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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-24908
TRANSPORT CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1386925
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1715 YANKEE DOODLE ROAD
EAGAN, MINNESOTA 55121
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (651) 686-2500
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
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to 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.
The aggregate market value of shares held by non-affiliates of the Registrant as
of March 23, 2001 (based on the closing sale price of the Common Stock on that
date) was $37,004,612.
As of March 23, 2001, the Company had outstanding 7,189,477 shares of Common
Stock, $.01 par value.
Documents Incorporated by Reference: Part III, Items 10, 11, 12 and 13
incorporate by reference portions of Transport Corporation of America, Inc.'s
Proxy Statement for the 2001 Annual Meeting of Stockholders.
This Form 10-K report consists of 51 pages (including exhibits: the index to
exhibits is set forth on page 22).
TRANSPORT CORPORATION OF AMERICA, INC.
PART I
ITEM 1. BUSINESS
OVERVIEW
Transport Corporation of America, Inc. (the "Company" or "Transport
America"), which began substantial operations in 1984, provides a wide range of
truckload carriage and logistics services in various lengths of haul in the
United States and parts of Canada. The Company has designed its business to
provide high quality, customized logistics services that allow it to be a
preferred partner or core carrier to major shippers. The Company serves as an
integral part of the distribution system of many of its major customers,
including 3M Company, Clorox Company, Federal Express, Ford Motor Company,
General Mills, Hon Company, P.P.G. Industries, Polaris Industries, S.C. Johnson
& Sons, and Sears, Roebuck & Co. The Company's customers require time-definite
pick-up and delivery to support just-in-time inventory management, specialized
equipment, such as temperature controlled trailers, trailers designed to support
decking, multi-stop loading and unloading, and electronic data interchange
services to automate the exchange of order and load data. The Company also
provides transportation logistics services in which it arranges transportation
for customers with other third-party transportation providers. To support these
complex customer requirements and deliver logistics services cost effectively,
Transport America has developed a sophisticated information management system
which it believes makes it a technological leader in the industry.
The Company carries out its business strategy by assigning an
experienced marketing representative to each customer to tailor its logistics
services, and by providing a wide range of transportation services, including
line-haul, multi-stop capability, regional and local operations, van trailers
with and without refrigeration or temperature control, time-definite pick-up and
delivery, satellite monitored transit, load optimization services, and
information technology services. As part of its mission to serve the logistics
needs of its mostly Fortune 500 customers, Transport America provides dedicated
transportation and logistic services.
In July 1998, the Company acquired North Star Transport, Inc. ("North
Star"), a private truckload carrier based in Eagan, Minnesota. The operations of
North Star were integrated into those of the Company during the second half of
1998. The Company operated Transport International Express, Inc. ("TIE") from
August 1997 through December 1998. Because TIE did not meet Company
expectations, the Company sold the assets and operations of TIE, effective
January 1, 1999. In May 1999, Transport America acquired Robert Hansen Trucking,
Inc. ("RHT"), a private truckload carrier in Delavan, Wisconsin.
In October 1999, the Company announced the formation of TA Logistics,
Inc. ("TA Logistics"), a wholly owned subsidiary. TA Logistics provides services
related to transportation procurement and logistics processes. Operations of TA
Logistics commenced in the first quarter of 2000 and provided approximately $1.0
million of revenue during 2000.
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TRANSPORT CORPORATION OF AMERICA, INC.
On January 17, 2000, Transport America entered into an Agreement and
Plan of Merger (the "Merger Agreement") with USFreightways Corporation based in
Chicago, Illinois, and Zeus Acquisition Corporation, a wholly-owned subsidiary
of USFreightways. On February 8, 2000, the parties terminated the Merger
Agreement by mutual agreement.
CUSTOMER FOCUS AND SERVICES
The Company has designed its business to be a core carrier or preferred
partner to major shippers by providing high quality, tailored logistics service.
The Company serves as an integral part of the distribution system of many of its
major customers, including 3M Company, Clorox Company, Federal Express, Ford
Motor Company, General Mills, Hon Company, P.P.G. Industries, Polaris
Industries, S.C. Johnson & Sons, and Sears, Roebuck & Co. Among the Company's
other major customers are Arctic Cat, Dupont, Golden Valley Foods, Osco Drug
Distributors, Target Corporation, Toys-R-Us, and Walmart/Sams Club. The
principal categories of freight hauled by the Company are department store
merchandise, grocery, industrial, consumer, paper products, and expedited
services.
During 2000, the Company's largest 5, 10, and 25 customers accounted
for approximately 43%, 61%, and 76%, respectively, of operating revenues. During
2000, Sears, Roebuck & Co. accounted for approximately 13% of the Company's
operating revenues.
MARKETING. The Company's marketing personnel seek to strengthen
Transport America's position with existing customers and establish it with
prospective customers by taking advantage of the trend among shippers toward
just-in-time inventory management, private fleet conversions, outsourcing of
transportation requirements, and utilization of core carriers. The Company
employs a marketing force located throughout its primary business areas. Senior
management is also actively involved in marketing, logistics planning, and
customer relations, especially with large national customers.
SERVICE CENTERS. The Company utilizes strategically located service
centers to provide an added level of customer service and support. These
facilities are located in close proximity to major customer locations, thereby
enabling the Company to provide a large amount of equipment, local cartage
service, and local customer service representatives to work directly with
customers on a day-to-day basis. The Company believes these service centers
provide a competitive advantage by allowing it to work more directly and
frequently with customers and provide equipment more rapidly. The Company also
believes that its service centers allow it to maintain closer relationships with
its driver workforce through on-site driver amenities and interactions with
service center personnel.
TIME-DEFINITE SERVICE. In each of its markets, the Company seeks to
provide 100% on-time pickup and delivery, expedited time-in-transit, logistical
planning to coordinate and deliver freight within time-definite parameters, and
advanced information capabilities that provide value to customers. Time-definite
transportation requires pick-ups and deliveries to be performed within narrowly
defined time frames. Time-definite services are particularly
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TRANSPORT CORPORATION OF AMERICA, INC.
important to the Company's customers who operate just-in-time manufacturing,
distribution, and retail inventory systems.
HUMAN RESOURCES
Transport America's human resources are an important element of its
customer-focused business strategy. Employee drivers, independent contractors,
and non-driver employees regularly interact with customers and are ultimately
responsible for customer satisfaction. In order for the Company to grow and
continue to be positioned as a quality carrier of choice for existing and new
customers, the Company regularly evaluates changes to the driver's work
environment that will improve driver satisfaction. The Company continues to
emphasize competitive pay packages, quality at-home time, and "driver friendly"
freight as principal means to attract and retain its driver workforce.
INDEPENDENT CONTRACTORS. The Company believes that a fleet of both
employee drivers and independent contractors is essential if the Company is to
continue its growth. Independent contractors provide their own tractors,
generally have a lower turnover rate than the Company has experienced with
employee drivers, and have a strong emphasis on safety.
The Company enters into operating agreements with its independent
contractors, pursuant to which its independent contractors agree to furnish a
tractor and driver to transport, load and unload goods on behalf of the Company.
These agreements typically have terms of one year and provide for the payment to
independent contractors of fixed compensation for total loaded and empty miles
as well as for performing other ancillary services. Independent contractors must
pay all of their operating expenses and must meet Department of Transportation
("DOT") regulatory requirements, as well as safety and other standards
established by the Company. The Company has implemented an incentive program to
encourage safe driving and good customer service habits.
DRIVER WORK ENVIRONMENT. The Company believes that the type of freight
it typically handles is a significant factor in retention of employee drivers
and independent contractors. Consequently, the Company focuses much of its
marketing efforts on customers with freight that is "driver-friendly" in that it
requires minimal loading or unloading by drivers and customer employees.
The Company utilizes late-model, reliable equipment including standard
features such as double sleeper bunks, extra large cabins, air-ride suspensions,
and anti-lock brakes. The Company also provides satellite communications
technology which enables drivers to receive load-related information,
directions, pay information, and family emergency information. The Company's
service centers are strategically located to provide services for the driver,
such as showers, laundry facilities, break-rooms, fuel, tractor and trailer
maintenance, and in-person assistance from service center personnel.
COMPENSATION AND BENEFITS. The Company's compensation and benefits
package has been structured to compensate drivers on the basis of miles driven
and ancillary services performed, with increases in base compensation
commensurate with length of service.
4
TRANSPORT CORPORATION OF AMERICA, INC.
Employee driver benefits include paid vacation days, health insurance, and a
Company funded 401(k) retirement plan. Performance bonuses are paid based upon
safety, customer service and fuel consumption. The Company believes its
compensation and benefits package for employee drivers and independent
contractors continue to rank among the highest in the truckload industry.
RECRUITING AND TRAINING. The Company's employee drivers are hired, and
independent contractors are approved, in accordance with specific Company
guidelines relating to safety records, prior work history, personal evaluation,
accident and driving record verification, drug and alcohol screening, and a
physical examination. The Company's initial orientation and training seminar
includes a review of all Company policies and operating requirements, written
and road driving tests, defensive driving and safety skills, DOT compliance
requirements, and the employee driver's and independent contractor's role in
providing safe and efficient value-added service to customers. The Company has
increased the recruitment and training of inexperienced driver trainees. These
driver candidates are placed in an extensive training program before being
assigned their own truck. To enhance its recruiting efforts, the Company opened
its new training school in the first quarter of 2000. All 187 school graduates
were employed as Company drivers. The school enables persons new to the
transportation industry to acquire a commercial driver's license ("CDL").
In addition to the initial training seminar, on-going training on
subjects such as safety, compliance, the handling of hazardous materials,
equipment operation, customer expectations, and Company policies, is conducted
at the Company's service centers and periodically at outside training facilities
under contract with the Company. The Company also conducts driver meetings,
publishes a newsletter, and conducts specific professional development training,
including training to become an over-the-road driver instructor.
DRIVER AND INDEPENDENT CONTRACTOR SUPERVISION. The Company assigns each
employee driver and independent contractor to a specific fleet manager and to a
home-base service center domicile. The fleet manager's role is to be the primary
support resource for the employee driver or independent contractor. The fleet
manager also communicates the work assignments and coordinates driver pay
matters using satellite technology, schedules time off, reviews performance,
provides day-to-day training, and is accountable for the retention and
productivity of the assigned employee drivers and independent contractors.
Service center managers arrange required safety inspections, review performance
and are available to drivers for personal assistance. In the first quarter of
2001, the Company implemented software that will enable fleet managers and
drivers to employ satellite technology to agree upon compensation and
reimbursable expenses at the level of the individual load assignment.
NON-DRIVER EMPLOYEES. Mechanics, service center personnel, corporate
staff, and marketing employees are as important to the success of the Company in
meeting or exceeding customer expectations as are employee drivers and
independent contractors. Employee task groups are used to analyze specific
problems, recommend a course of corrective action, and assist in the
implementation of required changes.
