, a bank holding company, for more than five years. 15 Jack H. Morris, III has served as a director of the Company since 1986. Mr. Morris has been Chief Executive Officer of Auto Glass of Memphis, Inc. for more than five years. The Amended and Restated Bylaws of the Company provide for a Board of Directors consisting of not less than three members, which number may be fixed from time to time by resolution of the Board of Directors. The term of each director expires at the next annual meeting of shareholders following the election of the director. 16 ITEM 11. EXECUTIVE COMPENSATION The following table and related notes summarizes the compensation paid by the Company to its Chief Executive Officer and the four other most highly compensated executive officers for the three fiscal years ended December 31, 1996.
Summary Compensation Table Annual Compensation Long Term Other Compensation Compensation ______________________________________________________________________________________ Name and Retirement Life Principal Position Year Salary Bonus Options Savings Plan(1) Insurance(2) ________________________________________________________________________________________________________________________ Michael S. Starnes 1996 $325,728 -- 30,000 -- $63,643 Chairman of Board, 1995 325,246 -- -- -- 64,238 President and Chief 1994 313,190 $29,096 -- $ 834 73,775 Executive Officer Carl J. Mungenast(3) 1996 103,838 -- 25,000 3,931 -- Advisor to the Chairman 1995 205,815 -- 40,000 4,620 -- 1994 190,401(4) 18,500 50,000 -- -- James W. Welch 1996 179,178 -- 20,000 4,750 5,887 Senior Vice President - 1995 188,178 -- -- 4,620 4,387 Marketing 1994 179,178 16,574 20,000 834 4,052 M.J. Barrow 1996 131,765 -- 20,000 3,294 5,984 Senior Vice President - 1995 138,365 -- -- 3,170 4,667 Finance and Administration 1994 135,313 12,188 20,000 3,589 4,313 Secretary-Treasurer Mike Reaves 1996 123,077 -- 20,000 3,736 -- Senior Vice President - 1995 94,071 900 5,000 3,736 -- Driver Services 1994 46,731 4,050 5,000 862 -- (1) The Company's contribution to the named individual's account in the Company's Retirement Savings Plan. The Company's Profit Sharing Plan was merged into the Retirement Savings Plan in 1996. (2) Premiums paid by the Company on split-dollar life insurance policies covering the named individual. Upon death of an individual, the Company will be reimbursed the amount it has paid in premiums. (3) Mr. Mungenast was employed as Executive Vice President and Chief Operating Officer of the Company from April 1994 to June 1996. (4) The amount listed under this column included $44,247 of reimbursed relocation expenses.
17 The following table sets forth information with respect to stock options granted to the Chief Executive Officer and each of the four other most highly compensated executive officers during the year ended December 31, 1996.
Individual Grants _________________________________________________________________________ Potential realizable value at assumed % of annual rates Number of Total of stock price Securities Options Exercise appreciation for Underlying Granted to or Base option term Options Employees in Price Expiration _____________________ Name Granted (#) Fiscal Year ($/SH) Date 5% 10% ____ ___________ _____________ _________ __________ ____ _____ Michael S. Starnes 30,000 1.9% $18.00 2/04/06 $339,603 $860,620 Carl J. Mungenast 25,000 1.6% $18.00 2/04/06 $283,602 $717,184 James W. Welch 20,000 1.3% $18.00 2/04/06 $226,402 $573,747 M.J. Barrow 20,000 1.3% $18.00 2/04/06 $226,402 $573,747 Mike Reaves 20,000 1.3% $18.00 2/04/06 $226,402 $573,747
18 The following table sets forth information with respect to stock options exercised by the Chief Executive Officer and each of the four other most highly compensated executive officers during the year ended December 31, 1996.
Aggregated Option Exercises in 1996 and Year-End Value Table Number of Value of Unexercised Unexercised Options In-the-Money Options Shares At December 31, 1996 At December 31, 1996(1) Acquired Value Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable Michael S. Starnes -- -- -- 90,000 -- -- Carl J. Mungenast -- -- 16,000 49,000 -- -- James W. Welch 50,000 $731,250 40,000 40,000 $364,900 -- M.J. Barrow -- -- 40,000 40,000 364,900 -- Mike Reaves -- -- -- 30,000 -- -- (1) This amount is the aggregate of the number of options multiplied by the difference between the last sale price of $16.31 of the Common Stock on the last trading day in 1996 minus the exercise price for those options.
