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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

|X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

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
of incorporation or organization) 		  (I.R.S. Employer
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

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act): YES |_|    NO |X|

As of May 1, 2003, the Company had outstanding 7,203,043 shares of Common Stock, $.01 par value.

This Form 10-Q consists of 20 pages.



TRANSPORT CORPORATION OF AMERICA, INC.
Quarterly Report on Form 10-Q

Table of Contents


Part I.       FINANCIAL INFORMATION      
   
Item 1.       Financial Statements  
   
                   Consolidated Balance Sheets as of  
                   March 31, 2003 and December 31, 2002   Page 3  
 
                   Consolidated Statements of Operations for the  
                   three months ended March 31, 2003 and 2002   Page 4  
 
                   Consolidated Statements of Cash Flows for the  
                   three months ended March 31, 2003 and 2002   Page 5  
 
                   Notes to Consolidated Financial Statements   Page 6  
 
Item 2.       Management’s Discussion and Analysis of Financial  
                   Condition and Results of Operations   Page 10  
    
Item 3.       Quantitative and Qualitative Disclosure about  
                   Market Risk   Page 14  
    
Item 4.       Controls and Procedures   Page 15  
    
Part II.     OTHER INFORMATION      
    
Item 6.       Exhibits and Reports on Form 8-K   Page 16  


2



Item 1. Financial Statements

Transport Corporation of America, Inc.
Consolidated Balance Sheets
(In thousands)


Assets March 31,
2003 		  December 31,
2002 		 
 
 
 
(unaudited)   *  
Current assets:            
     Cash and cash equivalents     $ 121   $ 124  
     Trade accounts receivable, net       30,253     28,374  
     Other receivables       2,410     1,942  
     Operating supplies – inventory       978     1,076  
     Deferred income tax benefit       4,874     5,245  
     Prepaid expenses       4,759     1,852  
Total current assets       43,395     38,613  
 
Property and equipment:    
     Land, buildings, and improvements       17,670     17,643  
     Revenue equipment       190,637     195,702  
     Other equipment       22,779     22,536  
       Total property and equipment       231,086     235,881  
       Less accumulated depreciation       (97,876 )   (95,422 )
        Property and equipment, net       133,210     140,459  
 
Other assets, net       3,101     2,803  
Total assets     $ 179,706   $ 181,875  
Liabilities and Shareholders’ Equity    
Current liabilities:    
     Current maturities of long-term debt     $ 16,367   $ 15,907  
     Current maturities of capital lease obligations       5,658     5,734  
     Accounts payable       4,845     4,427  
     Checks issued in excess of cash balances       1,773     1,404  
     Due to independent contractors       2,666     1,658  
     Accrued expenses       17,866     17,708  
Total current liabilities       49,175     46,838  
 
Long-term debt, less current maturities       28,468     30,575  
Capital lease obligations, less current maturities       16,213     17,267  
 
Deferred income taxes       26,237     26,973  
 
Shareholders’ equity:    
     Common stock       72     72  
     Additional paid-in capital       30,239     30,330  
     Retained earnings       29,302     29,820  
Total shareholders’ equity       59,613     60,222  
Total liabilities and shareholders’ equity     $ 179,706   $ 181,875  

* Derived from audited financial statements

  See accompanying notes to consolidated financial statements

3



Transport Corporation of America, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)


Three months ended
March 31,
 
2003
  2002
 
Operating revenues     $ 67,101   $ 66,048  
Operating expenses:    
     Salaries, wages, and benefits       18,665     20,497  
     Fuel, maintenance, and other expenses       10,883     9,331  
     Purchased transportation       23,767     20,567  
     Revenue equipment leases       260     63  
     Depreciation and amortization       6,338     7,177  
     Insurance, claims and damage       2,919     3,327  
     Taxes and licenses       1,204     1,381  
     Communications       537     695  
     Other general and administrative expenses       2,480     1,984  
     Impairment of revenue equipment charge (benefit)       (278 )   4,741  
     Loss on sale of property and equipment       7     1  
Total operating expenses       66,782     69,764  
 
Operating income (loss)       319     (3,716 )
 
Interest expense       1,156     1,495  
Interest income       (81 )   (4 )
Interest expense, net       1,075     1,491  
Loss before income taxes and cumulative    
     effect of change in accounting principle       (756 )   (5,207 )
 
Income tax benefit       (302 )   (2,384 )
Loss before cumulative effect    
     of change in accounting principle       (454 )   (2,823 )
 
Cumulative effect of change in    
     accounting principle, net of tax effect       (64 )   (16,694 )
Net loss     $ (518 ) $ (19,517 )
Net loss per share - basic:    
     Before cumulative effect of change    
        in accounting principle     $ (0.06 ) $ (0.39 )
     Cumulative effect of change in    
        accounting principle, net of tax effect       (0.01 )   (2.31 )
     Net loss per share     $ (0.07 ) $ (2.70 )
Net loss per share – diluted    
     Before cumulative effect of change    
        in accounting principle     $ (0.06 ) $ (0.39 )
     Cumulative effect of change in    
        accounting principle, net of tax effect       (0.01 )   (2.31 )
     Net loss per share     $ (0.07 ) $ (2.70 )
Average common shares outstanding:    
     Basic       7,217,394     7,227,320  
     Diluted       7,217,394     7,227,320  

See accompanying notes to consolidated financial statements


4



Transport Corporation of America, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


