-----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, QL6OBBCxu/T5mvyRINEX+DxluLKkEoHXuGLVxCthq/qP4rZGZdndzYlphTNEsekq RXbDiuuz/bOxaLNfZSCxYA== 0000801558-97-000002.txt : 19970222 0000801558-97-000002.hdr.sgml : 19970222 ACCESSION NUMBER: 0000801558-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANNON EXPRESS INC CENTRAL INDEX KEY: 0000801558 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710650141 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16386 FILM NUMBER: 97533329 BUSINESS ADDRESS: STREET 1: 1457 ROBINSON STREET 2: P O BOX 364 CITY: SPRINGDALE STATE: AR ZIP: 72765 BUSINESS PHONE: 5017519209 MAIL ADDRESS: STREET 1: PO BOX 364 STREET 2: PO BOX 364 CITY: SPRINGDALE STATE: AR ZIP: 72765 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ( X )QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996 ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________TO_________ Commission File No. 0-16386 CANNON EXPRESS, INC. (Exact name of registrant as specified in its charter) Delaware 71-0650141 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1457 Robinson P.O. Box 364 Springdale, Arkansas 72765 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 751-9209 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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of $.01 par value common stock outstanding at January 31, 1997: 3,147,652 INDEX CANNON EXPRESS, INC. and SUBSIDIARIES PART 1 -- FINANCIAL INFORMATION ITEM 1 -- Financial Statements (Unaudited) Consolidated Balance Sheets as of December 31, 1996 and June 30, 1996. . . . . . . . . . . . . . .1 Consolidated Statements of Income and Retained Earnings for the Three Months and Six Months Ended December 31, 1996 and 1995 . 3 Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1996 and 1995 . . . . . . . . . .4 Notes to Consolidated Financial Statements. . . . . . . . . . . . . . .5 ITEM 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . .6 PART II -- OTHER INFORMATION ITEM 1 -- Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . * ITEM 2 -- Changes in Securities . . . . . . . . . . . . . . . . . . . . * ITEM 3 -- Defaults Upon Senior Securities . . . . . . . . . . . . . . . * ITEM 4 -- Submission of Matters to a Vote of Security-Holders . . . . . 9 ITEM 5 -- Other Information . . . . . . . . . . . . . . . . . . . . . . * ITEM 6 -- Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . * *No information submitted under this caption. PART 1. ITEM 1. Financial Statements (Unaudited) Cannon Express, Inc. and Subsidiaries Consolidated Balance Sheets December 31 June 30 1996 1996 (Unaudited) (Note) Assets Current assets: Cash and cash equivalents $1,914,120 $4,169,919 Marketable securities 995,596 3,188,628 Receivables, net of allowance for doubtful accounts (December 31, 1996-$168,184; June 30, 1996-$171,175): Trade 8,782,546 14,103,923 Other 355,339 227,289 Prepaid expenses and supplies 900,234 1,470,940 Deferred income taxes 2,053,000 672,000 Total current assets 15,000,835 23,832,699 Property and equipment: Land, buildings and improvements 1,172,563 1,148,563 Revenue equipment 80,868,148 74,450,678 Service, office and other equipment 2,313,861 2,290,494 84,354,572 77,889,735 Less allowances for depreciation 21,278,521 19,662,206 63,076,051 58,227,529 Other assets: Receivable from stockholders 23,406 23,406 Restricted cash 1,270,026 770,026 Other 944,645 939,764 Total other assets 2,238,077 1,733,196 $80,314,963 $83,793,424 Note: The balance sheet at June 30, 1996 has been derived from the audited consolidated balance sheet at that date but it does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements. Cannon Express, Inc. and Subsidiaries Consolidated Balance Sheets (Continued) December 31 June 30 1996 1996 (Unaudited) (Note) Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 466,242 $ 1,120,828 Accrued expenses: Insurance reserves 2,977,233 2,553,205 Other 1,853,927 2,141,206 Federal and state income taxes payable 3,317,051 1,596,621 Current portion of long-term debt 12,128,417 12,282,068 Total current liabilities 20,742,870 19,693,928 Long-term debt, less current portion 40,386,750 43,963,848 Deferred income taxes 3,166,000 3,606,000 Other liabilities 229,092 283,719 Stockholders' equity: Common stock: $.01 par value; authorized 10,000,000 shares; issued 3,205,777shares 32,058 32,058 Additional paid-in capital 3,542,356 3,542,356 Retained earnings 12,790,257 11,950,566 Unrealized appreciation(depreciation) on marketable securities, net of income taxes (388,533) 906,836 15,976,138 16,431,816 Less treasury stock, at cost (116,250 shares) 185,887 185,887 15,790,251 16,245,929 $80,314,963 $83,793,424 Note: The balance sheet at June 30, 1996 has been derived from the audited consolidated balance sheet at that date but it does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements. Cannon Express, Inc. and Subsidiaries Consolidated Statements of Income and Retained Earnings Three Months Ended Six Months Ended December 31 1996 1995 1996 1995 (Unaudited) (Unaudited) Operating revenue $26,356,862 $22,205,240 $53,919,717 $43,832,825 Operating expenses and costs: Salaries, wages and fringe benefits 8,821,531 7,706,350 17,901,434 