19 Employment Contracts ____________________ The Company has employment agreements with Michael S. Starnes, Carl J. Mungenast, James W. Welch and M.J. Barrow. Under each of these employment agreements, the Executive Compensation Committee of the Company's Board of Directors determines the annual base salary of the executive officer and may award discretionary bonuses to the executive officer. Each executive officer is entitled to participate in all employee benefit plans generally available to the Company's employees. The Company shall reimburse all ordinary and necessary business expenses incurred by each of these executive officers. Each of these employment agreements provide that the employment of the executive officer may be terminated by either the Company or the executive officer upon thirty days notice. Mr. Mungenast's and Mr. Welch's employment agreements contain certain non-competition and confidentiality provisions which continue after the term of their employment. Compensation of Director ________________________ Directors who are not full-time employees receive a fee of $1,500 for each meeting of the Board of Directors they attend and for each Committee meeting they attend if not held on a day on which a meeting of the Board of Directors is held. Directors who are also officers of the Company receive no additional compensation for services as directors. Under the Company's Non-Employee Director Stock Option Plan, which was approved by the shareholders, each non-employee director received on September 14, 1994, an automatic, non- discretionary award of an option to purchase 2,500 shares of Common Stock and all new non-employee directors will receive a similar award upon their election to the Board. The option price per share is equal to the fair market value of the Common Stock on the date of the grant. Each stock option shall vest and become exercisable in five (5) equal annual installments on the anniversary dates of the date of the grant. If a non-employee director ceases to be a director of the Company for any reason other than death or disability, all options granted to him or her shall immediately terminate; provided, however, the non-employee director shall have thirty (30) days from the date on which he or she ceased to be a director to exercise any portion of the option which was exercisable on the date that the non-employee director ceased to be a director of the Company. Compensation Committee Interlocks and Inside Participation in Compensation Decisions ______________________________________________ Compensation decisions regarding the executive officers of the Company are made by the Executive Compensation Committee of the Company's Board of Directors. The Executive Compensation Committee consists of Michael S. Starnes, the Company's President and Chief Executive Officer, and the Company's two non-employee directors, Morris H. Fair and Jack H. Morris, III. 20 Compliance With Section 16(a) of the Securities Exchange Act of 1934 ____________________________________ Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than ten-percent shareholders also are required by rules promulgated by the SEC to furnish the Company with copies of all Section 16(a) forms they file. The Company believes that, during the fiscal year ended December 31, 1996, all filing requirements under Section 16(a) of the Exchange Act applicable to its officers, directors and greater than ten percent beneficial owners were complied with on a timely basis. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company's authorized capital stock consists of 20,000,000 shares of Common Stock, par value $.01 per share. As of March 7, 1997, the Company had 12,009,633 shares outstanding. The following table sets forth certain information as of March 7, 1997, with respect to the beneficial ownership of the Company's Common Stock by (i) each person known to the Company to be the beneficial owner of more than 5% of the Company's Common Stock; (ii) each director of the Company; (iii) each executive officer named in the Summary Compensation Table in Item 11; and (iv) all directors and executive officers as a group. 21
OWNERSHIP OF COMMON STOCK Name of Amount and Nature of Percent Beneficial Owner Beneficial Ownership(1) of Class ________________ _______________________ _________ Michael S. Starnes c/o M.S. Carriers, Inc. 3171 Directors Row Memphis, Tennessee 38116 ......... 3,106,058 25.9% Wellington Management Company 75 State Street Boston, Massachusetts 02109 ..... 1,299,780(2) 10.8% The Capital Group Companies, Inc. and Capital Research and Management Company 333 South Hope Street Los Angeles, CA 90071 .......... 837,000(3) 7.0% FMR Corp. 82 Devonshire Street Boston, MA 02109 ............... 689,500(4) 5.7% Carl J. Mungenast ................. 16,395(5) * James W. Welch .................... 146,464(6) 1.2% M.J. Barrow ....................... 52,334(7) * Robert P. Hurt .................... 41,785(8) * Mike Reaves ....................... 775(9) * Morris H. Fair .................... 20,000(10) * Jack H. Morris, III ............... 23,000(11) * All executive officers and directors as a group ...................... 3,406,811 28.3% *Indicates less than 1%. (1) Beneficial ownership of Common Stock consists of sole voting and investment power except as otherwise indicated. (2) According to a Schedule 13G (Amendment No. 9) dated January 24, 1997, Wellington Management Company, LLP claims as of December 31, 1996, shared voting power with respect to 892,780 shares and shared investment power with respect to 1,299,780 shares. Wellington Management Company, LLP does not claim sole voting power or sole investment power with respect to any of these shares. 