-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FaMj3KnHB2is0mBdlAtcZ/ibJX080bAKIgEe7NvBoB7qH+wDO5Cc4wgqJMlzTnih cGRTJWB+MPXR7YZX5hfM3w== 0000935721-95-000006.txt : 199507120000935721-95-000006.hdr.sgml : 19950711 ACCESSION NUMBER: 0000935721-95-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 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: 95523717 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 1994 M.S. Carriers, Inc. 3171 Directors Row Memphis, TN 38116 March 28, 1995 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, M.J. Barrow M.J. Barrow, Senior Vice President 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, 1994 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period _____________ to ________________ 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 The aggregate market value of the voting stock held by non- affiliates of the registrant as of March 7, 1995: Common Stock, $.01 par value $321,957,500 The number of shares outstanding of the Registrant s common stock as of March 7, 1995: Common Stock, $.01 par value 12,878,300 shares Documents Incorporated by Reference Portions of the Proxy Statement for the annual shareholders meeting to be held May 5, 1995 are incorporated by reference into Part III. Part I Item 1. Business M.S. Carriers, Inc. is an irregular route, truckload carrier transporting a wide range of general commodities in the eastern two-thirds of 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 (ICC) 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 another 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 U.S. to points in Quebec and Ontario and from points in Quebec and Ontario into the U.S. 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 Southeast, Southwest, Middle South, Central States and Northeast. The average length of a trip (one-way) was approximately 617 miles in 1994 and 618 miles in 1993. 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 truckload 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 publishes its own freight rates instead of using freight rates published for a group of carriers by freight rate publishing bureaus. This allows the Company to offer rates that are more responsive to market conditions and the level of service provided for a particular customer. The largest 25, 10 and 5 customers accounted for approximately 57%, 43% and 33%, respectively, of the Company's revenues during 1994. Most of these customers are large, publicly-held companies. One customer, Sears, accounted for approximately 15% of the Company's revenues during 1994 and 14% in 1993. No customer accounted for more than 10% of the Company's revenues during 1992. 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 computer system, 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 less than 650 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. Drivers 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 contribution. At December 31, 1994, the Company employed 2,220 drivers. 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, in addition to maintaining regular contact between dispatchers and drivers. Since competition for qualified drivers is intense, the Company emphasizes the importance of attracting and retaining qualified drivers. The Company employs seven full-time driver recruiters and regularly advertises in local newspapers. 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. None of the Company's drivers are represented by a collective bargaining unit. In the opinion of management, the Company's relationship with its drivers and other employees is excellent. Revenue Equipment The Company has a policy of purchasing standardized tractors and trailers manufactured to the Company's specifications. At December 31, 1994, the Company owned and operated 2,106 Company- owned tractors and leased 207 tractors owned by independent contractors (owner-operators). The Company's tractors include 2,065 over-the-road and 41 local tractors. The Company owns 6,481 van trailers, of which 2,210 are 48 feet long and 4,271 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. The Company is now maintaining all revenue equipment an additional year for use in its regional distribution operations. The Company constantly monitors the fuel efficiency of its power equipment. The miles- per-gallon average of the entire fleet was approximately 5.77 in 1994. The following table shows the type and age of equipment operated by the Company at December 31, 1994:
Model Year Over-the-Road 48-Foot 53-Foot Tractors Trailers Trailers 1995 290 906 1994 342 275 926 1993 602 422 1,017 1992 341 694 326 1991 250 227 1990 240 501 1989 445 172 1988 139 196 1987 137 1986 81 1985 17 2,065 2,210 4,271