5
TRANSPORT CORPORATION OF AMERICA, INC.
As of December 31, 2000, the Company employed 1,223 student and
professional employee drivers, 95 mechanics, 460 persons in operations,
marketing, training, and administration, and had agreements with independent
contractors who provided 743 tractors. The Company's employees are not
represented by any collective bargaining units, and the Company considers
relations with its employees and independent contractors to be good.
TECHNOLOGY
The Company has developed an integrated, client/server computer
information system. This system integrates operations with the principal
back-office functions of safety, maintenance, driver and independent contractor
settlement, fuel, billing, and accounting. The system also includes
satellite-based communications with the fleet. This system provides information
directly to and from the Company, its customers, and drivers to assist in
managing a complex information environment. During 2000, the Company completed
the development and initial implementation of a replacement enterprise
operations system to complete its migration to client/server technology.
Implementation of this new operations system was fully completed in January
2001. The Company believes that utilizing advanced technology is the best way to
manage a complex, customer-driven logistics process in a cost-effective manner.
OPERATIONS AND COMMUNICATIONS. The Company utilizes information systems
and satellite-based communications to process orders, dispatch loads, and
monitor loads in transit. Load planners match customer orders daily with driver
availability. Once the most appropriate load assignment decision is made, based
on computer monitored load factors, the load information is sent directly to the
driver through the satellite network. The satellite system simplifies locating
of equipment and permits timely and efficient communication of critical
operating data such as shipment orders, loading instructions, routing, fuel,
taxes paid and mileage operated, payroll, safety, traffic, and maintenance
information. The Company implemented software in the first quarter of 2001 that
expands its satellite-based communications with drivers to enable them to
validate their compensation and expense reimbursements.
ELECTRONIC DATA INTERCHANGE ("EDI"). The Company's system enables full
electronic data interchange of load tendering, shipment status, freight billing,
and payment. This system provides significant operating advantages to the
Company and its customers, including real-time information flow, reduction or
elimination of paperwork, error-free transcription, and reductions in clerical
personnel. EDI allows the Company to exchange data with its customers in a
variety of formats, depending on the individual customer's capabilities, which
significantly enhances quality control, customer service, and efficiency. A
significant portion of the Company's revenues are currently processed through
EDI.
INTERNET ACCESS. During 2000, the Company expanded customer on-line
access to certain load status information. The Company intends to add other
on-line features, depending upon customer needs and available resources. The
Company currently provides on-line download capability for images of various
shipping documents and on-line shipment
6
TRANSPORT CORPORATION OF AMERICA, INC.
status. The Company also maintains an internet web site
(www.transportamerica.com) to provide information for customers, potential
employees, and investors. The Company expects to continue to expand its use of
the internet and e-commerce.
REVENUE EQUIPMENT
The Company operates a modern fleet of tractors and trailers. Tractors
are typically replaced every 48 to 60 months, based on factors such as age and
condition, current interest rates, the market for used equipment, and
improvements in technology and fuel efficiency. The average age of the
Company-operated tractors at December 31, 2000 was approximately 27 months.
The Company has available a variety of trailers to meet customer
requirements. At December 31, 2000, these included 5,737 dry vans, most of which
are logistic capable and many of which are equipped with heaters, 233
refrigerated vans, and 40 flat beds. The trailer-to-tractor ratio of 3.0 allows
the Company to provide its high-volume customers with extra trailers to
accommodate loading and unloading, and to improve driver and asset utilization.
The Company is exploring technology that has the potential to enhance its
ability to identify the location and status of unattended trailers with the
objective of improving trailer utilization and reducing its investment in this
equipment. Depending on market conditions, the Company generally replaces
trailers after five to seven years of service. The average age of in-service
trailers at December 31, 2000 was approximately 39 months.
The following table shows the model years of the Company tractors and
trailers as of December 31, 2000:
Model Year Tractors Trailers
- ---------- ------------ ------------
2000 324 1,049
1999 468 1,481
1998 388 984
1997 96 587
1996 and prior 10 1,909
------------ ------------
Total Company 1,286 6,010
Independent Contractor 743 0
------------ ------------
Total available 2,029 6,010
------------ ------------
7
TRANSPORT CORPORATION OF AMERICA, INC.
COMPETITION
The truckload transportation business is extremely competitive and
fragmented. The Company competes primarily with other truckload carriers,
particularly those in the high service end of the truckload market. The Company
also competes with alternative forms of transportation, such as rail,
intermodal, and air freight, particularly in the longer haul segments of its
business. Competition in the truckload industry has created pressure on the
industry's pricing structure. Generally, competition for the freight transported
by the Company is based on service, equipment availability, trailer type,
efficiency, and freight rates. There are a number of competitors that have
substantially greater financial resources, operate more equipment, and transport
more freight than the Company.
8
TRANSPORT CORPORATION OF AMERICA, INC.
EXECUTIVE OFFICERS
The executive officers of Transport America are as follows:
NAME AND AGE POSITION WITH TRANSPORT AMERICA
- --------------------------------------------------------------
Robert J. Meyers (47) Director of Transport America since 1997; Chief
Executive Officer of Transport America since
December 1999; President and Chief Operating Officer
of Transport America since May 1997; Chief Financial
Officer of Transport America from January 1993 to
July 1998 and from December 1998 to July 1999; and
Chief Information Officer of Transport America since
January 1992.
Keith R. Klein (37) Chief Financial Officer of Transport America since
July 1999; From 1997 to July 1999, Mr. Klein was
founder and owner of a financial consulting firm;
From 1990 to 1997, he served in various positions at
Deluxe Corporation, most recently as Vice President
and Corporate Controller.
David L. Carter (52) Vice President of Risk Management of Transport
America since March 1999. Prior to March 1999, Mr.
Carter served as Transport America's Director of
Risk Management since March 1997, and Loss
Prevention Manager from February 1995 to March 1997.
Larry E. Johnson (56) Vice President of Marketing of Transport America
since August 2000; Vice President of Marketing
Services from March 1999 to August 2000; Director of
Marketing Services from January 1995 to March 1999;
and Manager of Marketing Services from September
1984 to January 1995.
Jeffrey P. Vandercook (45) Vice President of Operations of Transport America
since March 1999. Prior to March 1999, Mr.
Vandercook served as Director of Operations of
Transport America from 1993 to March 1999,
Operations Manager from 1989 to 1993, Area Manager
from 1987 to 1989, and a dispatcher from 1986 to
1987.
Robert C. Stone (48) Vice President of Fleet Services of Transport
America since March 1999. Prior to March 1999, Mr.
Stone served as Director of Fleet Management of
Transport America from January 1997 to 1999, Manager
of Emergency Road Service from February 1993 to
December 1996, and Shop Supervisor from December
1991 to February 1993.
9
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 2. PROPERTIES
The following chart provides information concerning the Company's
service centers and other facilities:
SERVICE CENTERS AND OTHER OWNED SQUARE
FACILITIES OR LEASED ACREAGE FOOTAGE
- ------------------ --------- ------- -------
Atlanta, Georgia Owned 16.2 14,860
Clarksville, Indiana Owned 14.7 18,126
Columbus, Ohio Leased 1.0 43,000
Eagan, Minnesota (1715 Yankee Doodle Road) Leased 8.3 118,978
Eagan, Minnesota (1769 Yankee Doodle Road) Owned 2.5 29,000
Eagan, Minnesota (Terminal Drive) Owned 14.9 17,500
Fontana, California Leased * *
Garland, Texas Owned 9.2 32,000
Grand Rapids, Minnesota Leased .2 140
Harrisburg, Pennsylvania Leased * *
Janesville, Wisconsin Owned 13.6 36,700
Kansas City, Missouri Owned 10.0 14,862
North Jackson, Ohio Owned 8.1 11,230
North Liberty, Iowa Owned 13.0 15,150
Roseau, Minnesota Leased 0 100
Scottsburg, Indiana Leased 6.0 14,073
Spirit Lake, Iowa Leased ** 6,000
* This facility is shared with another company.
** Office facility.
The Company's current rental payments for its leased facilities range
from approximately $400 to $5,000 per month. The Company does not anticipate any
difficulties renewing or continuing these leases. The monthly lease for the
Company's headquarters at 1715 Yankee Doodle Road in Eagan, Minnesota is based
on a variable interest rate with current payments of approximately $90,000 per
month.
In addition to the properties listed above, Transport America leases
parking and drop lot space at various locations.
10
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its
business, primarily involving claims for workers' compensation or for personal
injury and property damage incurred in the transportation of freight. The
Company maintains insurance which covers liability amounts in excess of retained
liabilities from personal injury and property damage claims. The Company
currently carries a total of $30 million liability insurance coverage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK. The Company's Common Stock is traded on
the Nasdaq National Market under the symbol TCAM. The following table sets forth
the high and low closing prices for the Company's Common Stock, as reported by
Nasdaq, for the periods indicated:
PERIOD HIGH LOW
------ ---- ---
2000:
1st Quarter $ 16.938 $4.875
2nd Quarter 7.250 5.250
3rd Quarter 9.000 5.125
4th Quarter 6.188 3.938
1999:
1st Quarter 13.750 11.250
2nd Quarter 13.438 9.750
3rd Quarter 16.250 12.375
4th Quarter 13.500 10.563
STOCKHOLDERS. As of March 23, 2001, the Company had 439 stockholders of
record, including Depository Trust Company, which held of record 6,445,617
shares.
DIVIDENDS. The Company has never paid any cash dividends on its Common
Stock and does not intend to pay cash dividends for the foreseeable future. Any
future decision as to the payment of dividends will be at the discretion of the
Company's Board of Directors and will depend upon the Company's results of
operations, financial position, cash requirements, certain corporate law
restrictions, restrictions under loan agreements and such other factors as the
Board of Directors deems relevant.