15,111,538 Operating supplies and expense 8,058,311 6,217,455 16,557,144 12,264,739 Taxes and licenses 1,657,190 1,183,170 3,210,852 2,137,175 Insurance & claims 1,023,303 1,421,549 2,262,962 2,775,834 Depreciation and amortization 2,925,951 2,496,246 5,761,328 4,906,542 Rents and purchased transportation 1,952,720 1,107,700 4,210,420 2,050,550 Other 509,943 427,901 911,187 725,626 24,948,949 20,560,371 50,815,327 39,972,004 Operating income 1,407,913 1,644,869 3,104,390 3,860,821 Other income(expense) Interest expense (937,439) (963,424) (1,873,754) (1,812,759) Other income 57,686 235,183 134,055 314,763 (879,753) (728,241) (1,739,699) (1,497,996) Income before income taxes 528,160 916,628 1,364,691 2,362,825 Federal and state income taxes Current 798,000 580,000 1,535,000 1,101,000 Deferred (595,000) (227,000) (1,010,000) (191,000) 203,000 353,000 525,000 910,000 Net income 325,160 563,628 839,691 1,452,825 Retained earnings at beginning of period 12,465,097 22,070,231 11,950,566 21,181,034 Retained earnings at end of period $12,790,257 $22,633,859 $12,790,257 $22,633,859 Earnings per share: Net income per share $0.10 $0.17 $0.26 $0.45 Average shares and share equivalents outstanding 3,239,597 3,239,463 3,244,795 3,244,728
See notes to consolidated financial statements. Cannon Express, Inc. and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended December 31 1996 1995 (Unaudited) Operating activities Net income $ 839,691 $ 1,452,825 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,742,149 4,899,283 Provision for losses on accounts receivable (2,991) 15,000 Provision (credit) for deferred income taxes 1,010,000 (191,000) Loss on disposals of assets 19,179 7,259 Gain on sale of marketable securities 40,438 (74,643) Changes in operating assets and liabilities: Accounts receivable 5,196,318 1,094,795 Prepaid expenses and supplies 570,706 397,366 Accounts payable, accrued expenses, taxes payable, and other liabilities (872,110) 1,300,384 Other assets (19,881) (9,377) Net cash provided by operating activities 12,523,499 8,891,892 Investing activities Purchases of property and equipment (25,122,914) (12,433,273) Purchases of marketable securities (62,743) (307,635) Purchases of restricted investments (500,000) (1,303) Sales of marketable securities 109,044 114,355 Proceeds from the sale of equipment 14,528,064 6,556,907 Net cash used in investing activities (11,048,549) (6,070,949) Financing activities Proceeds from long-term borrowing 22,820,747 12,859,814 Principal payments on long-term debt and capital lease obligations (26,551,496) (9,620,207) Net cash provided by financing activities (3,730,749) 3,239,607 Increase(decrease) in cash and cash equivalen (2,255,799) 6,060,550 Cash and cash equivalents at beginning of period 4,169,919 12,324,394 Cash and cash equivalents at end of period $1,914,120 $18,384,944 See notes to consolidated financial statements. Notes to Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10 - Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended December 31, 1996 are not necessarily indicative of the results that may be expected for the year ended June 30, 1997. For further information, refer to the Company's consolidated financial statements and notes thereto included in its Form 10 - K for the fiscal year ended June 30, 1996. Note B - Net Income Per Share Three Months Ended Six Months Ended December 31 December 31 1996 1995 1996 1995 (Unaudited) (Unaudited) Average number of common shares outstanding 3,147,652 3,147,652 3,147,652 3,147,652 Net effect of dilutive stock warrants and options 91,945 91,811 98,143 97,076 Average shares and share equivalents outstanding 3,239,597 3,239,463 3,244,795 3,244,728 Net income for the period $ 325,160 $ 563,628 $ 839,691 $1,452,825 Per share $.10 $.17 $.26 $.45 Note C - Contingencies A lawsuit has been filed in Phoenix, Arizona against the Company involving a company tractor which allegedly struck the plaintiff. The alleged accident occurred in July of 1995. Although the Company believes it should not be liable for any damages, the plaintiff's attorney has made a demand for approximately $700,000 in damages and has indicated it may pursue punitive damages. In May of 1996, a Company tractor and trailer were involved in an unavoidable fatal traffic accident which was the result of a heart attack suffered by the Company's driver who also died in the accident. The Company is a defendant in three lawsuits in which plaintiffs seek an aggregate of $20,000,000 related to this accident and is also aware of other parties who may have claims related to this accident. The Company believes it has a meritorious defense in these actions and expects to vigorously defend its interests, however, an adverse outcome in one or more of these actions could be expected to have a significant negative impact on the Company's profitability and liquidity. The Company maintained liability insurance with a limit of $1 million per occurrence at the time of these occurrences. Note D - Related Party Transactions In September, the Company entered into a receivables purchase agreement for up to $6 million of its accounts receivable with CUSA, Inc., a limited partnership which includes Alice L. Walton as one of its partners. Ms. Walton, who owns approximately 9% of the outstanding shares of the Company and is on the Company's Board of Directors, is a 9.9% limited partner in CUSA, Inc. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations -- Second Quarter Operating revenue for the second quarter of fiscal 1997 (ended December 31, 1996) increased to $26,356,862 from $22,205,240 representing an increase of $4,151,622 or 18.7% over the comparable period in fiscal 1995. The Company's fleet expanded from 820 trucks at December 31, 1995 to 909 trucks at December 31, 1996. The increase in operating revenue over the same period of fiscal 1996 is primarily attributable to the increased number of shipments to existing customers transported by the Company's larger fleet of trucks and trailers. The Company's revenue from intermodal activities increased by 51.1% in the second quarter of fiscal 1997 when compared to the second quarter of fiscal 1996. Operations of the Company continued to be affected in the second quarter of fiscal 1997 by excess capacity in the truckload industry,and additionally, increased fuel costs and a shortage of qualified drivers for its trucks adversely affected the quarter's results. The Company has increased its sales efforts focusing its attention on adding new customers and increasing shipments for existing customers. Salaries, wages, and fringe benefits, made up primarily of drivers' wages, decreased as a percentage of revenue to 33.5% in the second quarter of fiscal 1997 from 34.7% in the second quarter of fiscal 1996. This decrease was due to the increased revenue from intermodal activities. The Company's drivers were awarded approximately $657,000 in bonuses for the three-month period ended December 31, 1996 as compared with $515,000 awarded during the three-month period ended December 31, 1995. The Company expects that competition for drivers will continue to increase and that future pay increases may be necessary to attract and retain qualified drivers to operate its trucks. Operating supplies and expenses, as a percentage of revenue, increased to 30.6% in the second quarter of fiscal 1997 from 28.0% in the comparable period of fiscal 1996. This increase was primarily due to the Company's average fuel costs which were 19 cents per gallon higher in the second quarter fiscal 1997 than in the second quarter of fiscal 1996. Taxes and licenses increased to 6.3% of revenue in fiscal 1997 from 5.3% in fiscal 1996 due to the timing of new equipment purchases during fiscal 1997. Depreciation and amortization was steady at 11.1% and 11.2% of revenue in the second quarter of fiscal 1997 and fiscal 1996, respectively. Rents and purchased transportation increased to 7.4% of revenue in fiscal 1997 from 5.0% in fiscal 1996 due to the need for additional trailers used in intermodal activities. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations--Cont'd Although operating revenue for the second quarter of 1997 grew by 18.7% over the comparable period of 1996, operating expenses increased by $4,388,578 or 21.3%. Accordingly, the Company's operating ratio increased to 94.7% in the second fiscal quarter of 1997 from 92.6% in the same period of fiscal 1996. Other income and expense was 3.3% of revenue in both the second quarter of fiscal 1997and in the comparable period of fiscal 1996. The Company's effective income tax rate was 38.5% of pre-tax net income for the second quarter of fiscal 1997 and in the second quarter of fiscal 1996. Net income for the second quarter of fiscal 1997 ended December 31, 1996 was $325,160 ($.10 per share) compared to $563,628 ($.17 per share) during the comparable period of fiscal 1996, a decrease of $238,468 or 42.3% for the period. Results of Operations - Six Month Period Operating revenue for the first six months of fiscal 1997 ended December 31, 1996 increased to $53,919,717 from $43,832,825 in the comparable period of fiscal 1996 representing an increase of $10,086,892 or 23.0%. As in the three- month period, the increase in operating revenue over the same period of fiscal 1996 is primarily attributable to the increased number of shipments transported by the Company's larger fleet of trucks and trailers and to increased revenue from intermodal operations which increased by 114.4% when compared to the six-months period of fiscal 1996. Operating income declined to $3,104,390 in the six months ended December 31, 1996 from $3,860,821 during the comparable period of fiscal 1996, a decrease of 19.6%. Salaries, wages, and fringe benefits decreased to 33.2% of revenues in the six-month period of fiscal 1997 from the 34.5% reported in the six-month period of fiscal 1996. This decrease, as in the three-month period, is due to the additional revenue from intermodal activities. Operating supplies and expenses increased to 30.7% of revenue in fiscal 1997 from 28.0% in fiscal 1996. During the six months period, the Company's average cost of fuel was approximately 14 cents per gallon higher than in the same period of fiscal 1996. Taxes and licenses increased to 6.0% of revenue during fiscal 1997 from 4.9% in fiscal 1996 due to increased costs associated