22 (3) According to a Schedule 13G (Amendment No. 2) dated February 12, 1997, The Capital Group Companies, Inc. and Capital Research and Management Company, claim as of December 31, 1996 sole investment power with respect to 837,000 shares. Neither Capital Group Companies, Inc. nor Capital Research and Management Company claim sole voting power or shared voting power with respect to any of these shares. (4) According to a Schedule 13G dated February 14, 1997, FMR Corp. claims as of December 31, 1996, sole voting power with respect to 108,000 shares and sole investment power with respect to 689,500 shares. FMR Corp. does not claim shared voting power or shared investment power with respect to any of these shares. (5) The shares of Common Stock shown as beneficially owned by Carl J. Mungenast represent 395 shares allocated to his account in the Company's Retirement Savings Plan and 16,000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. (6) The shares of Common Stock shown as beneficially owned by James W. Welch represent 100,000 shares owned directly by him, 6,464 shares allocated to his account in the Company's Retirement Savings Plan and 40,000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. (7) The shares of Common Stock shown as beneficially owned by M. J. Barrow represent 7,931 shares owned directly by him, 60 shares owned by him as custodian for his children, 4,343 shares allocated to his account in the Company's Retirement Savings Plan and 40,000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. (8) The shares of Common Stock shown as beneficially owned by Robert P. Hurt represent 17,600 shares owned directly by him, 4,185 shares allocated to his account in the Company's Retirement Savings Plan and 20,000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. (9) The shares of Common Stock shown as beneficially owned by Mike Reaves represent 775 shares allocated to his account in the Company's Retirement Savings Plan. (10) The shares of Common Stock shown as beneficially owned by Morris H. Fair represent 19,000 shares owned directly by him and 1000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. (11) The shares of Common Stock shown as beneficially owned by Jack H. Morris represent 22,000 shares owned directly by him and 1000 shares which he may acquire through the exercise of stock options within 60 days of March 7, 1997. 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Starnes owns 20% and his brother, C.R. Bobby Starnes, owns 40% of the common stock of Southern Drayage, Inc., a Mississippi corporation ("SDI"). SDI is a motor common carrier providing services in markets which are not served by the Company. During 1996, the Company paid SDI $547,000 for transportation services provided by SDI to the Company's logistics operations. The terms on which SDI provided services to the Company were no less favorable than those which the Company could have obtained from other carriers. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules. (1) The following consolidated Financial Statements of the Company and its Subsidiaries are included herein on the page indicated. Page No. Report of Independent Auditor 29 Consolidated Balance Sheets 30-31 Consolidated Statements of Income 32 Consolidated Statements of Stockholders' Equity 33 Consolidated Statements of Cash Flow 34 Notes of Consolidated Statements 35-45 (2) Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the Company is included herein on page 46. (3) Exhibits -- An Exhibit Index of the exhibits required by Item 601 of Regulation S-K is included herein on page 26-27. (b) Reports on Form 8-K. The Company did not file any report on Form 8-K during the last quarter of 1996. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. M.S. Carriers, Inc. (Registrant) By: s/ Michael S. Starnes Michael S. Starnes Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. s/ Michael S. Starnes Chairman of the Board, President, Michael S. Starnes Chief Executive Officer and March 28, 1997 Director Date s/ Carl J. Mungenast Advisor to the Chairman and Carl J. Mungenast Director March 28, 1997 Date s/ James W. Welch Senior Vice President - March 28, 1997 James W. Welch Marketing and Director Date s/ M.J. Barrow Senior Vice President - March 28, 1997 M.J. Barrow Finance and Administration, Date Secretary-Treasurer and Director s/ Robert P. Hurt Vice President - Maintenance, March 28, 1997 Robert P. Hurt Assistant Secretary and Director Date Jack H. Morris, III Director Morris H. Fair Director s/ Daniel P. Goodspeed Controller March 28, 1997 Daniel P. Goodspeed Date 25 EXHIBIT INDEX Exhibit Page Number or Incorporation Number Description By Reference 3(i).1 Restated Charter of M.S. Carriers, Incorporated by reference from Inc. exhibits to the registrant's Registration Statement on Form S-1 (Registration Number 33-12070). 3(i).2 Articles of Amendment to Charter Incorporated by reference from of M.S. Carriers, Inc. exhibits to the registrant's Registration Statement on Form S-3 (Registration Number 33-63280). 3(ii) Amended and Restated By-Laws of M.S. Incorporated by reference from Carriers, Inc. exhibits to the registrant's Registration Statement on Form S-3 (Registration Number 33-63280). 10.1 Incentive Stock Option Plan Incorporated by reference from exhibits to the registrant's Registration Statement on Form S-1 (Registration Number 33-12070). 10.2 Amendment to Incentive Stock Option Incorporated by reference from Plan exhibits to the registrant's Registration Statement on Form S-1 (Registration Number 33-12070). 10.3 1993 Stock Option Plan Incorporated by reference from exhibits to the registrant's Registration Statement on Form S-3 (Registration Number 33-63280). 10.4 Non-Employee Directors Stock Option Incorporated by reference Plan from registrant's Proxy Statement dated March 31, 1995. 10.5 Employment Agreements with James W. Incorporated by reference Welch, M.J. Barrow and Robert P. from exhibits to the Hurt registrant's Statement on Form S-1 (Registration Number 33-12070). 10.6 Employment Agreement with Michael S. Incorporated by reference Starnes from exhibits to the registrant's 2nd Quarter 1995 Form 10-Q. 26 10.7(i) Employment Agreement with Carl J. Incorporated by reference Mungenast from exhibits to the registrant's 2nd Quarter 1995 Form 10-Q. 10.7(ii) Amendment to Employment Agreement Page 47-48 with Carl J. Mungenast 10.8 1993 Incentive Plan for Designated Incorporated by reference Key Employees from exhibits to the registrant's 2nd Quarter 1995 Form 10-Q. 10.9 M.S. Carriers, Inc. 1996 Stock Incorporated by reference Option Plan from exhibits to the registrant's Proxy Statement dated April 4, 1996 21 Subsidiaries of the Registrant Page 49 27 Financial Data Schedule NOT INCLUDED WITH PAPER FILING 27 Annual Report on Form 10-K Item 8, Item 14(a)(1) and (2), (c) and (d) Index of Financial Statements and Financial Statement Schedule Financial Statements and Supplementary Data Certain Exhibits Financial Statement Schedule Year ended December 31, 1996 M.S. Carriers, Inc. Memphis, Tennessee 28 Report of Independent Auditors Board of Directors M.S. Carriers, Inc. We have audited the accompanying consolidated balance sheets of M.S. Carriers, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of M.S. Carriers, Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. s/ Ernst & Young LLP Memphis, Tennessee January 17, 1997 29 M.S. Carriers, Inc. and Subsidiaries Consolidated Balance Sheets