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TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share and operating data) DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
INCOME STATEMENT DATA:
Operating revenues $ 290,611 $ 285,585 $ 245,913 $ 186,392 $ 164,666
Operating expenses:
Salaries, wages and benefits 83,868 79,938 67,937 53,166 45,515
Fuel, maintenance and other expenses 40,775 31,742 26,916 25,028 23,877
Purchased transportation 93,674 97,695 83,005 55,614 46,761
Revenue equipment leases 232 2,543 3,731 4,893 6,490
Depreciation and amortization 29,237 25,715 19,348 15,494 13,966
Insurance, claims and damage 8,051 7,270 6,816 5,620 4,686
Taxes and licenses 4,989 5,249 4,016 3,248 2,952
Communications 3,336 3,307 2,869 2,072 1,974
Other general and administrative expenses 10,665 11,849 9,310 6,410 5,324
Gain on sale of property and equipment (712) (794) (503) (1,336) (275)
---------- ---------- ---------- ---------- ----------
Total operating expenses 274,115 264,514 223,445 170,209 151,270
Operating income 16,496 21,071 22,468 16,183 13,396
Interest expense, net 8,836 7,504 4,999 3,242 2,734
---------- ---------- ---------- ---------- ----------
Earnings before income taxes 7,660 13,567 17,469 12,941 10,662
Provision for income taxes 2,987 5,291 6,813 5,190 4,368
---------- ---------- ---------- ---------- ----------
Net earnings $ 4,673 $ 8,276 $ 10,656 $ 7,751 $ 6,294
========== ========== ========== ========== ==========
Net earnings per share - basic $ 0.56 $ 1.02 $ 1.46 $ 1.18 $ 0.98
========== ========== ========== ========== ==========
Net earnings per share - diluted $ 0.46 $ 0.97 $ 1.42 $ 1.15 $ 0.94
========== ========== ========== ========== ==========
Weighted average shares outstanding 8,317 8,142 7,300 6,568 6,442
========== ========== ========== ========== ==========
Weighted average shares outstanding,
assuming dilution 10,069 8,570 7,521 6,734 6,718
========== ========== ========== ========== ==========
Pretax margin 2.6% 4.8% 7.1% 6.9% 6.5%
OPERATING DATA (TRUCKLINE ONLY):
Tractors (at end of period)
Company 1,286 1,256 1,078 891 775
Independent contractor 743 811 922 448 445
---------- ---------- ---------- ---------- ----------
Total 2,029 2,067 2,000 1,339 1,220
Trailers (at end of period) 6,010 6,119 5,387 3,723 3,236
Average revenues per tractor per week $ 2,747 $ 2,681 $ 2,831 $ 2,837 $ 2,736
Average revenues per mile (1) $ 1.26 $ 1.27 $ 1.28 $ 1.28 $ 1.28
Average empty mile percentage 12.2% 12.1% 10.8% 11.0% 11.2%
Average length of haul, miles 692 712 674 629 644
Average annual revenues per non-driver employee $ 549,100 $ 561,800 $ 591,000 $ 544,300 $ 526,700
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets $ 256,656 $ 272,141 $ 224,552 $ 147,528 $ 108,671
Long-term debt, net of current maturities 95,885 106,106 79,531 44,618 21,838
Common stock with non-detachable put -- 20,268 20,268 -- --
Stockholders' equity 80,688 75,129 61,733 50,807 43,083
(1) Net of fuel surcharges
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TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The primary business strategy of Transport Corporation of America, Inc.
and subsidiaries (the "Company") is to provide truckload carriage and logistics
services throughout the United States and parts of Canada as an integral part of
the distribution system of many of its major customers. Operations are conducted
primarily from the Company's Eagan, Minnesota corporate offices, with
maintenance and driver services at its eleven terminal facilities located
throughout the United States.
During 2000, the Company made a decision to focus its efforts on
strengthening its balance sheet, restructuring debt and other obligations, and
implementing processes for optimizing its freight network. Factors leading to
this decision included the Company's strong acquisition spending in 1999 as well
as softening freight demand in early 2000.
The Company's growth has historically been a result of additional
revenues from a well-established base of core customers who require high
quality, customized transportation services. During the five-year period ended
December 31, 2000, the Company increased its revenues at a compounded annual
growth rate of 15.0%. Also contributing to the revenue increases were the
acquisitions of two private truckload carriers, North Star Transport, Inc.
("North Star") in July 1998, and Robert Hansen Trucking, Inc. ("RHT") in May
1999. These acquisitions allowed the Company to expand its business with several
significant new customers and to expand its relationship with an existing
significant customer. In 1999 the Company formed TA Logistics, Inc. to provide
transportation procurement and management services.
13
TRANSPORT CORPORATION OF AMERICA, INC.
RESULTS OF OPERATIONS
The following table sets forth certain operating and other expense
items as a percentage of operating revenues for the periods indicated:
Years ended December 31,
---------------------------------------
(amounts in percents) 2000 1999 1998
- --------------------------------------------------------------------------------------------------
Operating revenues 100.0 100.0 100.0
Operating expenses:
Salaries, wages, and benefits 28.9 28.0 27.6
Fuel, maintenance, and other expenses 14.0 11.1 10.9
Purchased transportation 32.2 34.2 33.8
Revenue equipment leases 0.1 0.9 1.5
Depreciation and amortization 10.1 9.0 7.9
Insurance, claims and damage 2.8 2.5 2.8
Taxes and licenses 1.7 1.8 1.6
Communications 1.1 1.2 1.2
Other general and administrative expenses 3.7 4.2 3.8
Gain on sale of property and equipment (0.3) (0.3) (0.2)
------- ------- -------
Total operating expenses 94.3 92.6 90.9
------- ------- -------
Operating income 5.7 7.4 9.1
Interest expense, net 3.1 2.6 2.0
------- ------- -------
Earnings before income taxes 2.6 4.8 7.1
Provision for income taxes 1.0 1.9 2.8
------- ------- -------
Net earnings 1.6 2.9 4.3
======= ======= =======
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Operating revenues increased 1.8% to $290.6 million for the year ended
December 31, 2000 from $285.6 million for the year ended December 31, 1999.
Revenue increases in 2000 were primarily the result of fuel surcharges,
partially offset by soft demand among the Company's customers as well as
unfavorable operating conditions due to weather, particularly in the last
quarter of 2000. Revenues per mile, excluding fuel surcharges, were $1.26 per
mile for 2000, compared to $1.27 per mile for 1999. Equipment utilization, as
measured by average revenues per tractor per week, including fuel surcharges,
was $2,747 for 2000, compared to $2,681 for 1999. The increase in 2000 was
attributable to additional fuel surcharge revenues, partially offset by lower
equipment utilization.
14
TRANSPORT CORPORATION OF AMERICA, INC.
During 2000, Company-owned tractors averaged 62.4% of all available
tractors, compared to 57.9% in 1999, with the remaining portion of the tractor
fleet provided by independent contractors. The Company believes that increased
operating costs, including fuel and insurance premiums, reduced the number of
independent contractors in the truckload industry and limited the Company's
ability to increase its independent contractor fleet. As a result, a greater
proportion of miles was driven by Company drivers in 2000 than in the prior
year. Accordingly, several expense categories increased as a percentage of
revenue in 2000, when compared to 1999. At December 31, 2000 and 1999,
respectively, the Company's fleet included 1,286 and 1,256 Company-owned
tractors, and 743 and 811 tractors owned by independent contractors.
Salaries, wages and benefits expenses, as a percentage of operating
revenues, were 28.9% for 2000, compared to 28.0% for 1999. The increase reflects
the higher proportion of Company drivers and higher employee medical claim costs
in 2000. Efficiency, as measured by average annualized revenues per non-driver
employee, was $549,100 for 2000, compared to $561,800 for 1999.
Fuel, maintenance and other expenses, as a percentage of operating
revenues, were 14.0% for 2000, compared to 11.1% for 1999. Significantly higher
fuel costs in 2000 and the higher proportion of miles driven by Company drivers
were the primary factors of the increase in 2000. The Company estimates that the
higher fuel costs in 2000, partially offset by fuel surcharge revenues, reduced
pre-tax income by approximately $1.1 million, when compared to 1999. Most of the
increase in 2000 costs occurred in the first half of the year because fuel
surcharge recoveries trail the actual increase in fuel costs, depending on
specific provisions of the Company's contracts with its customers.
Purchased transportation, as a percentage of operating revenues,
declined to 32.2% in 2000 from 34.2% in 1999. The decrease reflects the lower
proportion of miles driven by independent contractors in 2000, partially offset
by an increased pass-through of fuel surcharge revenues to independent
contractors.
Revenue equipment lease expenses, as a percentage of operating
revenues, decreased to 0.1% for 2000 from 0.9% for 1999 as a result of a
reduction in the use of operating leases.
Depreciation and amortization, as a percentage of operating revenues,
were 10.1% for 2000, compared to 9.0% for 1999. The increase is primarily a
result of the greater proportion of Company-owned revenue equipment in 2000 as
well as leasehold improvements and computer software that were placed in service
during 2000.
Insurance, claims and damage expenses, as a percentage of operating
revenues, were 2.8% for 2000, compared to 2.5% for 1999. The increase is
primarily a result of unfavorable accident claim experience in 2000, when
compared to 1999.
Other general and administrative expenses, as a percentage of operating
revenues were 3.7% for 2000, compared to 4.2% for 1999. The decrease reflects
the effect of a $2.7 million special bad debt provision in 1999, partially
offset by additional expenses in 2000,
15
TRANSPORT CORPORATION OF AMERICA, INC.
including one-time expenses associated with a terminated merger in early 2000,
higher driver hiring and training expenses, and additional rental expenses
associated with the new corporate office that was occupied mid-year.
Gain on the sale of property and equipment was $0.7 million in 2000,
including a $0.6 million gain on the sale of real estate properties, compared to
a gain of $0.8 million in 1999.
Net interest expense, as a percentage of operating revenues, was 3.1%
for 2000, compared to 2.6% for 1999, primarily a result of higher average
outstanding debt and higher interest rates during 2000, when compared to 1999.
The provision for income taxes, as a percentage of operating revenues,
was 1.0% for 2000 and 1.9% for 1999. The effective tax rate for both 2000 and
1999 was 39.0%.
As a result of the items discussed above, the Company's operating ratio
(operating expenses as a percentage of operating revenues) was 94.3% for 2000,
compared to 92.6% for 1999. Net earnings were $4.7 million, or 1.6% of operating
revenues, for the year ended December 31, 2000, compared to $8.3 million, or
2.9% of operating revenues, for the year ended December 31, 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Operating revenues increased 16.1% to $285.6 million for the year ended
December 31, 1999, from $245.9 million for the year ended December 31, 1998.
Revenue growth was driven by expansion of existing customer relationships, new
customer additions, and business attributable to the North Star acquisition,
which became effective July 1, 1998, and the RHT acquisition, which became
effective May 1, 1999. Revenues per mile, excluding fuel surcharges, were $1.27
per mile for 1999, compared to $1.28 per mile for 1998. Equipment utilization,
as measured by average revenues per tractor per week, was $2,681 during 1999,
compared to $2,831 during 1998. The decline reflects decreased equipment
utilization from the historically lower utilization of the North Star and RHT
businesses and a significant number of unseated tractors during the last half of
the year. In addition, the Company experienced computer database problems in
August 1999, which caused the Company to forgo freight revenue opportunities for
over 2,000 loads.
Salaries, wages and benefits expenses, as a percentage of operating
revenues, were 28.0% for 1999, compared to 27.6% for 1998. Non-driver
efficiency, as measured by average annual revenues per non-driver employee, was
$561,800 for 1999 and $591,000 for 1998.
Fuel, maintenance and other expenses, as a percentage of operating
revenues, were 11.1% for 1999, compared to 10.9% for 1998. The increase reflects
significantly higher fuel costs in the last half of 1999, partially offset by
the lower proportion of miles driven by Company drivers in 1999, when compared
to 1998.