The Company plans to order 2,360 trailers and 933 tractors during 1995. Competition The entire trucking industry is highly competitive. The Company competes primarily with other irregular route truckload carriers. Railroads, less-than-truckload carriers, and contract carriers generally provide competition to a lesser degree. However, any one of them may be significant in one geographic area or at any one time. 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. Several other irregular route truckload carriers have substantially greater financial resources, own more equipment or carry a larger volume of freight than the Company. Employees At December 31, 1994, the Company employed 3,238 persons, of whom 2,220 were drivers, 259 were mechanics and other equipment maintenance personnel, and 759 were support personnel including management and administration. The Company also leased 207 tractors with qualified drivers from independent contractors (owner operators). Regulation The Company is a motor carrier regulated by the Interstate Commerce Commission (the ICC). Motor carrier operations also are subject to safety requirements prescribed by the United States Department of Transportation governing interstate operation. Additionally, such matters as weight and dimensions of equipment are subject to federal and state regulations. Item 2. Properties Office and Terminal Facilities The Company's executive office and principal terminal are located on 3-acre and 48-acre tracts of land, respectively, in Memphis, Tennessee. The principal terminal consists of 52,000 square feet of office space and 41,000 square feet of maintenance facilities. The executive office has 57,000 square feet of office space. The Company owns a 3,000 square foot office and terminal on a 4- acre tract of land in Tupelo, Mississippi and a 18,000 square foot office and maintenance facility on a 9-acre tract of land in Nashville, Tennessee. Additionally, the Company owns office and maintenance facilities of 34,500 square feet in Columbus, Ohio, 16,500 square feet in Laredo, Texas, and 16,500 square feet in Martinsburg, West Virginia. In 1994, the Company acquired a 24-acre tract of land in Atlanta, Georgia. This land was purchased to build a full-service terminal similar to the Columbus facility. 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 maintains insurance in an amount which management believes is sufficient to cover its risks, subject to the Company's practice of self- insuring in the amount of $1,000,000 for any single occurrence resulting from cargo and property damage claims. 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 1994. 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 1994 1st Quarter 28 1/2 20 1/2 2nd Quarter 23 1/4 18 3/4 3rd Quarter 25 1/4 19 1/2 4th Quarter 25 20 1993 1st Quarter 25 1/4 20 1/2 2nd Quarter 25 3/4 20 1/2 3rd Quarter 25 1/2 21 1/4 4th Quarter 26 1/2 19 1/4
As of March 7, 1995 the Company had 272 shareholders of record. 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. 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 1994 1993 1992 1991 1990 (In thousands, except per share amounts) Statement of income data: Operating revenues $292,883 $224,716 $181,303 $152,569 $123,577 Operating expenses: Salaries, wages and benefits 111,493 84,820 66,568 55,648 42,748 Operations and maintenance 64,498 60,880 52,077 44,973 36,088 Taxes and licenses 8,746 6,901 6,040 4,965 4,124 Insurance and claims 14,471 9,545 8,035 7,863 7,245 Communications and utilities 4,698 4,135 3,279 2,803 2,122 Depreciation and amortization 33,694 27,360 21,866 18,186 15,897 Rent and purchased transportation 23,564 4,246 1,358 1,603 948 Other 2,058 1,792 1,706 1,161 1,281 Total operating expenses 263,222 199,679 160,929 137,202 110,453 Operating income 29,661 25,037 20,374 15,367 13,124 Interest expense (1,802) (2,041) (2,463) (2,535) (2,517) Other (expense) income 147 118 68 151 (56) Income before income taxes and cumulative effect of change in accounting for income taxes 28,006 23,114 17,979 12,983 10,551 Income taxes 10,856 9,512 7,405 5,223 4,169 Income before cumulative effect of accounting change 17,150 13,602 10,574 7,760 6,382 Cumulative effect as of January 1, 1993 of change in accounting for income taxes 500 Net income $17,150 $14,102 $10,574 $7,760 $6,382 Earnings per share: Income before cumulative effect of accounting change $1.31 $1.13 $0.97 $0.73 $0.60 Cumulative effect of accounting change 0.04 Net income $1.31 $1.17 $0.97 $0.73 $0.60
December 31 1994 1993 1992 1991 1990 (In thousands) Balance sheet data: Total assets $276,073 $198,960 $150,842 $122,275 $111,223 Long-term obligations 51,187 17,985 32,693 26,799 25,609 Stockholders' equity 147,924 131,939 71,969 61,293 53,373
The following table sets forth data regarding the freight revenues and operations of the Company.
1994 1993 1992 1991 1990 For the year ended December 31: Operating ratio (1) 89.9% 88.9% 88.8% 89.9% 89.4% Average number of truckloads per week (2) 6,971 5,759 4,300 3,324 2,812 Average revenues per tractor per week (2) $2,613 $2,530 $2,575 $2,597 $2,250 Average miles per trip (2) 617 618 693 765 741 Average revenue per mile (2) $1.26 $1.19 $1.17 $1.15 $1.14 At December 31: Total tractors 2,106 1,854 1,460 1,227 1,056 Total trailers 6,481 5,256 3,925 2,478 2,440 Number of employees 3,238 2,705 2,177 1,897 1,726 (1) Operating expenses as a percentage of operating revenues. (2) Excludes revenues from Logistics and Intermodal services, which began in September 1993.