December 31 1996 1995 --------------------------------- Assets Current assets: Cash and cash equivalents $ 1,153,993 $ 486,459 Accounts receivable: Trade, net 33,018,388 27,643,708 Officers and employees 1,506,247 1,181,729 ____________ ____________ 34,524,635 28,825,437 Recoverable income taxes 5,870,263 4,277,297 Deferred income taxes 3,755,000 4,136,679 Prepaid expenses and other 4,898,183 5,125,254 ____________ ____________ Total current assets 50,202,074 42,851,126 Property and equipment: Land and land improvements 6,110,279 5,568,043 Buildings 30,128,055 28,589,080 Revenue equipment 260,026,924 254,132,265 Service equipment and other 37,014,110 33,757,292 Construction in progress 177,218 3,218,800 ____________ ____________ 333,456,586 325,265,480 Accumulated depreciation and amortization 96,240,862 91,407,638 ____________ ____________ 237,215,724 233,857,842 Other assets 3,243,916 3,225,277 ____________ ____________ Total assets $290,661,714 $279,934,245 ____________ ____________ ____________ ____________
30 M.S. Carriers, Inc. and Subsidiaries Consolidated Balance Sheets (continued)
December 31 1996 1995 ____________________________________ Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 7,288,149 $ 4,336,847 Accrued compensation and related costs 3,125,694 2,578,420 Other accrued expenses 6,608,104 5,552,364 Claims payable 11,694,210 13,142,682 Current maturities of long-term obligations 14,315,462 16,666,155 ___________ ____________ Total current liabilities 43,031,619 42,276,468 Long-term obligations, less current maturities 45,373,288 47,376,558 Deferred income taxes 48,045,423 37,757,200 Commitments and contingencies Stockholders' equity: Common Stock, $.01 par value: Authorized shares- 20,000,000 Issued and outstanding shares 12,009,633 in 1996 and 12,464,400 in 1995 120,096 124,644 Additional paid-in capital 59,959,590 62,076,687 Retained earnings 96,135,352 92,301,919 Cumulative translation adjustments (2,003,654) (1,979,231) _____________ ____________ Total stockholders' equity 154,211,384 152,524,019 _____________ ____________ Total liabilities and stockholders' equity $290,661,714 $ 279,934,245 ______________ _____________ ______________ _____________ See accompanying notes.
31 M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Income
Year ended December 31 1996 1995 1994 ____________________________________________ Operating revenues $340,235,583 $333,069,506 $292,882,828 Operating expenses: Salaries, wages and benefits 127,236,924 126,176,172 111,492,850 Operations and maintenance 66,224,264 66,961,380 64,497,963 Taxes and licenses 8,972,386 10,024,270 8,746,479 Insurance and claims 18,776,953 15,666,099 14,470,493 Communications and utilities 5,208,967 6,080,563 4,698,024 Depreciation and amortization 37,010,281 39,142,879 33,694,434 Gain on disposals of revenue equipment (2,397,205) Rent and purchased transportation 53,014,083 41,945,874 23,564,113 Other 2,361,881 2,434,767 2,058,001 ____________ ____________ _____________ 316,408,534 308,432,004 263,222,357 ____________ ____________ _____________ Operating income 23,827,049 24,637,502 29,660,471 Other expense (income): Interest expense 4,844,062 5,524,467 1,801,981 Interest income (91,926) (1,448,577) Other (395,488) 24,081 (147,994) ____________ ____________ _____________ 4,356,648 4,099,971 1,653,987 ____________ ____________ _____________ Income before income taxes 19,470,401 20,537,531 28,006,484 Income taxes 7,031,357 7,386,439 10,856,000 ____________ ____________ _____________ Net income $12,439,044 $13,151,092 $17,150,484 _____________ ____________ ____________ _____________ ____________ ____________ Net income per share $1.02 $1.01 $1.31 _____________ ____________ ____________ _____________ ____________ ____________ Weighted average common shares and common share equivalents 12,244,873 13,028,562 13,097,586 _____________ ____________ ____________ _____________ ____________ ____________ See accompanying notes.
32 M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Additional Cumulative Common Stock Paid-in Retained Translation Shares Amount Capital Earnings Adjustments Total ___________________________________________________________________________________ Balance at January 1, 1994 12,875,632 $128,757 $64,118,752 $67,691,557 $ $131,939,066 Net income 17,150,484 17,150,484 Exercise of stock options 2,668 26 19,157 19,183 Translation adjustments (1,185,000) (1,185,000) _______________________________________________________________________________________ Balance at December 31, 1994 12,878,300 128,783 64,137,909 84,842,041 (1,185,000) 147,923,733 Net Income 13,151,092 13,151,092 Repurchase of common stock (413,900) (4,139) (2,061,222) (5,691,214) (7,756,575) Translation adjustments (794,231) (794,231) _______________________________________________________________________________________ Balance at December 31,1995 12,464,400 124,644 62,076,687 92,301,919 (1,979,231) 152,524,019 Net Income 12,439,044 12,439,044 Exercise of stock options 131,333 1,313 801,681 802,994 Repurchase of common stock (586,100) (5,861) (2,918,778) (8,605,611) (11,530,250) Translation adjustments (24,423) (24,423) ____________________________________________________________________________________ Balance at December 31, 1996 12,009,633 $120,096 $59,959,590 $96,135,352 $(2,003,654) $154,211,384 ____________________________________________________________________________________ ____________________________________________________________________________________ See accompanying notes.