16
TRANSPORT CORPORATION OF AMERICA, INC.
Purchased transportation expenses, as a percentage of operating
revenues, increased to 34.2% for 1999, from 33.8% for 1998. As a consequence of
the higher average number of independent contractors in 1999, when compared to
1998, miles driven by independent contractors increased to 45.5% of all miles in
1999, from 43.8% in 1998.
Revenue equipment lease expenses, as a percentage of operating
revenues, decreased to 0.9% for 1999, from 1.5% for 1998, as a result of a
decline in the use of lease-financed equipment in 1999, when compared to 1998.
Depreciation and amortization expenses, as a percentage of operating
revenues, were 9.0% for 1999, compared to 7.9% for 1998, as a result of reduced
equipment leasing activity and under-utilized equipment capacity in the last
half of 1999, as well as a higher proportion of company-owned equipment in 1999,
compared to 1998.
Insurance, claims and damage expenses, as a percentage of operating
revenues, were 2.5% for 1999, compared to 2.8% for 1998, reflecting improved
accident and claims experience in 1999.
Other general and administrative expenses, as a percentage of operating
revenues, were 4.2% for 1999, compared to 3.8% for 1998. Expenses in 1999
included a $2.7 million special bad debt provision for certain specific
receivables due to a change in strategy relating to a particular type of
relationship and increased exposure risk.
Gain on the sale of equipment was $0.8 million in 1999, compared to a
gain of $0.5 million in 1998, as a result of more equipment dispositions in 1999
when compared to 1998.
Net interest expenses, as a percentage of operating revenues, were 2.6%
for 1999, compared to 2.0% for 1998, primarily reflecting higher average debt in
1999 associated with the acquisition of Robert Hansen Trucking in May 1999, and
purchases of additional revenue equipment in 1999, when compared to 1998.
The provision for income taxes, as a percentage of operating revenues,
was 1.9% for 1999 and 2.8% for 1998. The effective tax rate was 39.0% for both
1999 and 1998.
As a result of the items discussed above, the Company's operating ratio
(operating expenses as a percentage of operating revenues) was 92.6% for 1999,
compared to 90.9% for 1998. Net earnings for 1999 were $8.3 million, or 2.9% of
operating revenues compared to $10.7 million, or 4.3% of operating revenues, for
1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $34.0 million, $35.4
million, and $40.3 million for the years ended 2000, 1999, and 1998,
respectively. During 2000, the net change of operating assets and liabilities
consumed $2.1 million.
17
TRANSPORT CORPORATION OF AMERICA, INC.
Investing activities consumed $6.1 million in 2000, including $0.2
million for the purchase of new revenue equipment, net of proceeds from the
disposition of used revenue equipment, and $5.9 million for software
development, purchases of other equipment and completion of leasehold
improvements, net of proceeds from the disposition of real estate properties.
Net cash consumed by financing activities in 2000 was $28.5 million.
The primary source of financing was a $23.5 million capital lease involving the
sale and leaseback of revenue equipment. Net repayments of the Company's
long-term credit facility, normal payments on long-term debt, and a repurchase
of shares of common stock that carried certain put rights consumed $29.8
million, $16.4 million, and $7.8 million, respectively.
Working capital was negative $8.5 million at December 31, 2000,
compared to $0.6 million at December 31, 1999. As part of its efforts to
strengthen its balance sheet and restructure its debt and other obligations in
2000, the Company arranged for a $23.5 million capital lease transaction at
favorable interest rates for the sale and leaseback of certain revenue
equipment. Proceeds from this transaction were used to reduce outstanding
borrowings under its credit facility and, in combination with newly issued
subordinated debt, to repurchase 1,155,000 shares of common stock that carried
certain put rights. As a result, liabilities previously classified as
non-current were replaced by capital lease obligations and subordinated debt of
which, at December 31, 2000, $9.8 million was classified as current. The Company
believes that its operating cash flows, collections on accounts receivable, and
available borrowings under its credit facility are adequate to meet its debt
service requirements and capital needs in the foreseeable future.
The Company has a credit agreement with seven banks for an unsecured
credit facility with maximum combined borrowings and letters of credit of $80
million. Amounts actually available under the credit facility are limited by the
Company's accounts receivable and unencumbered revenue equipment. At December
31, 2000, there were outstanding borrowings of $60.2 million and letters of
credit totaling $1.8 million under this credit facility. In the future, the
facility will be used to meet working capital needs, make purchases of revenue
equipment and other assets, and to satisfy letter of credit requirements
associated with the Company's self-insured retention arrangements.
During 2000, the Company negotiated amendments to the credit facility
to permit certain transactions, including the capital lease transaction
previously described, the repurchase of shares of common stock that carried
certain put rights, revisions to certain covenant restrictions, and a reduction
of the maximum borrowings under the credit facility to more closely match the
Company's financing needs. The Company is currently considering various
financing alternatives, including more permanent long-term arrangements to
replace the credit facility, which expires in March 2002. The Company believes
that it will be successful in arranging such financing.
18
TRANSPORT CORPORATION OF AMERICA, INC.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," became effective for the Company beginning January 1, 2001.
Management believes the adoption of SFAS 133 will not have a significant impact
on the Company's results of operations or financial condition.
FORWARD-LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, in the Company's Annual Report,
elsewhere in this Report, in future filings by the Company with the SEC, in the
Company's press releases, and in oral statements made with the approval of an
authorized executive officer which are not historical or current facts, are
forward-looking statements made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any forward-looking statements which speak only as of the date
made. The following important factors, among other things, in some cases have
affected and in the future could affect the Company's actual results and could
cause the Company's actual financial performance to differ materially from that
expressed in any forward-looking statement: (1) the highly competitive
conditions that currently exist in the Company's market and the Company's
ability to compete, (2) the Company's ability to recruit, train, and retain
qualified drivers, (3) increases in fuel prices, and the Company's ability to
recover these costs from its customers, (4) changes in governmental regulations
applicable to the Company's operations, (5) adverse weather conditions, (6)
accidents, (7) the market for used revenue equipment, and (8) downturns in
general economic conditions affecting the Company and its customers. The
foregoing list should not be construed as exhaustive and the Company disclaims
any obligation subsequently to revise or update any previously made
forward-looking statements. Unanticipated events are likely to occur.
SEASONALITY
As is typical in the truckload industry, the Company's operations
fluctuate seasonally according to customer shipping patterns which tend to peak
in the summer and fall, then increase again after the holiday and winter
seasons. Operating expenses also tend to be higher during the cold weather
months, primarily due to poorer fuel economy and increased maintenance costs.
19
TRANSPORT CORPORATION OF AMERICA, INC.
INFLATION
Many of the Company's operating expenses are sensitive to the effects
of inflation, which could result in higher operating costs. With the exception
of fuel price increases in 2000, the effects of inflation on the Company's
business have not been significant during the last three years. The Company has
in place with the majority of its customers fuel surcharge provisions that allow
the Company to partially recover additional fuel costs when fuel prices exceed a
certain reference price per gallon.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks with its $80 million
credit agreement, of which $60.2 million was outstanding at December 31, 2000.
The agreement bears interest at a variable rate, which was 8.6% at December 31,
2000. Consequently, the Company is exposed to the risk of greater borrowing
costs if interest rates increase. Although the Company does not employ
derivatives, or similar instruments to hedge against increases in fuel prices,
fuel surcharge provisions enable the Company to reduce the effects of price
increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements described in Item 14(a)1 of this report are
incorporated herein. See "Quarterly Financial Data" appearing on page F-23 of
the audited consolidated financial statements which are incorporated herein, by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning the Company's executive officers, reference
is made to the information set forth under the caption "Executive Officers"
located in Item 1 of this Form 10-K. For information concerning the Company's
directors and compliance by the Company's directors, executive officers and
significant stockholders with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, reference is made to the
information set forth under the captions "Election of Directors" and "Beneficial
Ownership of Common Stock," respectively, in the Company's Proxy Statement for
the Annual Meeting of Stockholders to be held on May 22, 2001 to be filed
pursuant to Regulation 14A, which information is incorporated herein by
reference.
20
TRANSPORT CORPORATION OF AMERICA, INC.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption
"Executive Compensation and Other Information" in the Company's Proxy Statement
for the Annual Meeting of Stockholders to be held on May 22, 2001 to be filed
pursuant to Regulation 14A, which information is incorporated herein by
reference, except to the extent stated therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to the information set forth under the caption
"Beneficial Ownership of Common Stock" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 22, 2001 to be filed pursuant
to Regulation 14A, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under caption "Certain
Transactions" in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 22, 2001 to be filed pursuant to Regulation 14A,
which information is incorporated herein by reference.
21
TRANSPORT CORPORATION OF AMERICA, INC.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K
1. Consolidated Financial Statements
Form 10-K
Page Reference
--------------
Index to Consolidated Financial Statements..................F-1
Independent Auditors' Report................................F-2
Consolidated Balance Sheets.................................F-3
Consolidated Statements of Earnings.........................F-4
Consolidated Statements of Stockholders' Equity.............F-5
Consolidated Statements of Cash Flows.......................F-6
Notes to Consolidated Financial Statements..................F-7
2. Consolidated Financial Statement Schedules
Consolidated Financial Statement Schedules
Included in Part IV of this report:
Independent Auditors' Report on Schedule....................S-1
Schedule II - Valuation and Qualifying Accounts.............S-2
3. Exhibits
Exhibit
Number Description Page
------ ----------- ----
3.1 Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File No.
33-84140) as declared effective by the Commission
on November 3, 1994 (the "1994 S-1")).
3.2 Bylaws (incorporated by reference to Exhibit 3.2
to the 1994 S-1).
4.1 Rights Agreement by and between the Company and
Norwest Bank Minnesota, N.A., dated February 25,
1997 (incorporated by reference to Exhibit 1 to
the Company's Registration Statement on Form 8-A,
as amended, filed with the SEC on February 27,
1997; to Exhibit 1 to the Company's Registration
Statement on Form 8-K/A, filed with the SEC on
June 29, 1998; and to Exhibit 1 to the Company's
Registration Statement on Form 8-A/A, filed with
the SEC on January 21, 2000).
22
TRANSPORT CORPORATION OF AMERICA, INC.
10.1 Credit Agreement dated as of August 14, 1998 among
ABN-AMRO Bank, N.V., certain other bank parties,
and the Company (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1998).
10.2 1986 Stock Option Plan, as amended (incorporated
by reference to Exhibit 10.2 to the Company's Form
10-K for the year ended December 31, 1996).
10.3 401(k) Retirement Plan (incorporated by reference
to Exhibit 10.3 to the 1994 S-1).
10.4 Master Lease, dated as of April 9, 1999, between
the Company and ABN/AMBRO Leasing, Inc.
(incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
10.5 Form of Change in Control Severance Agreement
(incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.6 Form of Vehicle Lease and Independent Contractor
Agreement (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K for the year
ended December 31, 1996).