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 1994 1993 1992 Operating revenues 100.0% 100.0% 100.0% Operating expenses: Salaries, wages and benefits 38.1 37.7 36.7 Operations and maintenance 22.0 27.1 28.7 Taxes and licenses 3.0 3.1 3.3 Insurance and claims 5.0 4.3 4.4 Communications and utilities 1.6 1.8 1.8 Depreciation and amortization 11.5 12.2 12.1 Rent and purchased transportation 8.0 1.9 .8 Other 0.7 0.8 1.0 Total operating expenses 89.9 88.9 88.8 Operating income 10.1 11.1 11.2 Interest expense (0.6) (0.9) (1.4) Other income 0.1 .1 .1 Income before income taxes and cumulative effect of change in accounting for income taxes 9.6 10.3 9.9 Income taxes 3.7 4.2 4.1 Income before cumulative effect of accounting change 5.9 6.1 5.8 Cumulative effect as of January 1, 1993 of change in method of accounting for income taxes 0.2 Net income 5.9% 6.3% 5.8%
Results of Operations M.S. Carriers continued its growth during 1994 as operating revenues were $292.9 million compared to $224.7 million in 1993 and $181.3 million in 1992. The percentage increases in revenues were 30.3%, 23.9%, and 18.8% for 1994, 1993, and 1992, respectively. Management continued to control revenue growth during 1994 in order to maintain the high level of service provided to customers. The Company's increased revenues reflect additional volume from existing customers as well as new volume from the expansion of the Company's customer base. Revenues per mile were $1.26, $1.19, and $1.17 in 1994, 1993, and 1992, respectively. The increase in revenues per mile in 1994 and 1993 resulted from a continued expansion of the Company's regional markets. The Company's regional traffic involves shorter lengths of haul and higher revenues per mile. Revenues from regional operations were 32% of the Company's total revenues in 1994 compared to 24% in 1993 and 7% in 1992. In addition, rates charged to customers were increased in mid-year to provide for increased driver compensation in an attempt to attract and retain qualified drivers. Salaries, wages and benefits were 38.1% of revenues in 1994 compared to 37.7% in 1993 and 36.7% in 1992. Effective January 1, 1994, the Company no longer paid per diem to line-haul drivers as reimbursement for expenses incurred during extended periods of time away from home. Instead, these drivers now receive a higher pay rate per mile which has caused a significant increase in the Company's salary and wages expense. This is offset by the Company's implementation of the use of owner-operators during 1994. Amounts paid to owner-operators are recorded as purchased transportation. The increase in 1993 was due primarily to increased driver pay per mile associated with regional operations. Operations and maintenance expense was 22.0% of revenues compared to 27.1% in 1993 and 28.7% in 1992. The decrease in 1994 is primarily attributable to the discontinuance of per diem payments to line-haul drivers and the use of owner-operators. The decrease in 1993 was attributable to a decrease in fuel prices together with the continued expansion of regional markets which result in lower operating and maintenance costs. Insurance and claims expense was 5.0% of revenue in 1994 compared to 4.3% in 1993 and 4.4% in 1992. The increase in costs is due primarily to adjustments to reflect increased liability related to claims incurred in prior periods. Depreciation and amortization has remained relatively constant as a percentage of revenues during the past three years. Depreciation and amortization as a percentage of revenues were 11.5%, 12.2%, and 12.1% in 1994, 1993, and 1992, respectively. The slight decrease in 1994 is associated with the Company's use of owner operators. Rent and purchased transportation was 8.0% of revenues in 1994 compared to 1.9% in 1993 and 0.8% in 1992. The increase in 1994 is attributable primarily to expenses incurred in conjunction with the use of owner-operators and the increase in the Company's logistics operations. The increase in 1993 reflects expenses incurred related to the Company's logistics operations. Interest expense was $1,801,981 in 1994 compared to $2,041,114 in 1993 and $2,463,486 in 1992. The decrease in interest expense is due to the reduction in average outstanding debt during 1994 and 1993. The effective tax rates are 38.8%, 41.2%, and 41.2% in 1994, 1993, and 1992, respectively. The decrease in 1994 is due primarily to a significant reduction in the Company's nondeductible meals and travel expense resulting from discontinuance of the per diem pay to line-haul drivers. The per diem pay was only partially deductible by the Company for federal income tax purposes. Inflation can be expected to have an impact on the Company's operating costs. The effect of inflation has been minimal over the past three years. In the trucking industry, generally, results of operations tend to show a seasonal pattern as customers reduce shipments during and after the winter holiday season and during the summer months due to temporary plant closings for vacations. 