with the Company's larger fleet of revenue equipment. Depreciation and amortization, as a percentage of revenue, declined to 10.7% of revenue in fiscal 1997 from 11.2% in the same period of fiscal 1996. Rents and purchased transportation increased to 7.8%of revenue in the first six months of fiscal 1997 from 4.7% during the comparable period of fiscal 1996. As was the case in the three-months period, this increase was caused primarily by the need for additional trailers to support the increased intermodal activities. Other expenses were steady at 1.7% of revenue in both periods. Net income for the first six months of fiscal 1997 ended December 31, 1996 was $839,691 ($.26 per share) compared to $1,452,825 ($.45 per share) during the comparable period of fiscal 1996, a decline of $613,134 or 42.2% for the six-month period. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations--Cont'd Fuel Cost and Availability The Company, and the motor carrier industry as a whole, is dependent upon the availability and cost of diesel fuel. Diesel fuel costs, as mentioned above, increased dramatically in the first two quarters of fiscal 1997 over the same period of fiscal 1996. The Company's operating costs in the three months period ended December 31, 1996 were $825,000 higher due to increased fuel costs when compared to the same period of 1995. Results for the six month period ended December 31, 1996 were negatively impacted in the amount of $1,260,000 due to higher fuel costs. Although the Company implemented fuel surcharges for its customers, these surcharges did not cover the additional fuel costs the Company incurred. Fuel cost increases have historically been passed through to the Company's customers in the form of a rate increase or a fuel surcharge, however, it is unknown if market conditions will allow future rate increases or fuel surcharges to cover additional costs. Future cost increases or shortages of fuel could affect the Company's future profitability. Liquidity and Capital Resources The Company's primary sources of liquidity have been cash flows generated from operations and proceeds from borrowings. The Company typically extends credit to its customers, billing freight charges after delivery. Accordingly, the ability of the Company to generate cash to satisfactorily meet its ongoing cash needs is substantially dependent upon timely payment by its customers. The Company has not experienced significant uncollectible accounts receivable. The Company primarily finances revenue equipment purchases with debt or lease agreements which are secured by the asset being acquired. The Company is not dependent on one source or lender for its credit needs; at the present time the Company has finance agreements in place with eight different lenders. The Company took delivery of 200 new trucks and traded in 193 trucks in the quarter ended December 31, 1996. The Company also took delivery of 100 new air-ride 53 foot trailers in the quarter ended December 31, 1996. The Company has on order an additional 200 trailers with a total cost of approximately $3.3 million which are scheduled to be delivered in the third quarter of fiscal 1997 ending March 31, 1997. The Company expects to finance these trailers through debt or lease agreements. The Company's working capital at December 31, 1996 was a deficit of $5.7 million compared to a surplus of $4.1 million at June 30, 1996. The deficit at December 31 was due to the Company's decision to purchase equipment for cash in the quarter ended December 31, 1996. The Company expects that it will finance these acquisitions in the quarter ending March 31, 1997, which will increase it's working capital by approximately $7.5 million. Historically, working capital needs have been met from cash generated from operations. Management believes that the Company's working capital will be sufficient for its short-term needs. However, to the extent that such revenues are insufficient for such purposes, the Company may be required to rely on additional borrowings or equity offerings to meet its capital asset needs. PART II OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders On November 19, 1996, the Annual Meeting of Stockholders was held in Springdale, Arkansas. The only matter submitted to a vote of the stockholders was the reelection of the Company's current Board of Directors whose terms expire in 1996 and the addition of Alice L. Walton to the Board of Directors. Over 99% of the shares present or represented by proxy were voted in favor of management's nominees. SIGNATURES Pursuant to the requirements 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. CANNON EXPRESS, INC. (Registrant) Date: February 14, 1997 /s/ Dean G. Cannon President, Chairman of the Board, Chief Executive Officer and Chief Accounting Officer Date: February 14, 1997 /s/ Rose Marie Cannon Secretary, Treasurer and Director EX-27 2
5 6-MOS JUN-30-1997 DEC-31-1996 1,914,120 995,596 8,950,730 168,184 0 15,000,835 84,354,572 21,278,521 80,314,963 20,742,870 0 0 0 32,058 0 80,314,963 53,919,717 53,919,717 0 50,815,327 0 0 1,873,754 1,364,691 525,000 0 0 0 0 839,691 0 .26
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