10.12 2001 Employee Stock Purchase Plan.
10.13 1995 Stock Plan, as amended (incorporated by
reference to Exhibit 10.13 to the Company's Form
10-K for the year ended December 31, 1996).
11.1 Statement re: Computation of Earnings (Loss) per
Share
21 Subsidiaries of the Registrant: TA Logistics,
Inc., North Star Transport, Inc., and Robert
Hansen Trucking, Inc., Minnesota corporations.
23.1 Independent Auditors' Consent
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended December 31, 2000.
(c) Exhibits
Reference is made to Item 14(a)3.
(d) Schedules
Reference is made to Item 14(a)2.
23
TRANSPORT CORPORATION OF AMERICA, INC.
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.
TRANSPORT CORPORATION OF AMERICA,
INC. ("Registrant")
Dated: March 30, 2001 By: /s/ Robert J. Meyers
--------------------------------------
Robert J. Meyers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature and Title Date
- ------------------- ----
/s/ Robert J. Meyers March 30, 2001
- ---------------------------------------------------
Robert J. Meyers
President, Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ Keith R. Klein March 30, 2001
- ---------------------------------------------------
Keith R. Klein
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ William D. Slattery March 30, 2001
- ---------------------------------------------------
William D.Slattery, Chairman of the Board
/s/ Anton J. Christianson March 30, 2001
- ---------------------------------------------------
Anton J. Christianson, Director
/s/ Michael J. Paxton March 30, 2001
- ---------------------------------------------------
Michael J. Paxton, Director
/s/ Kenneth J. Roering March 30, 2001
- ---------------------------------------------------
Kenneth J. Roering, Director
24
TRANSPORT CORPORATION OF AMERICA, INC.
Independent Auditors' Report on Schedule
The Board of Directors and Stockholders
Transport Corporation of America, Inc.:
Under date of February 2, 2001, we reported on the consolidated balance sheets
of Transport Corporation of America, Inc. and subsidiaries as of December 31,
2000 and 1999, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements, and our
report thereon, are included in the annual report on Form 10-K for the year
2000. In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule as listed in the accompanying index. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statement
schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Minneapolis, Minnesota
February 2, 2001
S-1
TRANSPORT CORPORATION OF AMERICA, INC.
SCHEDULE II
Valuation and Qualifying Accounts
(In thousands)
Additions
---------------------------
Additions
Balance at charged to Charged to Balance
beginning cost and other at end
Description of year expense accounts Deductions of year
- --------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 31, 2000 $ 3,170 590 25 3,509 $ 276
Year ended December 31, 1999 $ 461 2,772(3) 55(1) 118 $ 3,170
Year ended December 31, 1998 $ 324 162 30(2) 55 $ 461
Reserve for insurance, claim and damage liability
Year ended December 31, 2000 $ 4,504 6,716 0 6,425 $ 4,795
Year ended December 31, 1999 $ 4,663 5,581 706(1) 6,446 $ 4,504
Year ended December 31, 1998 $ 3,408 5,191 1,490(2) 5,426 $ 4,663
Reserve for workers' compensation liability
Year ended December 31, 2000 $ 1,992 1,001 0 2,069 $ 924
Year ended December 31, 1999 $ 1,420 2,087 0 1,515 $ 1,992
Year ended December 31, 1998 $ 1,320 1,601 0 1,501 $ 1,420
(1) Includes Robert Hansen Trucking valuation at date of acquisition
(2) North Star valuation at date of acquisition
(3) Includes $2.7 million special bad debt provision due to increased exposure
risk in the fourth quarter of 1999
S-2
TRANSPORT CORPORATION OF AMERICA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report-------------------------------------------------F-2
Consolidated Balance Sheets--------------------------------------------------F-3
Consolidated Statements of Earnings------------------------------------------F-4
Consolidated Statements of Stockholders' Equity------------------------------F-5
Consolidated Statements of Cash Flows----------------------------------------F-6
Notes to Consolidated Financial Statements-----------------------------------F-7
F-1
TRANSPORT CORPORATION OF AMERICA, INC.
Independent Auditors' Report
The Board of Directors and Stockholders
Transport Corporation of America, Inc.:
We have audited the accompanying consolidated balance sheets of Transport
Corporation of America, Inc. and subsidiaries (the "Company") as of December 31,
2000 and 1999, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Transport
Corporation of America, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Minneapolis, Minnesota
February 2, 2001
F-2
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31,
------------------------------
ASSETS 2000 1999
- -----------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 234 $ 745
Trade accounts receivable, net (note 1 and 4) 31,279 30,133
Other receivables (note 2) 561 1,522
Operating supplies - inventory (note 1) 1,244 1,479
Deferred income tax benefit (note 1 and 9) 3,087 4,035
Prepaid expenses 1,974 1,924
- -----------------------------------------------------------------------------------------------------
Total current assets 38,379 39,838
Property and equipment:
Land, buildings, and improvements 19,907 21,469
Revenue equipment (note 1, 4, and 11) 227,205 228,709
Other equipment 22,881 15,122
- -----------------------------------------------------------------------------------------------------
Total property and equipment 269,993 265,300
Less accumulated depreciation (78,947) (59,479)
- -----------------------------------------------------------------------------------------------------
Property and equipment, net 191,046 205,821
Other assets, net (note 3) 27,231 26,482
- -----------------------------------------------------------------------------------------------------
Total assets $ 256,656 $ 272,141
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (note 4) $ 18,670 $ 14,899
Current maturities of capital lease obligations (note 11) 3,964 0
Accounts payable 5,221 5,913
Checks issued in excess of cash balances 4,099 2,127
Due to independent contractors 2,395 2,814
Accrued expenses (note 5) 12,527 13,489
- -----------------------------------------------------------------------------------------------------
Total current liabilities 46,876 39,242
Long-term debt, less current maturities (note 4) 68,591 106,106
Capital lease obligations, less current maturities (note 11) 27,294 0
Deferred income taxes (note 9) 33,207 31,396
Commitments and contingencies (note 7 and 11)
1,200,000 shares of common stock with non-detachable put (note 6) 0 20,268
Stockholders' equity (note 6 and 7):
Common stock, $.01 par value; 15,000,000 shares authorized;
7,177,955 and 7,114,490 shares issued and outstanding as of
December 31, 2000 and 1999, respectively (excluding
1,200,000 shares with put rights at December 31, 1999) 72 71
Additional paid-in capital 30,094 29,209
Retained earnings 50,522 45,849
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 80,688 75,129
- -----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 256,656 $ 272,141
=====================================================================================================
See accompanying notes to consolidated financial statements
F-3
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Years ended December 31,
------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------
Operating revenues $ 290,611 $ 285,585 $ 245,913
Operating expenses:
Salaries, wages, and benefits 83,868 79,938 67,937
Fuel, maintenance, and other expenses 40,775 31,742 26,916
Purchased transportation 93,674 97,695 83,005
Revenue equipment leases 232 2,543 3,731
Depreciation and amortization 29,237 25,715 19,348
Insurance, claims and damage 8,051 7,270 6,816
Taxes and licenses 4,989 5,249 4,016
Communications 3,336 3,307 2,869
Other general and administrative expenses 10,665 11,849 9,310
Gain on sale of property and equipment (712) (794) (503)
- -------------------------------------------------------------------------------------------
Total operating expenses 274,115 264,514 223,445
- -------------------------------------------------------------------------------------------
Operating income 16,496 21,071 22,468
Interest expense 8,955 7,544 5,129
Interest income (119) (40) (130)
- -------------------------------------------------------------------------------------------
Interest expense, net 8,836 7,504 4,999
- -------------------------------------------------------------------------------------------
Earnings before income taxes 7,660 13,567 17,469
Provision for income taxes (note 9) 2,987 5,291 6,813
- -------------------------------------------------------------------------------------------
Net earnings (note 7) $ 4,673 $ 8,276 $ 10,656
- -------------------------------------------------------------------------------------------
Net earnings per share:
Basic $ 0.56 $ 1.02 $ 1.46
Diluted $ 0.46 $ 0.97 $ 1.42
- -------------------------------------------------------------------------------------------
Average common shares outstanding:
Basic 8,317 8,142 7,300
Diluted 10,069 8,570 7,521
- -------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-4
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Common Stock Additional Total
------------------------- paid-in Retained stockholders'
Shares Amount capital earnings equity
- -------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,590,634 $ 66 $ 23,824 $ 26,917 $ 50,807
Common stock options,
warrants, and stock
purchase plan 128,239 1 559 0 560
Tax benefits related to
employee stock warrant
transactions 0 0 86 0 86
Repurchase and retirement
of common stock (31,000) 0 (376) 0 (376)
Net earnings 0 0 0 10,656 10,656
- -------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 6,687,873 67 24,093 37,573 61,733
Common stock options,
warrants, and stock
purchase plan 116,617 1 1,000 0 1,001
Tax benefits related to
employee stock warrant
transactions 0 0 89 0 89
Repurchase and retirement
of common stock 310,000 3 4,027 0 4,030
Net earnings 0 0 0 8,276 8,276
- -------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 7,114,490 71 29,209 45,849 75,129
Put options converted
into common stock 45,000 0 760 0 760
Common stock options,
warrants, and stock
purchase plan 18,465 1 125 0 126
Net earnings 0 0 0 4,673 4,673
- -------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 7,177,955 $ 72 $ 30,094 $ 50,522 $ 80,688
=======================================================================================================
See accompanying notes to consolidated financial statements.
F-5
TRANSPORT CORPORATION OF AMERICA, INC.
Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------
Operating activities:
Net earnings $ 4,673 $ 8,276 $ 10,656
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 29,237 25,715 19,348
Gain on sale of equipment (712) (794) (503)
Deferred income taxes 2,930 3,368 6,599
Tax benefits related to employee stock transactions 0 89 87
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade receivables (1,146) 35 (1,652)
Other receivables 961 132 2,899
Operating supplies 235 (101) (389)
Prepaid expenses and tires (50) 630 841
Accounts payable (692) (2,411) 2,284
Due to independent contractors (419) 744 408
Accrued expenses (962) (329) (247)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 34,055 35,354 40,331
- -----------------------------------------------------------------------------------------------------------------
Investing activities:
Purchases of revenue equipment (8,057) (65,766) (56,382)
Purchases of property and other equipment (8,340) (8,165) (3,544)
(Increase) decrease in other assets (349) 131 (200)
Acquisition of business, net of cash acquired 0 (2,696) (15,555)
Proceeds from sales of equipment 10,662 25,042 7,710
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (6,084) (51,454) (67,971)
- -----------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of common stock,
and exercise of options and warrants 126 1,131 559
Proceeds from sale-leaseback 23,463 0 0
Payments for conversion of put options to subordinated debt (7,804) 0 0
Payments of loan origination fees 0 0 (267)
Payments for repurchase and retirement of common stock 0 0 (376)
Proceeds from issuance of long-term debt 0 165 10,577
Principal payments on long-term debt (16,389) (23,600) (37,214)
Proceeds from issuance of notes payable to bank 125,720 147,696 96,450
Principal payments on notes payable to bank (155,570) (110,696) (43,450)
Change in net checks issued in excess of cash balances 1,972 1,701 426
- -----------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (28,482) 16,397 26,705
- -----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (511) 297 (935)
Cash and cash equivalents, beginning of year 745 448 1,383
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 234 $ 745 $ 448
=================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 8,752 $ 7,598 $ 5,028
Income taxes, net 517 695 (949)
Supplemental Schedule of noncash investing and financing activities:
Capital lease obligations incurred for revenue equipment $ 8,638 $ 0 $ 0
Subordinated notes payable issued in exchange of put options 11,704 0 0
Put options exercised for common shares 760 0 0
Value of common shares issued for acquisitions 0 4,030 20,268
See accompanying notes to consolidated financial statements.