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. Liquidity and Capital Resources The growth of 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 borrowings, unsecured credit facilities and capital markets during the past three years. Net cash provided by operating activities was approximately $55.8 million in 1994, $36.2 million in 1993, and $38.8 million in 1992. At December 31, 1994, the Company had obligations of $67.9 million related to purchases of revenue equipment. The Company expects to purchase approximately $81 million of additional revenue equipment in 1995. The Company anticipates expenditures of approximately $15 million for expansion of its office and terminal facilities. The Company expects to fund these expenditures through available cash, cash provided by operating activities, secured borrowings and 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 borrowings and existing credit facilities have been sufficient to satisfy substantially all of the Company s working capital and capital expenditure requirements. The Company has a bank line of credit providing for borrowing of up to $10 million with interest at the lower of the bank's corporate prime rate or the 30-day LIBOR rate plus .45%. At December 31, 1994, there were no amounts outstanding under this line of credit. Management expects to maintain this line of credit for an indefinite period. Item 8. Financial Statements and Supplementary Data The response to this item is submitted in a separate section of this report. Selected quarterly financial data are found in Note 11 to the financial statements located elsewhere herein. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Information responsive to Items 10, 11, 12 and 13 is incorporated by reference to sections entitled "Election of Directors," "Additional Information Related to the Board of Directors," "Executive Compensation" and "Beneficial Ownership of Common Stock" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held May 5, 1995. Part IV Item 14. Exhibits, Financial Statements and Reports on Form 8-K (a)(1) and (2) -- The response to this portion of Item 14 is submitted as a separate section of this report. (3) Listing of Exhibits Exhibit Number 3A Restated Charter of M.S. Carriers, Inc.* 3B Amended By-Laws of M.S. Carriers, Inc.* 10A Industrial Development Loan Agreement dated as of July 26, 1984 between M.S. Carriers, Inc. and The Industrial Development Board of the City of Memphis and County of Shelby, Tennessee* 10B Incentive Stock Option Plan and Agreements* 10C Amendment to Incentive Stock Option Plan* 10D Restricted Stock Purchase Agreements* 10E Amendments to Restricted Stock Purchase Agreements* 10F Employment Agreements* 10G Matched Stock/Savings Plan* 10H Incentive Compensation Plan** 11 Statement regarding: Computation of Per Share Earnings 22 List of Subsidiaries * Incorporated by references from exhibits to the Registrant's Registration Statement on Form S-1 (Registration Number 33-12070). ** Incorporated by reference from Exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of 1994. (c) Exhibits - The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedule - The response to this portion of Item 14 is submitted as a separate section of this report. 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: Michael S. Starnes Chairman of the Board and President 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. Michael S. Starnes Member of Board of Directors March 27, 1995 and President Carl Mungenast Member of Board of Directors March 27, 1995 and Chief Operating Officer James W. Welch Member of Board of Directors March 27, 1995 and Senior Vice President -Marketing M. J. Barrow Member of Board of Directors March 27, 1995 and Senior Vice President -Finance and Secretary- Treasurer Gary L. Hardeman Member of Board of Directors March 27, 1995 and Senior Vice President- Operations Robert P. Hurt Member of Board of Directors March 27, 1995 and Vice President- Maintenance Jack H. Morris, III Member of Board of Directors March 27, 1995 Morris H. Fair Member of Board of Directors March 27, 1995 Dwight M. Bassett Controller and Director of March 27, 1995 Accounting Index to Exhibits Exhibit Sequential Number Description Page Number 11 Statement regarding: Computation of Per Share Earnings 36 12 List of Subsidiaries 37 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 Certain Exhibits Financial Statement Schedule Year ended December 31, 1994 M.S. Carriers, Inc. Memphis, Tennessee M.S. Carriers, Inc. Form 10-K -- Item 14(a)(1) and (2) Index of Financial Statements and Financial Statement Schedule The following financial statements and report of independent auditors of M.S. Carriers, Inc. are included in Item 8: Report of independent auditors Consolidated balance sheets - December 31, 1994 and 1993 Consolidated statements of income - Years ended December 31, 1994, 1993 and 1992 Consolidated statements of stockholders' equity - Years ended December 31, 1994, 1993, and 1992 Consolidated statements of cash flows - Years ended December 31, 1994, 1993, and 1992 Notes to consolidated financial statements - December 31, 1994 The following financial statement schedule of M.S. Carriers, Inc. is included in Item 14(d): Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Report of Independent Auditors Board of Directors M.S. Carriers, Inc. We have audited the accompanying consolidated balance sheets of M.S. Carriers, Inc. as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the 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 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, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, 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. As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for income taxes in the year ended December 31, 1993. January 27, 1995 M.S. Carriers, Inc. and Subsidiaries Consolidated Balance Sheets