33 M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31 1996 1995 1994 _____________________________________________ Operating activities Net income $12,439,044 $13,151,092 $ 17,150,484 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,010,281 39,142,879 33,694,434 Gain on disposals of revenue equipment (2,397,205) Other (324,759) (208,613) 131,483 Deferred income taxes 10,669,902 6,326,521 4,300,000 Changes in operating assets and liabilities: Accounts receivable (5,699,198) 4,959,327 (10,988,038) Current and other assets (1,084,198) (5,407,782) (70,719) Trade accounts payable 2,951,302 (2,004,678) 3,249,456 Other current liabilities 154,542 (585,670) 8,284,040 ______________________________________________ Net cash provided by operating activities 53,719,711 55,373,076 55,751,140 Investing activities Purchases of property and equipment (57,929,668) (76,590,161) (100,346,967) Proceeds from disposals of property and equipment 19,958,710 2,490,800 31,378,170 ______________________________________________ Net cash used in investing activities (37,970,958) (74,099,361) (68,968,797) Financing activities Proceeds from long-term obligations 139,515 59,534,954 Net change in line of credit obligations 12,213,000 12,856,000 (5,985,000) Proceeds from issuance of common stock 802,994 19,183 Repurchase of common stock (11,530,250) (7,756,575) Principal payments on long-term obligations (16,706,478) (16,693,412) (9,654,829) _______________________________________________ Net cash provided by (used in) financing activities (15,081,219) (11,593,987) 43,914,308 _______________________________________________ Increase (decrease) in cash and cash equivalents 667,534 (30,320,272) 30,696,651 Cash and cash equivalents at beginning of year 486,459 30,806,731 110,080 _______________________________________________ Cash and cash equivalents at end of year $ 1,153,993 $ 486,459 $ 30,806,731 _______________________________________________ _______________________________________________ See accompanying notes.
34 M.S. Carriers, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 1. Nature of Business M.S. Carriers, Inc. is an irregular route, truckload carrier transporting a wide range of commodities throughout the United States, and the provinces of Ontario and Quebec, Canada, with interline service to Mexico. The Company may transport any type of freight (except certain types of explosives, household goods and commodities in bulk) from any point in the continental United States to any other point in another state over any route selected by the Company. The Company's primary traffic flows are between the Middle South and Southwest, Midwest, Central States, Southeast and Northeast. The principal types of freight transported are packages, retail goods, non-perishable foodstuffs, paper and paper products, household appliances, furniture and packaged petroleum products. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries. The Company performs ongoing credit evaluations and generally does not require collateral. 2. Significant Accounting Policies Organization and Principles of Consolidation The consolidated financial statements include the accounts of M.S. Carriers, Inc. and its wholly-owned subsidiaries, M.S. Carriers Warehousing and Distribution, Inc., M.S. Carriers Logistics Mexico, S.A. de C.V., M.S. International, Inc. and M.S. Global, Inc. Significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its 50% investment in Trasportes EASO S.A. de C.V. (EASO), a Mexican trucking company, by the equity method. This investment is included in other assets in the consolidated financial statements and is approximately $1,197,000 and $1,254,000 at December 31, 1996 and 1995 respectively. The operations of EASO were approximately break even in 1996, 1995 and 1994. Revenue Recognition Operating revenues are recognized on the date the freight is delivered. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 35 Property and Equipment Property and equipment are stated at cost. Depreciation, which includes amortization of assets held under capital leases, is computed on the straight-line method over the estimated useful lives as follows: Buildings 15-30 Years Revenue equipment 3-6 Years Service equipment and other 3-5 Years Tires and tubes purchased as part of revenue equipment are capitalized as a cost of the equipment. Replacement tires and tubes are expensed when placed in service. Foreign Currency Translation The functional currency of the Company's foreign subsidiary and equity investee is the local currency, the Mexican peso. Balance sheet accounts are translated at exchange rates in effect at the end of the year and income statement accounts are translated at average exchange rates for the year. Translation gains and losses are included as a separate component of stockholders' equity. Transaction gains and losses included in the statement of income were not significant. Effective January 1, 1997, Mexico is considered to be a highly inflationary economy. As a result, the functional currency will change from the local currency to the reporting currency and translation gains and losses will be made to income beginning in the first quarter of 1997 rather than as a separate component of stockholders' equity. Income Taxes The Company accounts for income taxes using the liability method. Earnings Per Share Earnings per share is computed based on the weighted average number of common shares outstanding during the year, adjusted to include common stock equivalents attributable to dilutive options. 36 Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Stock-Based Compensation The Company accounts for stock-based compensation awards under provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. 3. Change in Accounting Estimate Effective February 1, 1996, the Company changed the estimated salvage value of substantially all of its trailers to more accurately reflect market conditions. This change in accounting estimate decreased depreciation expense by approximately $3,500,000 and increased net income by approximately $2,200,000, or $.18 per share, for the year ended December 31, 1996. 4. Long-Term Obligations Long-term obligations consist of the following:
December 31 1996 1995 ___________________________________ Equipment loans $13,291,078 $25,612,761 Capitalized lease obligations 21,328,672 25,573,952 Revolving line of credit 25,069,000 12,856,000 ___________________________________ 59,688,750 64,042,713 Less current maturities (14,315,462) (16,666,155) ___________________________________ $45,373,288 $47,376,558 ___________________________________ ___________________________________