F-6
TRANSPORT CORPORATION OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS
NATURE OF BUSINESS
Transport Corporation of America, Inc. (the "Company") is a truckload
motor carrier engaged in the transportation of a variety of general
commodities for customers principally in the United States and
portions of Canada, pursuant to nationwide operating authority.
Customer freight is transported by Company equipment and by
independent contractors. Payments to Company drivers and independent
contractors are primarily based upon miles driven.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of the
Company and its wholly owned subsidiaries, TA Logistics, Inc.,
Robert Hansen Trucking, Inc. ("RHT"), North Star Transport, Inc.
("North Star"), TCA of Ohio, Inc., and Transport International
Express, Inc. ("TIE"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Operating revenues are recognized when the freight to be transported
has been loaded. The Company operates primarily in the
short-to-medium length of haul category of the trucking industry;
therefore, the Company's typical customer delivery is completed one
day after pickup. Accordingly, this method of revenue recognition is
not materially different from recognizing revenue based on
completion of delivery. Amounts payable to independent contractors
for purchased transportation, to Company drivers for wages and any
other direct expenses are accrued when the related revenue is
recognized.
TRADE ACCOUNTS RECEIVABLE
Trade Accounts Receivable at December 31, 2000 and 1999, are net of
allowances for doubtful accounts of $276,000 and $3,170,000,
respectively.
REVENUE EQUIPMENT, PROPERTY, AND OTHER EQUIPMENT
Revenue equipment, property, and other equipment are recorded at cost.
Depreciation, including amortization of capitalized leases, is
computed using the straight-line basis over the estimated useful
lives of the assets or the lease periods, whichever is shorter. The
Company regularly updates its estimates of revenue equipment salvage
values and adjusts depreciation expense prospectively if there has
been a significant change from earlier estimates.
F-7
TRANSPORT CORPORATION OF AMERICA, INC.
The estimated useful lives for new equipment when placed in service are as
follows:
Years
- --------------------------------------------------------------------------------
Tractors 5
Trailers 5
Buildings 30
Other equipment, including computers and furniture 3 - 8
- --------------------------------------------------------------------------------
The Company changed the estimated salvage value of certain of its
revenue equipment during 1998. The changes resulted in a net
decrease in depreciation expense of approximately $1,095,000, an
increase in net income of approximately $668,000, and an increase of
basic and diluted earnings per share of $0.09 for 1998. The Company
periodically assesses its salvage values to better match revenues
and expenses.
TIRES
Tires placed on new equipment after December 31, 1996, are capitalized
as part of revenue equipment and amortized over their estimated
life. Tires placed on new equipment prior to December 31, 1996, are
included in other assets (net) and are capitalized and recorded as
prepaid tires and amortized over their estimated life. Replacement
tires are expensed when placed in service.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net
undiscounted cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of
the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight-line basis over
the expected periods to be benefited, 25 years. Amortization expense
charged to operations for 2000, 1999, and 1998 was $1,090,000,
$1,035,000, and $480,000, respectively. The Company assesses the
recoverability of the intangible assets in accordance with its
Impairment of Long-lived Assets policy.
OPERATING SUPPLIES
Operating supplies representing repair parts, fuel, and replacement
tires for revenue equipment are recorded at cost.
F-8
TRANSPORT CORPORATION OF AMERICA, INC.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
ESTIMATED LIABILITY FOR INSURANCE CLAIMS
The Company maintains automobile, general, cargo, and workers'
compensation claim liability insurance coverages under both
deductible and retrospective rating policies. In the month claims
are reported, the Company estimates and establishes a liability for
its share of ultimate settlements using all available information,
coupled with the Company's history of such claims. Claim estimates
are adjusted when additional information becomes available. The
recorded expense depends upon actual loss experience and changes in
estimates of settlement amounts for open claims that have not been
fully resolved. However, final settlement of these claims could
differ materially from the amounts the Company has accrued at
year-end. The Company accrues for health insurance claims reported,
as well as for claims incurred but not reported, based upon the
Company's past experience.
STOCK-BASED EMPLOYEE COMPENSATION
The Company follows the provisions of APB Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its stock-based
employee compensation plans. The Company has adopted the
disclosure-only requirements of Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the amounts
presented on the consolidated financial statements for the existing
assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
NET EARNINGS PER SHARE: BASIC AND DILUTED
Basic net earnings per common share is computed by dividing net
earnings by the weighted average number of common shares outstanding
during the year. The 310,000 shares of common stock that were issued
at the time of the acquisition of RHT and the 1.2 million shares of
common stock that were issued at the time of the acquisition of
North Star are considered outstanding effective May 1, 1999, and
July 1, 1998, respectively.
F-9
TRANSPORT CORPORATION OF AMERICA, INC.
Diluted net earnings per share is computed by dividing net earnings by
the weighted average number of potential common shares outstanding,
assuming exercise of dilutive stock options and warrants. The
potential common shares are computed using the treasury stock method
based upon the average market price of the Company's stock during
each period.
Diluted net earnings for 2000, 1999, and 1998 include the effect of 1.2
million common shares with a non-detachable put option associated
with the acquisition of North Star. The potential common shares for
the put have been calculated using the reverse treasury stock method
and the average market price of the Company's stock for the period
since the July 1, 1998, effective date. The remaining 1,155,000
common shares with the put right were repurchased for $11.7 million
of subordinated debt and $7.8 million in cash on December 28, 2000,
and thus only affect dilutive shares through that date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial assets and liabilities,
because of their short-term nature, approximate fair value. The fair
value of the Company's borrowing, if recalculated based on current
interest rates, would not significantly differ from the recorded
amounts.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with initial maturities of three months or
less to be cash equivalents.
(2) OTHER RECEIVABLES
Other receivables at December 31, 2000 and 1999 include a receivable of
approximately $0.1 million and $1.0 million, respectively, related
to the sale of certain revenue equipment.
(3) OTHER ASSETS
Other assets at December 31, 2000 include goodwill of $3.7 million (net
of accumulated amortization of $0.2 million) from the acquisition of
RHT and $21.8 million (net of accumulated amortization of $2.4
million) from the acquisition of North Star (see notes 12 and 13).
F-10
TRANSPORT CORPORATION OF AMERICA, INC.
(4) CREDIT FACILITY AND LONG-TERM DEBT
The Company has a credit agreement with seven major banks for an
unsecured credit facility with maximum combined borrowings and
letters of credit of $80 million. Amounts actually available under
the credit facility are limited by the Company's accounts receivable
and unencumbered revenue equipment. Net of actual outstanding
borrowings and letters of credit at December 31, 2000, the Company
had available additional borrowings of $19 million. The credit
agreement expires in March 2002. At December 31, 2000, the average
interest rate of outstanding borrowings was 8.6% and there were
letters of credit outstanding totaling $1.8 million under this
credit facility.
The credit agreement contains certain financial covenants, which
include maintenance of a minimum net worth, maintenance of a
consolidated funded indebtedness to consolidated earnings before
interest, taxes, depreciation, amortization and lease rental
expenses, and maintenance of a consolidated fixed charge coverage
ratio. The Company was in compliance with these covenants at
December 31, 2000.
In December 2000, the credit facility was reduced from $100 million to
$80 million in conjunction with certain other transactions including
establishment of subordinated debt to repurchase shares of common
stock and a $23.5 million sale-leaseback transaction.
The following is a summary of data relating to the credit facility:
Years ended
December 31,
-----------------------
2000 1999
- --------------------------------------------------------------------------------
Long Term
- ---------
Outstanding balance at year end $ 60,150 $ 90,000
Average amount outstanding 85,569 75,061
Maximum amount outstanding 97,500 90,750
Weighted average interest rate during the year 7.99% 6.18%
Commitment fee on unused balances 0.325% 0.200%
F-11
TRANSPORT CORPORATION OF AMERICA, INC.
Long-term debt consists of the following:
December 31,
--------------------------
2000 1999
- ----------------------------------------------------------------------------------------------
Notes payable to banks and other financial institutions with
maturities through January 2003, secured by certain revenue
equipment with interest rates ranging from 6.6% to 7.4% $ 15,407 $ 31,005
Subordinated notes with maturities through September 2002
and interest rate of 8.0%. (See note 6) 11,704 0
Unsecured credit facility 60,150 90,000
- ----------------------------------------------------------------------------------------------
Total long-term debt 87,261 121,005
Less current maturities of long-term debt 18,670 14,899
- ----------------------------------------------------------------------------------------------
Long-term debt, less current maturities $ 68,591 $ 106,106
==============================================================================================
The aggregate annual maturities of long-term debt at December 31, 2000, are as
follows:
Years ending December 31, Amount
- ----------------------------------------------------------------------------------------------
2001 $ 18,670
2002 68,564
2003 27
- ----------------------------------------------------------------------------------------------
Total $ 87,261
==============================================================================================
(5) ACCRUED EXPENSES
Accrued expenses are as follows:
December 31,
--------------------------
2000 1999
- ----------------------------------------------------------------------------------------------
Salaries and wages $ 3,207 $ 2,888
Insurance, claims and damage 4,795 4,504
Workers compensation 924 1,992
Taxes 1,408 1,697
Interest 437 240
Other 1,756 2,168
- ---------------------------------------------------------------------------------------------
Total $ 12,527 $ 13,489
=============================================================================================
F-12
TRANSPORT CORPORATION OF AMERICA, INC.
(6) COMMON STOCK WITH NON-DETACHABLE PUT
In July 1998, as part of its acquisition of North Star, the Company
issued 1.2 million shares of common stock with a non-detachable put
option. The shares are considered issued and outstanding as of
December 31, 1999 and December 31, 1998.
The put gave the stockholder the right to sell some or all of the 1.2
million shares of the Company's common stock back to the Company at
$16.89 per share, payable in cash, during a 60-day period commencing
June 30, 2001.