December 31 1994 1993 Assets Current assets: Cash and cash equivalents $ 30,806,731 $ 110,080 Accounts receivable: Trade, net 33,327,599 22,447,815 Officers and employees 457,165 216,972 Other 131,939 33,784,764 22,796,726 Recoverable income taxes 2,727,344 Deferred income taxes 4,774,000 3,375,000 Prepaid expenses and other 4,419,081 3,011,378 Total current assets 73,784,576 32,020,528 Property and equipment: Land and land improvements 6,201,674 4,574,956 Buildings 23,393,800 23,142,732 Revenue equipment 232,771,820 192,608,567 Service equipment and other 28,531,425 18,001,576 Construction in progress 2,813,438 2,242,730 293,712,157 240,570,561 Accumulated depreciation and amortization 95,019,410 77,020,694 198,692,747 163,549,867 Other assets 3,595,196 3,389,836 Total assets $276,072,519 $198,960,231
M.S. Carriers, Inc. and Subsidiaries Consolidated Balance Sheets
December 31 1994 1993 Liabilities and stockholders equity Current liabilities: Trade accounts payable $ 6,341,525 $ 3,092,069 Accrued expenses 8,277,724 4,834,417 Claims payable 12,325,226 8,740,679 Income taxes payable 1,256,186 Current maturities of long-term obligations 16,693,512 6,000,000 Total current liabilities 44,894,173 22,667,165 Long-term obligations, less current maturities 51,186,613 17,985,000 Deferred income taxes 32,068,000 26,369,000 Stockholders equity: Common Stock, $.01 par value: Authorized shares- 20,000,000 Issued and outstanding shares 12,878,300 in 1994 and 12,875,632 in 1993 128,783 128,757 Additional paid-in capital 64,137,909 64,118,752 Retained earnings 84,842,041 67,691,557 Equity adjustment from foreign currency translation (1,185,000) Total stockholders' equity 147,923,733 131,939,066 Total liabilities and stockholders' equity $276,072,519 $198,960,231 See accompanying notes.
M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Income
Year ended December 31 1994 1993 1992 Operating revenues $292,882,828 $224,716,304 $181,303,289 Operating expenses: Salaries, wages and benefits 111,492,850 84,819,837 66,568,051 Operations and maintenance 64,497,963 60,880,244 52,077,299 Taxes and licenses 8,746,479 6,900,546 6,039,373 Insurance and claims 14,470,493 9,545,503 8,035,075 Communications and utilities 4,698,024 4,134,864 3,279,350 Depreciation and amortization 33,694,434 27,360,554 21,865,371 Rent and purchased transportation 23,564,113 4,245,735 1,358,095 Other 2,058,001 1,792,382 1,706,305 263,222,357 199,679,665 160,928,919 Operating income 29,660,471 25,036,639 20,374,370 Other expense (income): Interest expense 1,801,981 2,041,114 2,463,486 Other (147,994) (118,445) (68,288) 1,653,987 1,922,669 2,395,198 Income before income taxes and cumulative effect of change in accounting for income taxes 28,006,484 23,113,970 17,979,172 Income taxes 10,856,000 9,512,000 7,405,000 Income before cumulative effect of accounting change 17,150,484 13,601,970 10,574,172 Cumulative effect as of December 31, 1992 of change in accounting for income taxes 500,000 Net income $ 17,150,484 14,101,970 $ 10,574,172 Earnings per share: Income before cumulative effect of accounting change $1.31 $1.13 $0.97 Cumulative effect of accounting change 0.04 Net income $1.31 $1.17 $0.97 Weighted average common shares and common share equivalents 13,097,586 12,036,386 10,913,012 See accompanying notes.
M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity
Equity Adjustment Additional From Foreign Common Stock Paid-in Retained Currency Shares Amount Capital Earnings Translation Total Balance at January 1, 1992 5,331,333 $ 53,313 $18,224,609 $43,015,415 $ $ 61,293,337 Net income for 1992 10,574,172 10,574,172 Issuance of stock dividend 5,331,333 53,314 (53,314) Issuance of Common Stock upon exercise of stock options 17,000 170 33,830 34,000 Tax benefit of deduction for employee exercise of stock options 67,405 67,405 Balance at December 31, 1992 10,679,666 106,797 18,272,530 53,589,587 71,968,914 Net income for 1993 14,101,970 14,101,970 Issuance of Common Stock upon exercise of stock options 39,666 397 304,022 304,419 Issuance of Common Stock 2,156,300 21,563 45,531,997 45,553,560 Tax benefit of deduction for employee exercise of stock options 10,203 10,203 Balance at December 31, 1993 12,875,632 128,757 64,118,752 67,691,557 131,939,066 Net income for 1994 17,150,484 17,150,484 Issuance of Common Stock upon exercise of stock options 2,668 26 19,157 19,183 Equity adjustment from foreign currency translation (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 See accompanying notes.