37 The equipment loans are payable through 1998 in varying monthly installments with interest at rates ranging from 5.7% to 8.12% and $1,000,000 of these loans are secured by revenue equipment with a net book value of approximately $4,100,000. The Company has separate lines of credit available for borrowings up to $30,000,000 and $5,000,000, respectively, with interest at the lower of the bank's prime rate or the 30-day LIBOR rate plus .45% (6.01% and 6.26% at December 31, 1996 and 1995, respectively). There are no commitment fees or compensating balance requirements for the lines of credit, which expire June 1, 1998 and April 30, 1997, respectively. During 1994, the Company entered into sale leaseback transactions related to revenue equipment. These capitalized leases are secured by the related revenue equipment with a net book value at December 31, 1996 and 1995 of approximately $23,100,000 and $26,100,000, respectively, which is net of accumulated amortization of $6,900,000 and $3,900,000, respectively. The remaining lease terms are from 1 to 3 years and contain renewal or fixed price purchase options and guarantees of residual value at the end of the lease terms. Certain of the Company's debt agreements contain covenants including the ratios of notes payable to net worth and notes payable to cash flow. The future maturities of long-term debt and future minimum lease payments under capital lease obligations, by year and in the aggregate, consist of the following at December 31, 1996:
Long-Term Capital Lease Debt Obligations ___________________________________ 1997 $ 8,652,950 $ 7,269,364 1998 29,707,128 8,882,976 1999 8,315,267 ___________________________________ 38,360,078 24,467,607 Amounts representing interest (3,138,935) ___________________________________ Total long-term obligations $38,360,078 $21,328,672 ___________________________________ ___________________________________
38 The Company paid interest of approximately $4,769,000 in 1996, $5,524,000 in 1995 and $1,819,000 in 1994. 5. Claims Payable Under an agreement with its insurance underwriters, the Company self-insures for liability of $1,500,000 for the initial occurence per policy year, $1,250,000 for the second occurrence per policy year, and $1,000,000 for each occurrence thereafter involving bodily injury and property damage. Excess liability is assumed by the insurance underwriters. Reserves for claims are provided in amounts which management considers adequate. The Company self-insures employee health claims up to $175,000 per employee per policy year and workers' compensation claims up to $300,000 per employee per policy year and has provided reserves which management considers adequate for the Company's estimated liability for covered claims. 6. Income Taxes The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense (benefit) consists of the following: 39
Year ended December 31 1996 1995 1994 ____________________________________________ Current: Federal $(3,085,513) $ 1,115,242 $ 5,835,000 State (553,032) (55,324) 721,000 ____________________________________________ (3,638,545) 1,059,918 6,556,000 Deferred: Federal 9,148,595 5,273,783 3,665,000 State 1,521,307 1,052,738 635,000 ____________________________________________ 10,669,902 6,326,521 4,300,000 ____________________________________________ $ 7,031,357 $ 7,386,439 $10,856,000 ____________________________________________ ____________________________________________
The effective tax rate varied from the statutory federal income tax rate of 35% as follows:
Year ended December 31 1996 1995 1994 ______________________________________________ Taxes at statutory rate $ 6,814,640 $ 7,188,136 $ 9,802,269 State income taxes, net of federal tax benefits 696,066 734,215 1,001,231 Other (479,349) (535,912) 52,500 ________________________________________________ $ 7,031,357 $ 7,386,439 $10,856,000 ________________________________________________ ________________________________________________
Income tax payments (refunds) were approximately $(2,046,000) in 1996, $6,593,000 in 1995 and $2,573,000 in 1994. The Company has alternative minimum tax credit carryforwards of approximately $1,057,000 at December 31, 1996 which have no expiration date and which have been utilized for financial statement purposes. 40 Significant components of the Company's deferred tax liabilities and assets as of December 31 are as follows:
1996 1995 ________________________________ Deferred tax liabilities: Property and equipment $48,563,673 $38,075,635 Other - net 1,774,718 1,846,513 _________________________________ Total deferred tax liabilities 50,338,391 39,922,148 Deferred tax assets: Claims payable 4,511,042 4,903,403 Other - net 1,536,926 1,398,224 _________________________________ Total deferred tax assets 6,047,968 6,301,627 _________________________________ Net deferred tax liabilities $44,290,423 $33,620,521 _________________________________ _________________________________
7. Employee Benefit Plans Effective October 1, 1996 the M.S. Carriers, Inc. Profit Sharing Plan and Trust (the Profit Sharing Plan) was merged into M.S. Carriers, Inc. Retirement Savings Plan (the Savings Plan). Pursuant to the merger, the individual account balances of all employees in the Profit Sharing Plan were transferred to the Savings Plan. Concurrent with the merger of the plans, the Savings Plan was amended and restated. The amended and restated Savings Plan is a defined contribution plan under Section 401(k) of the Internal Revenue Code which provides for voluntary contributions by employees and matching contributions by the Company. All employees who are 19 years of age or older and have completed six months of service are eligible for the Savings Plan. The Savings Plan provides each participant with the option of contributing from 1% to 15% of the employee's annual compensation. The Company matches the employee contribution up to 50% of the participant's contribution, but limited to a maximum of 3% of the participant's compensation. The Company's contribution to the Savings Plan, net of forfeitures, was approximately $1,178,000 for 1996, $1,078,000 for 1995 and $840,000 for 1994. The Company's contribution to the Profit Sharing Plan was approximately $323,000 for 1994. No contributions were made to the Profit Sharing Plan by the Company during 1995 and 1996. 8. Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation (Statement 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company's Stock Option Plans (the Option Plans) provide for the granting of either qualified or nonqualified stock options. Options are subject to terms and conditions determined by the Compensation Committee of the Board of Directors. Options granted under the 1986 Incentive Stock Option Plan generally are exercisable in increments of one-third per year beginning two years from the date of grant and expire ten years from the date of grant. Options granted under the 1993 and 1996 Stock Option Plans are exercisable five years from the date of grant. Under the Option Plans, the Company may grant options to purchase up to a total of 2,600,000 shares of common stock at the prevailing market price at the date of grant. Pro forma information regarding net income and earnings per share is required by FASB Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1996 and 1995, respectively: risk-free interest rates of 6.6% and 6.5%; a volatility factor of the expected market price of the Company's common stock of .25; a weighted-average expected life of the options of 7 years, and no dividend payments. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the respective options' vesting period. The Company's pro forma information follows: Year Ended December 31 1996 1995 _______________________________ Pro forma net income $11,676,648 $13,104,073 Pro forma net income per share $ .95 $ 1.01 Because Statement 123 applies only to stock-based compensation awards for 1995 and future years, the pro forma disclosures under Statement 123 are not likely to be indicative of future disclosures until the disclosures reflect all outstanding, nonvested awards. 41 A summary of the Company's stock option plan activity is as follows:
Number of Weighted Shares Under Average Option Exercise Price ______________________________________ Balance at January 1, 1994 384,668 $10.70 Options granted 245,000 21.22 Options exercised (2,668) 7.19 _____________________________________ Balance at December 31, 1994 627,000 14.82 Options granted 45,000 22.61 Options canceled (18,000) 21.31 _____________________________________ Balance at December 31, 1995 654,000 15.18 Options granted 1,539,000 19.03 Options exercised (131,333) 6.11 Options canceled (365,667) 19.86 _____________________________________ Balance at December 31, 1996 1,696,000 $18.37
Options exercisable were 177,999, 229,669 and 214,002 at December 31, 1996, 1995 and 1994, respectively. The weighted-average fair value of options granted during 1996 and 1995 was $8.37 and $9.82, respectively. Exercise prices for options outstanding as of December 31, 1996 ranged from $7.19 to $25.50. The following table segregates option information between ranges of exercise prices as of December 31, 1996:
Exercise Price Less Than Greater Than $10 $10 Total ___________________________________________________ Number of shares under option 144,000 1,552,000 1,696,000 Weighted-average exercise price $ 7.19 $ 19.40 $ 18.37 ___________________________________________________ Weighted-average years of remaining contractual life 4.0 9.0 8.6 Exercisable options 144,000 33,999 177,999 Weighted-average exercise price of exercisable options $ 7.19 $ 21.10 $ 9.85
9. Stockholders' Equity In November 1995, the Board of Directors authorized the purchase of up to one million shares of the Company's common stock in the open market. The Company repurchased and retired approximately 586,000 shares at a cost of approximately $11,500,000 in 1996 and approximately 414,000 shares at a cost of approximately $7,800,000 in 1995 under this authorization. At December 31, 1996, the Company had reserved 772,667 shares of its common stock for issuance pursuant to stock option plans. 10. Significant Customers The Company operates primarily in one business segment, that of a truckload carrier. One customer, Sears, accounted for 10% or more of revenues in 1996, 1995, and 1994 with revenues of $57,358,000, $59,533,000 and $43,876,000, respectively. 11. Commitments and Contingencies The Company has noncancelable contracts to purchase revenue equipment of approximately $66,000,000 during 1997. The Company is involved in certain legal actions and claims arising in the ordinary course of business. It is the opinion of management that such litigation and claims will be resolved without material effect on the Company's financial position or results of operations. 12. Fair Value of Financial Instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents, accounts receivable, and accounts payable: The carrying amounts reported in the balance sheet approximate fair value. Long-term obligations, including current portion: Using a discounted cash flow analyses, the book value approximates fair value based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. 13. Selected Quarterly Data (Unaudited) Summarized quarterly data for 1996 and 1995 follows:
1996 (A) March 31 June 30 September 30 December 31 _______________________________________________________________ Operating revenues $79,690,228 $84,267,277 $85,822,977 $90,455,101 Operating expenses 75,811,677 76,610,270 78,134,832 85,851,755 _______________________________________________________________ Operating income 3,878,551 7,657,007 7,688,145 4,603,346 Other expense 1,132,854 1,099,724 1,044,321 1,079,749 _______________________________________________________________ Income before taxes 2,745,697 6,557,283 6,643,824 3,523,597 Income taxes 1,020,626 2,364,097 2,387,308 1,259,326 _______________________________________________________________ Net income $ 1,725,071 $ 4,193,186 $ 4,256,516 $ 2,264,271 _______________________________________________________________ _______________________________________________________________ Net income per share $.14 $.34 $.35 $.19 _______________________________________________________________ _______________________________________________________________ 1995 March 31 June 30 September 30 December 31 _______________________________________________________________ Operating revenues $81,701,370 $84,541,100 $84,326,406 $82,500,630 Operating expenses 74,973,573 77,221,560 79,399,971 76,836,900 _______________________________________________________________ Operating income 6,727,797 7,319,540 4,926,435 5,663,730 Other expense 849,108 983,678 915,978 1,351,207 _______________________________________________________________ Income before taxes 5,878,689 6,335,862 4,010,457 4,312,523 Income taxes 2,115,000 2,311,123 1,429,377 1,530,939 _______________________________________________________________ Net income $ 3,763,689 $ 4,024,739 $ 2,581,080 $ 2,781,584 _______________________________________________________________ _______________________________________________________________ Net income per share $.29 $.31 $.20 $.22 _______________________________________________________________ _______________________________________________________________
(A) Includes the effect of a change in accounting estimate. See note 3. Schedule II Valuation and Qualifying Accounts M.S. Carriers, Inc.