The effect of the 1.2 million shares associated with the put is
included in the computations of both basic and diluted earnings per
share. Additionally, for dilutive earnings per share, the reverse
treasury stock method is applied to the 1.2 million shares because
the Company's average stock price has been below the put price of
$16.89. The dilutive effect for 2000, 1999 and 1998 is $0.10, $0.05
and $0.03 per share, respectively.
In January 2000, 45,000 shares of the common stock with the
non-detachable put option valued at $16.89 per share were converted
to common stock.
In December 2000, the Company repurchased the remaining 1,155,000
common shares with the put right for $11.7 million of subordinated
debt and $7.8 million in cash. The subordinated debt is due in equal
installments on September 30, 2001 and 2002. Interest accrues on the
principal balance commencing on October 1, 2001 at an annual rate of
8.0% and is payable on September 30, 2002. For financial statement
purposes, the Company is accruing interest at an imputed rate of
3.1% over the term of the notes.
(7) STOCKHOLDERS' EQUITY
STOCKHOLDER RIGHTS PLAN AND PREFERRED STOCK DISTRIBUTION
The Company has adopted a stockholder rights plan, which provides for a
dividend of one Preferred Stock Purchase Right ("Right") for each
outstanding share of the Company's common stock. The plan and
dividend become operative in certain events involving the
acquisition of 15% or more of the Company's voting stock by any
person or group in a transaction not approved by the Board of
Directors.
F-13
TRANSPORT CORPORATION OF AMERICA, INC.
Each Right entitles the holder to purchase two-hundredths of a share of
Series A Junior Participating Preferred Stock for $60 upon the
occurrence of certain specified events. Additionally, the Rights
entitle the holder, upon the occurrence of certain specified events,
to purchase common stock having a value of twice the exercise price
of the Right; upon the occurrence of certain other specified events,
to purchase from an entity acquiring at least 15% of the voting
securities or voting power of the Company, common stock of the
acquiring entity having twice the exercise price of the Right. The
Rights may be redeemed by the Company at a price of $0.001 per
Right. The Rights expire on February 25, 2007, and are not presently
exercisable.
WARRANTS
At December 31, 1998, the Company had outstanding warrants for the
purchase of 22,500 shares of the Company's common stock at $5.20 per
share. All of the warrants were exercised prior to December 31,
1999. No warrants were granted from 1998 to 2000.
Warrant transactions are summarized as follows:
Years ended
December 31,
------------------------
2000 1999
- ----------------------------------------------------------------------------------------
Warrants outstanding at beginning of year 0 22,500
Warrants exercised 0 22,500
- ----------------------------------------------------------------------------------------
Warrants outstanding at end of year 0 0
========================================================================================
Weighted average price of warrants outstanding at end of year $0.00 $0.00
========================================================================================
EMPLOYEE STOCK PURCHASE PLAN
In 1996, the Company adopted an Employee Stock Purchase Plan ("the 1996
Plan"). The purpose of the 1996 Plan was to encourage employees to
purchase shares of common stock in the Company, thereby providing a
greater community of interest between the Company and its employees.
There were 100,000 shares of the Company's common stock reserved for
issuance under the 1996 Plan, which terminated on December 31, 2000,
at which time 73,603 shares remained unissued.
The 1996 Plan permitted employees to purchase shares of Common Stock of
the Company at a price equal to the lesser of 85% of the market
value of the Common Stock at the commencement or termination dates
of each phase. Each year, during the term of the 1996 Plan, there
were two six-month phases commencing on January 1 and July 1,
respectively. Employees who have been employed for one year and who
are regularly scheduled to work more than 20 hours per week and who
are less than 5% owners were eligible to participate in the 1996
Plan via payroll deductions. Purchases are limited to 10% of a
participant's base pay during the respective phase.
F-14
TRANSPORT CORPORATION OF AMERICA, INC.
In November 2000, the Board of Directors approved the 2001 Employee
Stock Purchase Plan, which replaced the 1996 Plan. The 2001 Plan is
subject to approval of the Company's stockholders at the annual
stockholder meeting to be held in May 2001. The 2001 Plan is
effective for a ten-year period beginning January 1, 2001. 100,000
shares of common stock are reserved for issuance under the 2001
Plan. All other provisions of the 2001 Plan are substantially the
same as in the 1996 Plan.
During 2000 and 1999, employees purchased 7,066 and 7,375 shares,
respectively, at average prices of $7.38 and $10.20 per share,
respectively, under the 1996 Plan.
TA REWARDS PROGRAM
The Company has an incentive program to reward employee drivers and
independent contractor drivers who achieve certain performance and
safety goals. Under this program, drivers are awarded points on a
quarterly basis for achieving their safety and performance goals.
Drivers may redeem these points for various rewards, including
shares of the Company's common stock. Through 1998, the Company
satisfied driver point redemptions for shares of the Company's
common stock by purchasing the shares on the open market on behalf
of the drivers.
In 1998, the Board approved the T.A. Rewards Program - Stock Component
("TA Rewards"). TA Rewards provides for the issuance of up to
100,000 shares of the Company's common stock for driver redemptions
of their TA Rewards points. During 2000 and 1999, 11,399 and 7,471
common shares, respectively, were issued under this program.
STOCK OPTION PLANS
The Company has adopted two stock option plans that allow for the grant
of options to officers and other key employees to purchase common
shares at an exercise price not less than 100% of fair market value
on the date of grant. Officers and other key employees of the
Company who are responsible for, or contribute to, the management,
growth and/or profitability of the business of the Company, as well
as selected consultants under contract to the Company and
non-employee directors are eligible to be granted awards.
These option plans allow for the grant of up to 725,000 shares. Options
generally vest in cumulative annual increments over periods from one
to four years and expire five or ten years from date of issuance. At
December 31, 2000, the exercise prices of outstanding options ranged
from $4.66 to $18.00, with a weighted average contractual life of
approximately 3.8 years.
F-15
TRANSPORT CORPORATION OF AMERICA, INC.
Option transactions are summarized as follows:
Weighted average
Shares exercise price
- ---------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Options outstanding at beginning of year 132,677 193,197 $ 12.44 $ 10.80
Granted 232,550 47,000 5.88 12.93
Canceled (64,887) (18,400) 9.50 11.27
Exercised 0 (89,120) 0.00 9.39
- ---------------------------------------------------------------------------------------------------------
Options outstanding at end of year 300,340 132,677 $ 8.00 $ 12.44
=========================================================================================================
Options exercisable at end of year 99,959 76,011 $ 10.67 $ 12.85
=========================================================================================================
The following table summarizes information about fixed stock options
outstanding at December 31, 2000:
Outstanding options Exercisable options
--------------------------------------- ----------------------------
Exercise Weighted average Weighted Weighted
price remaining average average
range Number contractual life exercise price Number exercise price
- -------------- ---------- -------------------- ---------------------------- ----------------
$ 0 - 5 4,000 4.9 years 4.66 4,000 4.66
5 - 10 207,050 4.4 years 5.92 32,000 6.48
10 - 15 77,290 2.6 years 12.20 51,959 12.02
15 - 20 12,000 2.4 years 18.00 12,000 18.00
---------- ---------
300,340 99,959
========== =========
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized
with respect to the Company's stock option plans or the Employee
Stock Purchase Plan. Had compensation cost been determined on the
basis of fair value pursuant to the provisions of SFAS No. 123, net
earnings and net earnings per share would have been reduced to the
pro forma amounts indicated below.
F-16
TRANSPORT CORPORATION OF AMERICA, INC.
2000 1999
-----------------------------------------------------------------------
Net earnings:
As reported $ 4,673 $ 8,276
========== ==========
Pro forma $ 4,438 $ 8,142
========== ==========
Net basic earnings per share:
As reported $ 0.56 $ 1.02
========== ==========
Pro forma $ 0.53 $ 1.00
========== ==========
Net diluted earnings per share:
As reported $ 0.46 $ 0.97
========== ==========
Pro forma $ 0.44 $ 0.95
========== ==========
The above pro forma amounts may not be representative of the effects on
reported net earnings for future years. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted-average assumptions
used for grants in 2000 and 1999:
2000 1999
- --------------------------------------------------------------------------------
Dividend yield 0.00% 0.00%
Expected volatility 103.00% 55.00%
Risk-free interest rate 5.00% 5.40%
Expected lives 5 years 5 years
(8) EMPLOYEE BENEFIT PLANS
The Company has a savings retirement plan ("the Plan") for eligible
employees under Section 401(k) of the Internal Revenue Code. The
Plan allows employees to defer up to 19% of their compensation on a
pretax basis. The Company may, at its discretion, match a portion of
the employee deferrals. During 2000, 1999, and 1998, the Company
contributed amounts equal to one-fourth of the employee deferrals,
up to 1% of each participant's compensation. For participants who
are employed as truck drivers with pay based on actual miles driven,
the Company may also elect to contribute 1/2(cent) and 1(cent) per
paid mile driven for drivers with over one and two years of service,
respectively. On behalf of all employees, the Company contributed
$748,000, $638,000, and $506,000 to the Plan in 2000, 1999, and
1998, respectively.
F-17
TRANSPORT CORPORATION OF AMERICA, INC.
(9) INCOME TAXES
The provision for income taxes consists of the following:
(In thousands)
Current Deferred Total
- -----------------------------------------------------------------------------------------------------
For the year ended December 31, 2000:
Federal $ -- $ 2,390 $ 2,390
State 57 540 597
- -----------------------------------------------------------------------------------------------------
Total $ 57 $ 2,930 $ 2,987
=====================================================================================================
For the year ended December 31, 1999:
Federal $ 133 $ 4,105 $ 4,238
State 190 863 1,053
- -----------------------------------------------------------------------------------------------------
Total $ 323 $ 4,968 $ 5,291
=====================================================================================================
For the year ended December 31, 1998:
Federal $ 27 $ 5,474 $ 5,501
State 106 1,206 1,312
- -----------------------------------------------------------------------------------------------------
Total $ 133 $ 6,680 $ 6,813
=====================================================================================================
The income tax expense differs from the "expected" tax expense as
follows for the years ended December 31, 2000, 1999, and 1998:
2000 1999 1998
- -----------------------------------------------------------------------------------------------------
Expected federal tax expense at statutory rates $ 2,604 $ 4,748 $ 6,114
Increases in taxes resulting from:
State income taxes, net of federal benefit 369 684 853
Expenses not deductible for tax purposes 153 157 191
Other (139) (298) (345)
- -----------------------------------------------------------------------------------------------------
Actual tax expense $ 2,987 $ 5,291 $ 6,813
=====================================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2000 and 1999, are presented below:
2000 1999
- -----------------------------------------------------------------------------------------------------
Deferred tax assets:
Vacation accrual $ 733 $ 481
Allowance for doubtful accounts 124 1,217
Net operating loss carryforward 3,827 7,549
Insurance, claims, and damage reserves 2,294 2,449
Alternative minimum tax credit carryforward 3,559 3,334
- -----------------------------------------------------------------------------------------------------
Total deferred tax assets 10,537 15,030
- -----------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Equipment, principally due to differences in depreciation and lease 40,117 42,092
Other 540 299
- -----------------------------------------------------------------------------------------------------
Total deferred tax liabilities 40,657 42,391
- -----------------------------------------------------------------------------------------------------
Net deferred tax liability $ 30,120 $ 27,361
=====================================================================================================
F-18
TRANSPORT CORPORATION OF AMERICA, INC.