M.S. Carriers, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31 1994 1993 1992 Operating activities Net income $ 17,150,484 $ 14,101,970 $ 10,574,172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 33,694,434 27,360,554 21,865,371 Other 131,483 130,819 225,337 Provision for deferred income taxes 4,300,000 4,668,000 3,023,000 Cumulative effect of change in accounting principle (500,000) Changes in operating assets and liabilities: Accounts receivable (10,988,038) (4,294,336) (2,647,453) Current and other assets (70,719) (4,624,213) (1,512,481) Trade accounts payable 3,249,456 (3,262,213) 4,674,370 Other current liabilities 8,284,040 2,613,749 2,633,492 Net cash provided by operating activities 55,751,140 36,194,330 38,835,808 Investing activities Purchases of property and equipment (100,346,967) (66,058,904) (46,135,676) Proceeds from disposals of property and equipment 31,378,170 82,210 702,551 Net cash used in investing activities (68,968,797) (65,976,694) (45,433,125) Financing activities Proceeds from long-term obligations and revolving line of credit 147,271,905 107,724,000 78,222,000 Proceeds from issuance of Common Stock 19,183 45,857,979 34,000 Principal payments on long-term obligations and revolving line of credit (103,376,780) (123,735,365) (71,674,473) Net cash provided by (used in) financing activities 43,914,308 29,846,614 6,581,527 Increase (decrease) in cash and cash equivalents 30,696,651 64,250 (15,790) Cash and cash equivalents at beginning of year 110,080 45,830 61,620 Cash and cash equivalents at end of year $30,806,731 $ 110,080 $ 45,830 See accompanying notes.
M.S. Carriers, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1994 1. Significant Accounting Policies Organization and Principles of Consolidation The consolidation 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. and M.S. International, Inc. Significant intercompany accounts have been eliminated. Business The Company operates primarily as a truckload carrier. 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. 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. Property and Equipment Property and equipment are stated at cost. At the time of trade-in, the cost of revenue equipment is adjusted for any difference between the trade-in value and net book value. 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 4-6 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 Included in other assets in the accompanying consolidated financial statements is an investment in a Mexican trucking company which is accounted for under the equity method. The operations of the Mexican trucking company during 1994 were approximately break even. The Company considers the Mexican peso to be the functional currency. During 1994 the Company recorded an equity translation adjustment to reduce the carrying value of its investment and stockholders' equity by $1,185,000 due to devaluation of the Mexican peso. Income Taxes The Company accounts for income taxes under the provisions of Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. (see Note 4). 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. 2. Debt Long-term obligations consist of:
December 31 1994 1993 Equipment loans $38,369,490 $18,000,000 Capitalized lease obligations 29,510,635 Revolving line of credit 5,985,000 67,880,125 23,985,000 Less current maturities (16,693,512) (6,000,000) $51,186,613 $17,985,000
The equipment loans are payable through 1998 in varying monthly installments with interest at rates ranging from 5.7% to 6.15% and $12,000,000 of these loans are secured by revenue equipment with a net book value of approximately $17,700,000. The Company has a line of credit available for borrowings up to $10,000,000, with interest at the lower of the bank's prime rate or the 30-day LIBOR rate plus .45%. There are no commitment fees or compensating balance requirements for the line of credit, which expires June 1, 1995. The Company may elect through June 1, 1995 to reduce the line of credit by up to $7,500,000 with term loans payable in monthly installments over three to four years. During 1994, the Company entered into sale leaseback transactions related to revenue equipment with an original value of approximately $30,000,000. These capital leases are secured by the related revenue equipment with a net book value at December 31, 1994 of approximately $29,700,000, net of accumulated amortization of $300,000. The leases extend from 3 to 5 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 with financial ratios and a requirement to maintain minimum net worth of $50,000,000. The future maturities of long-term debt and future minimum lease payments under capitalized lease obligations, by year and in the aggregate, consist of the following at December 31, 1994:
Capitalized Lease Debt Obligations 1995 $ 12,756,728 $ 6,291,819 1996 12,321,683 6,371,200 1997 8,652,951 7,224,316 1998 4,638,128 8,840,043 1999 8,304,156 38,369,490 37,031,534 Amounts representing interest (7,520,899) Total long-term obligations $ 38,369,490 $ 29,510,635