Column A Column B Column C Column D Column E ______________________________________________________________________________________________________________________ Additions ___________________________________ Balance at Charged to Charged to Balance at Beginning Costs and Other End Description Of Period Expenses Accounts Deductions Of Period ______________________________________________________________________________________________________________________ Year ended December 31, 1996 Deducted from asset accounts: Allowance for doubtful accounts receivable $508,919 $400,000 $394,309 (1) $514,610 Year ended December 31, 1995 Deducted from asset accounts: Allowance for doubtful accounts receivable $492,400 $202,176 $185,657 (1) $508,919 Year ended December 31, 1994 Deducted from asset accounts: Allowance for doubtful accounts receivable $559,881 $233,854 $301,335 (1) $492,400 (1) Uncollectible accounts written off, net of recoveries.
46 EX-10 2 EXHIBIT 10.7(II) AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment is made and entered into this 1st day of June, 1996, by and between M.S. Carriers, Inc. a Tennessee corporation (the "Company") and Carl J. Mungenast, a resident of Germantown, Tennessee (the "Employee"). WHEREAS, the Company and Employee entered into a certain Employment Agreement (the "Agreement") dated the first day of April, 1994; and WHEREAS, the Company and the Employee have determined that it is in their mutual best interests to amend certain provisions of the Agreement to reflect the decrease in the scope of the duties assigned to Employee by the Company. NOW, THEREFORE, in consideration of the premises, the parties do amend the Agreement as follows: Section 2 of the Agreement is deleted in its entirety and the following is substituted in its place: 2. COMPENSATION. (a) Base Salary. Company agrees to pay Employee an annual base salary to be paid to him in regular installments in accordance with the Company's usual payroll procedures. The annual base salary to be paid Employee for the period commencing June 1, 1996, and ending May 31, 1997, is $70,000 which shall be paid on a pro rata basis. Thereafter, the Employee's annual base salary shall be determined by the Company. (b) Employee Benefits. Employee shall be eligible to participate in such employee benefit plans as the Company may make available to its employees in general from time to time provided that Employee shall meet the eligibility requirements of such plans. Notwithstanding anything contained herein to the contrary, Employee acknowledges that he has been advised of the following specific benefits and/or benefits plans and, nonetheless, declines to accept such benefits or be covered by such benefit plans: (i) all medical and dental benefits; (ii) all group life insurance benefits; (iii) all split-dollar insurance benefits; and (iv) all long-term disability benefits. (c) Expense Reimbursement. The Company shall reimburse to Employee all ordinary and necessary business expenses incurred directly in connection with his employment duties hereunder, 47 provided Employee shall satisfactorily substantiate, in such detail as reasonably necessary, the business relationship of such expenses. IN WITNESS WHEREOF, the parties have executed this Amendment on the day and year first above written. COMPANY: M.S. CARRIERS, INC. BY: s/ Michael S. Starnes Michael S. Starnes, Chairman of the Board EMPLOYEE: s/ Carl J. Mungenast CARL J. MUNGENAST 48 EX-21 3 LIST OF SUBSIDIARIES Exhibit 21 Subsidiaries of M.S. Carriers, Inc. Jurisdiction of Subsidiary Incorporation M.S. Carriers Warehousing & Distribution, Inc. Tennessee M.S. Nationwide, Inc. (inactive) Tennessee M.S. Carriers Logistics Mexico, S.A. de C.V. Mexico M.S. International, Inc. Nevada M.S. Global, Inc. Nevada 49 EX-27 4 ART. 5 FINANCIAL DATA SCHEDULES FOR 10-K
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996, AND THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR DECEMBER 31, 1996, AND THE NOTES RELATED THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1996 DEC-31-1996 1,153,993 0 33,532,998 514,610 0 50,202,074 333,456,586 96,240,862 290,661,714 43,031,619 45,373,288 120,096 0 0 154,091,288 290,661,714 0 340,235,583 0 316,408,534 0 0 4,844,062 19,470,401 7,031,357 12,439,044 0 0 0 12,439,044 1.02 1.02
-----END PRIVACY-ENHANCED MESSAGE-----