At December 31, 2000, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $9.9 million, which
are available to offset future federal taxable income, if any,
through 2019. The Company also has alternative minimum tax credit
carryforwards of approximately $3.5 million, which are available to
reduce future federal regular income taxes, if any, over an
indefinite period.
The Company has reviewed the need for a valuation allowance relating to
the deferred tax assets and has ascertained that no allowance is
needed.
(10) MAJOR CUSTOMERS
Sales to the Company's five largest customers represented 43%, 45%, and
39% of total revenues for 2000, 1999, and 1998, respectively. One
customer accounted for approximately 13% of operating revenues in
2000, 15% of operating revenues in 1999 and 14 % in 1998.
(11) COMMITMENTS
CAPITAL LEASES
In December 2000, the Company entered into a sale-leaseback agreement.
Under the arrangement, the Company sold 1,300 trailers and leased
them back for periods ranging from 53 to 70 months. The leaseback
was accounted for as a capital lease. No gain or loss was incurred
as a result of the transaction.
The Company also entered into capital leases for revenue equipment in
2000. The lease agreements are for terms of 36 to 60 months and
contain TRAC (terminal rental adjustment clause) provisions, which
require the Company to guarantee a termination value as a percentage
of the original cost of the leased equipment at the lease
termination date.
Following is a summary of revenue equipment under capital leases:
Years ended
December 31,
---------------------------------
2000 1999
- --------------------------------------------------------------------------------
Revenue Equipment $ 32,100,884 $ 0
Less accumulated depreciation (1,071,829) 0
- --------------------------------------------------------------------------------
$ 31,029,055 $ 0
================================================================================
F-19
TRANSPORT CORPORATION OF AMERICA, INC.
OPERATING LEASES
In 1999, the Company entered into a five-year operating lease for a new
headquarters facility. Lease payments, which commenced in August
2000, are contingent on variable LIBOR rates. The weighted average
rates for 2000 were 7.9%. Assuming an average rate of 7.9%, future
rent payments are estimated to be $1.03 million per year. The lease
provides for renewal and purchase options at the expiration of the
lease term. The purchase option is $13 million. At the end of the
lease term, there is a one-year renewal option at the same terms and
conditions as the original lease.
Rental expense under facility operating leases was approximately
$844,000 in 2000, $407,000 in 1999, and $286,000 in 1998.
Rental expense for revenue equipment operating leases was approximately
$198,000 in 2000, $2,522,000 in 1999 and $3,477,000 in 1998.
Future minimum payments by year and in the aggregate, under the
aforementioned capital and operating leases and other
non-cancellable operating leases with initial or remaining terms in
excess of one year as of December 31, 2000, are as follows:
Capital Operating
Year ending December 31, Leases Leases
- ---------------------------------------------------------------------------------------
2001 $ 5,968 $ 1,027
2002 5,976 1,027
2003 7,223 1,027
2004 5,371 342
2005 8,979 0
2006 4,570 0
- ---------------------------------------------------------------------------------------
Total minimum lease payments $ 38,087 $ 3,423
===========
Less amount representing interest with imputed rates
ranging from 6.5% to 7.5% 6,829
- ----------------------------------------------------------------------
Present value of net minimum lease payments 31,258
Less current maturities 3,964
- ----------------------------------------------------------------------
Long term maturities $ 27,294
======================================================================
GUARANTEE OF INDEBTEDNESS
The Company has a program whereby experienced Company drivers can
purchase their own truck. As part of the program, the driver agrees
to make certain commitments to the Company and to purchase a vehicle
meeting certain specifications established by the Company. In
exchange, the Company facilitates the financing of the vehicle and
may guarantee some or all of the loans made to drivers participating
in the program.
F-20
TRANSPORT CORPORATION OF AMERICA, INC.
To accommodate the financing for this program, the Company has entered
into a loan, servicing, and guaranty agreement with two banks. Under
the terms of the agreement, the Company guarantees 100% of
individual driver loans for one bank and 10% of the driver loans
with the other bank. The Company has the right to repossess the
vehicle in the event a driver defaults on the loan. There were 78
loans with outstanding balances totaling $3.0 million at December
31, 2000, and 99 loans with outstanding balances totaling
approximately $4.3 million as of December 31, 1999. No loans were in
default. The Company guaranteed $1.1 and $2.4 million of the
outstanding balances as of December 31, 2000 and 1999, respectively.
(12) ACQUISITION OF NORTH STAR TRANSPORT, INC.
On July 1, 1998, the Company acquired all of the issued and outstanding
capital stock of North Star Transport, Inc. ("North Star"). The
purchase price paid by the Company consisted of 1.2 million shares
of the Company's Common Stock (valued at $16.89 per share) and $15.8
million in cash, for a total purchase price of $36.1 million.
Additionally, beginning with the quarter ended June 30, 1999, the
Company was obligated to pay $0.0756 per share of the Company's
stock still owned by the sellers of North Star for each quarter
through June 30, 2001. The Company made payments totaling $349,272
in 2000 and $272,160 in 1999 related to the contingent
consideration. As a result of the restructuring of the put agreement
as discussed in note 6, there is no further contingent consideration
due to be paid at December 31, 2000.
The acquisition was accounted for using the purchase method of
accounting and, accordingly, the operating results of North Star
have been included in the Company's consolidated financial
statements since the date of acquisition. The total purchase price
for the acquisition has been allocated to tangible and intangible
assets and liabilities based upon management's estimates of their
fair value on the acquisition date. The $23.9 million excess of
purchase price over fair value of net assets acquired has been
recorded as goodwill with amortization on a straight-line basis over
25 years.
The following unaudited pro forma combined historical results are based
on available information and certain assumptions which management
believes are reasonable and appropriate to give effect to the North
Star acquisition as if the transaction occurred at the beginning of
fiscal 1998. No adjustments have been made to the historical results
to reflect anticipated improvements which may be realized in the
future. Accordingly, the pro forma information may not be indicative
of actual results of operations which would have been obtained, or
which may be realized in the future, if the acquisition had occurred
on January 1, 1998.
F-21
TRANSPORT CORPORATION OF AMERICA, INC.
(In thousands, except per share amounts)
1998
- --------------------------------------------------------------------------------
Operating revenues $ 283,275
Net earnings $ 10,934
Net earnings per share:
Basic $ 1.38
Diluted $ 1.34
- --------------------------------------------------------------------------------
(13) ACQUISITION OF ROBERT HANSEN TRUCKING, INC.
On May 1, 1999, the Company issued 350,000 shares (valued at $13.00 per
share) of its common stock as a portion of the purchase price to
acquire Robert Hansen Trucking, Inc. ("RHT"). The Company
subsequently retired 40,000 of these shares as part of the final
purchase price adjustment. The purchase price consisted of $2.7
million in cash and the 310,000 net shares of the Company's common
stock, for a total purchase price of $6.2 million.
The acquisition was accounted for using the purchase method of
accounting and, accordingly, the operating results of RHT have been
included in the Company's consolidated financial statements since
the date of acquisition. The total purchase price for the
acquisition has been allocated to tangible and intangible assets and
liabilities based upon management's estimates of their fair value on
the acquisition date. The $3.9 million excess of purchase price over
fair value of net assets acquired has been recorded as goodwill with
amortization on a straight-line basis over 25 years.
The following unaudited pro forma combined historical results are based
on available information and certain assumptions, which management
believes are reasonable and appropriate to give effect to the RHT
acquisition as if the transaction occurred at the beginning of
fiscal 1999 and 1998. No adjustments have been made to the
historical results to reflect anticipated improvements that may be
realized in the future. Accordingly, the pro forma information may
not be indicative of actual results of operations that would have
been obtained, or that may be realized in the future, if the
acquisition had occurred on January 1, 1998.
(In thousands, except per share amounts)
1999 1998
- --------------------------------------------------------------------------------
Operating revenues $ 295,074 $ 307,208
Net earnings $ 7,965 $ 10,778
Net earnings per share:
Basic $ 0.97 $ 1.31
Diluted $ 0.92 $ 1.27
- --------------------------------------------------------------------------------
F-22
TRANSPORT CORPORATION OF AMERICA, INC.
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 2000, 1999, and 1998:
(In thousands, except per share amounts)
Quarter
----------------------------------------------
2000: First Second Third Fourth
- --------------------------------------------------------------------------------------
Operating revenues $ 72,200 $ 73,431 $ 73,549 $ 71,431
Operating income 3,665 4,211 5,083 3,537
- --------------------------------------------------------------------------------------
Net earnings $ 914 $ 1,263 $ 1,647 $ 849
Net earnings per common share:
Basic $ 0.11 $ 0.15 $ 0.20 $ 0.10
Diluted $ 0.10 $ 0.12 $ 0.17 $ 0.08
======================================================================================
Quarter
----------------------------------------------
1999: First Second Third Fourth*
- --------------------------------------------------------------------------------------
Operating revenues $ 67,145 $ 75,034 $ 70,722 $ 72,684
Operating income 4,979 8,402 6,366 1,324
- --------------------------------------------------------------------------------------
Net earnings (loss) $ 2,079 $ 3,959 $ 2,644 $ (406)
Net earnings (loss) per common share:
Basic $ 0.26 $ 0.49 $ 0.32 $ (0.05)
Diluted $ 0.25 $ 0.46 $ 0.31 $ (0.05)
======================================================================================
Quarter
----------------------------------------------
1998: First Second Third Fourth
- --------------------------------------------------------------------------------------
Operating revenues $ 49,488 $ 53,075 $ 74,087 $ 69,263
Operating income 3,157 4,680 7,885 6,746
- --------------------------------------------------------------------------------------
Net earnings $ 1,300 $ 2,214 $ 3,940 $ 3,202
Net earnings per common share:
Basic $ 0.19 $ 0.33 $ 0.50 $ 0.41
Diluted $ 0.19 $ 0.33 $ 0.48 $ 0.38
======================================================================================
* Includes $2.7 million pre-tax special bad debt provision due to increased
exposure risk in the fourth quarter of 1999.
(15) RELATED PARTY TRANSACTIONS
During fiscal 2000, 1999, and 1998, the Company paid MicroMation, Inc.
$151,710, $469,357, and $193,362, respectively, for information
technology services, primarily for the development of the Company's
web site and document imaging systems. Robert J. Meyers, the
Company's President and Chief Executive Officer, is a founder,
former executive officer, and current stockholder of MicroMation,
Inc.
F-23