The Company paid interest of approximately $1,819,000 in 1994, $2,060,000 in 1993, and 2,432,000 in 1992. 3. Claims Payable Under an agreement with its insurance underwriters, the Company acts as a self-insurer for liability up to $1,000,000 for any single occurrence involving cargo and property damage. Liability in excess of this amount 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 $100,000 and workers' compensation claims up to $250,000 and has provided reserves which management considers adequate for the Company's estimated liability for covered claims. 4. Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement No. 109, Accounting for Income Taxes. The Company adopted the provisions of the new standard in its financial statements for the year ended December 31, 1993. As permitted by Statement 109, prior year financial statements were not restated to reflect the change in accounting method. The cumulative effect as of January 1, 1993 of adopting Statement 109 increased net income by $500,000 and $.04 per share. Under Statement 109, 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 bases 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. Prior to the adoption of Statement 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As a result of the change in the federal statutory rate from 34 percent to 35 percent effective January 1, 1993 resulting from legislation enacted during 1993, the Company recorded an adjustment to increase income tax expense by approximately $550,000 in 1993. Income taxes consist of the following:
Year ended December 31 1994 1993 1992 Current: Federal $ 5,835,000 $4,134,000 $3,458,000 State 721,000 710,000 924,000 6,556,000 4,844,000 4,382,000 Deferred: Federal 3,665,000 4,022,000 2,872,000 State 635,000 646,000 151,000 4,300,000 4,668,000 3,023,000 $10,856,000 $9,512,000 $7,405,000
The effective tax rate varied from the statutory federal income tax rate of 35% in 1994 and 1993 and 34% in 1992 as follows:
Year ended December 31 1994 1993 1992 Taxes at statutory rate $ 9,802,269 $ 8,089,890 $ 6,112,919 Increase (decrease) in taxes arising from: State income taxes, net of federal tax benefits 1,001,231 826,324 709,255 Nondeductible expenses 203,291 501,074 530,244 Other (150,791) 94,712 52,582 $10,856,000 $ 9,512,000 $7,405,000
The Company paid income taxes of approximately $2,573,000 in 1994, $6,949,000 in 1993, and $5,100,000 in 1992. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1994 and 1993 are as follows:
1994 1993 Deferred tax liabilities: Property and equipment $ 30,408,000 $ 25,486,000 Other - net 1,660,000 883,000 Total deferred tax liabilities 32,068,000 26,369,000 Deferred tax assets: Claims payable 4,588,000 3,205,000 Other net 186,000 170,000 Total deferred tax assets 4,774,000 3,375,000 Net deferred tax liabilities $ 27,294,000 $ 22,994,000
5. Employees' Benefit Plans The Company has a profit sharing plan (the Plan) for all employees who are 21 years of age or older and have completed 1,000 hours of service. The Plan provides for discretionary contributions by the Company not to exceed income before federal income taxes for the year and limited to the amount permitted under the Internal Revenue Code as a deductible expense. Each eligible employee may also contribute up to 10% of the employee's annual compensation. The Company's contribution was approximately $323,000 for 1994, $345,000 for 1993, and $275,000 for 1992. The Company also has a defined contribution plan under Section 401(k) (the 401(k) Plan) 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 401(k) Plan which provides each participant with the option of contributing from 1% to 15% of compensation to the 401(k) Plan. 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, net of forfeitures, was approximately $840,000 for 1994, $678,000 for 1993, and $427,000 for 1992. 6. Operating Leases The Company leases revenue equipment under operating leases with terms of less than one year. Rent and purchased transportation includes rental of revenue equipment of approximately $164,000 in 1994, $465,000 in 1993, and $1,358,000 in 1992. Other operating expense includes rentals of certain office, terminal and warehouse facilities of $653,000 in 1994, $481,000 in 1993, and $286,000 in 1992. 7. Stockholders' Equity The Company has stock option plan for key employees and outside directors. Option transactions are summarized as follows:
1994 1993 Options outstanding at beginning of year 384,668 388,334 Options granted 245,000 76,000 Options cancelled (40,000) Options exercised (2,668) (39,666) Options outstanding as of end of year 627,000 384,668 Option price range as of December 31 $2.00-$25.50 $2.00-21.75 Options exercisable at December 31 214,002 144,664
Shares reserved for future grants were 491,000 shares at December 31, 1994. Options are granted at the then-prevailing market price. They become exercisable in equal parts over the succeeding three to five years. In June and July 1993, the Company sold to the public 2,000,000 and 156,300 shares, respectively, of common stock in a secondary public offering. The net proceeds of the sale of $45,553,560 were used to pay off $33,900,000 of long-term debt and to purchase additional revenue equipment. 8. Significant Customers The Company operates in one business segment, that of a truckload carrier. One customer, Sears, accounted for more than 10% of revenues in 1994 and 1993 with revenues of $43,876,000 and $31,949,000, respectively. No customer accounted for more than 10% of revenues in 1992. 9. Commitments and Contingencies The Company has noncancelable contracts to purchase revenue equipment of approximately $81,000,000, net of trade-ins, during 1995. The Company is involved in certain legal actions and claims arising in the ordinary course of business. It is the opinion of management (based on the advice of legal counsel) that such litigation and claims will be resolved without material effect on the Company's financial position. 10. 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: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Debt: The carrying amounts of the Company's borrowings under its line of credit arrangements and long-term debt approximate their fair value at December 31, 1994 and 1993. The fair values of the Company's debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. 11. Selected Quarterly Data (Unaudited) Summarized quarterly data for 1994 and 1993 follows.
1994 March 31 June 30 September 30 December 31 Operating revenues $60,432,420 $69,558,611 $80,303,567 $82,588,230 Operating expenses 56,118,951 61,862,141 71,016,620 74,224,645 Operating income 4,313,469 7,696,470 9,286,947 8,363,585 Other expense 290,532 376,758 473,932 512,765 Income before taxes 4,022,937 7,319,712 8,813,015 7,850,820 Income taxes 1,602,000 2,901,000 3,463,000 2,890,000 Net income $ 2,420,937 $ 4,418,712 $ 5,350,015 $ 4,960,820 Earnings per share: Net income per share $.18 $.34 $.41 $.38
1993 March 31 June 30 September 30 December 31 Operating revenues $49,847,268 $55,164,708 $59,277,923 $60,426,405 Operating expenses 44,687,405 48,646,090 52,286,484 54,059,686 Operating income 5,159,863 6,518,618 6,991,439 6,366,719 Other expense 621,009 718,444 169,371 413,845 Income before taxes and cumulative effect of change in accounting for income taxes 4,538,854 5,800,174 6,822,068 5,952,874 Income taxes 1,871,000 2,388,000 2,967,000 2,286,000 Income before cumulative effect of accounting change 2,667,854 3,412,174 3,855,068 3,666,874 Cumulative effect as of January 1, 1993 of change in accounting for income taxes 500,000 Net income $ 3,167,854 $ 3,412,174 $ 3,855,068 $ 3,666,874 Earnings per share: Earnings per share before cumulative effect of accounting change $.24 $.31 $.30 $.28 Cumulative effect of accounting change .05 Net income per share $.29 $.31 $.30 $.28
Schedule II Valuation and Qualifying Accounts M.S. Carriers, Inc.
Column A Column B Column C Column D Column E Additions Balance at Charge to Charge to Balance at Beginning Costs and Other End Description Of Period Expenses Accounts Deductions Of Period Year ended December 31, 1994 Deducted from asset accounts: Allowance for doubtful accounts receivable $559,881 $233,854 $301,335 (1) $492,400 Year ended December 31, 1993 Deducted from asset accounts: Allowance for doubtful accounts receivable $377,005 $187,594 $ 4,718 (1) $559,881 Year ended December 31, 1992 Deducted from asset accounts: Allowance for doubtful accounts receivable $198,664 $239,200 $60,859 (1) $377,005 (1) Uncollectible accounts written off, net of recoveries.
EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 Statement Regarding Computation of Per Share Earnings M.S. Carriers, Inc.
Year ended December 31 1994 1993 1992 Primary Weighted average shares and share equivalents outstanding 13,097,586 12,036,386 10,913,012 Income before cumulative effect of accounting change $17,150,484 $13,601,970 $10,574,172 Per share amount before cumulative effect of accounting change $1.31 $1.13 $.97 Net income $17,150,484 $14,101,970 $10,574,172 Per share amount $1.31 $1.17 $.97 Fully Diluted Weighted average shares and share equivalents outstanding 13,097,586 12,036,386 10,913,012 Net income $17,150,484 $14,101,970 $10,574,172 Per share amount $1.31 $1.17 $.97
EX-21 3 LIST OF SUBSIDIARIES Exhibit 22 List of Subsidiaries M.S. Carriers, Inc. M.S. Carriers Warehousing & Distribution, Inc. M.S. Nationwide, Inc. (inactive) M.S. Carriers Logistics Mexico S.A. de C.V. M.S. International, Inc. -----END PRIVACY-ENHANCED MESSAGE-----