Three months ended
March 31,
 
2003
  2002
 
Operating activities:            
    Net loss     $ (518 ) $ (19,517 )
    Adjustments to reconcile net loss to net cash    
       provided by operating activities:    
          Depreciation and amortization       6,338     7,177  
          Cumulative effect of change in accounting    
             principle, net of tax effect       64     16,694  
          Impairment of revenue equipment charge (benefit)       (278 )   4,741  
          Loss on sale of property and equipment       7     1  
          Deferred income taxes       (365 )   (1,866 )
          Changes in operating assets and liabilities:    
             Trade receivables       (1,879 )   (2,483 )
             Lease & other receivables       1,086     (2,289 )
             Operating supplies       98     (2 )
             Prepaid expenses       (2,801 )   (2,619 )
             Other assets       (298 )   (236 )
             Accounts payable       418     951  
             Due to independent contractors       1,008     786  
             Accrued expenses       (12 )   459  
Net cash provided by operating activities       2,868     1,797  
Investing activities:    
    Purchases of revenue equipment       (401 )   (1,950 )
    Purchases of property and other equipment       (288 )   (456 )
    Proceeds from sales of equipment       317     4,329  
Net cash (used) provided by investing activities       (372 )   1,923  
Financing activities:    
    Proceeds from issuance of common stock,    
       and exercise of options and warrants       18     254  
    Payments for repurchase and retirement of common stock       (109 )   —  
    Proceeds from issuance of long-term debt       655     274  
    Principal payments on long-term debt       (4,182 )   (4,277 )
    Proceeds from issuance of notes payable to bank       20,950     9,100  
    Principal payments on notes payable to bank       (20,200 )   (12,500 )
    Change in net checks issued in excess of cash balances       369     3,749  
Net cash used by financing activities       (2,499 )   (3,400 )
Net increase in cash       (3 )   320  
Cash and cash equivalents, beginning of period       124     1,107  
Cash and cash equivalents, end of period     $ 121   $ 1,427  
Supplemental disclosure of cash flow information:    
    Cash paid during the period for:    
       Interest     $ 1,186   $ 1,420  
       Income taxes       112     34  
Supplemental Schedule of noncash investing and financing activities:    
    Lease receivables from disposition of revenue equipment     $ 1,554   $ 289  

See accompanying notes to consolidated financial statements


5


TRANSPORT CORPORATION OF AMERICA, INC.

Notes to Consolidated Financial Statements
(Unaudited)


1. Basis of Presentation

          The unaudited interim consolidated financial statements contained herein reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the interim periods. They have been prepared in accordance with the instructions to Form 10-Q, Article 10 of Regulation S-X and, accordingly, do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

          These financial statements should be read in conjunction with the financial statements and footnotes included in the Company’s most recent annual financial statements on Form 10-K for the year ended December 31, 2002. The critical accounting policies described in that report are used in preparing quarterly reports.

          The Company’s business is seasonal. Operating results for the three-month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

  Impairment of Long-Lived Assets

          During March 2002 the Company initiated a plan to accelerate the disposal of approximately 260 tractors and 500 trailers. As a result of the change in utilization period and related estimated cash flows, the Company recorded a pre-tax $4.7 million impairment charge under Statement of Financial Accounting Standards (“SFAS”) No. 144 related to this disposition of revenue equipment. The estimated fair value of the revenue equipment was based on a combination of market quotes and independent appraisals of the equipment. The tractors identified for accelerated disposition represent over-the-road units not covered by manufacturer guaranteed residual value programs. The trailers to be disposed have been identified as being in excess of the Company’s needs. This initial impairment program was substantially completed during the first quarter 2003. An analysis of the initial impairment reserve demonstrated that the ultimate impairment charge on this disposal program was less than originally estimated and the reserve was reduced by $1.0 million in the fourth quarter of 2002 and a further $278,000 in the first quarter of 2003.


6



          The following is an analysis of the Company’s asset impairment reserve accounts:

                (Dollars in thousands) Revenue
equipment
impairment
 
           
                Balance as of December 31, 2001     $ —  
                Initial Charge       4,741  
                Utilization       (2,782 )
                Change in estimate       (1,000 )
                Balance as of December 31, 2002     $ 959  
                Utilization       (510 )
                Change in estimate       (278 )
                Balance as of March 31, 2003     $ 171  

                  During the fourth quarter of 2002, the Company established a new disposal program of an additional 400 trailers that will be disposed of in 2003. The pre-tax impairment charge on this new disposal program was approximately $1.0 million.

                (Dollars in thousands) Revenue
equipment
impairment
 
           
                Balance as of December 31, 2001     $ —  
                Initial Charge       1,000  
                Utilization       —  
                Balance as of December 31, 2002     $ 1,000  
                Utilization       (36 )
                Balance as of March 31, 2003     $ 964  

          The Company expects the majority of the remaining reserves to be utilized during 2003.


7



  Stock-Based Employee Compensation

          The company has adopted the disclosure provisions of SFAS No. 148 Accounting for Stock –Based Compensation – Transition and Disclosure. SFAS No. 148 amend the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, for stock-based employee compensation, effective as of the beginning of the fiscal year. As of March 31, 2003, the Company has two stock-based employee compensation plans. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of Statement No. 123.

Three Months Ended
March 31
 
2003
  2002
 
        Net loss, as reported     ($518 )   ($19,517 )
          
        Deduct: Total stock-based employee  
        compensation expense determined  
        under fair value based method for all  
        awards, net of related tax effects     ($84 )   ($74 )
          
        Pro forma net loss     ($602 )   ($19,591 )
        Loss per share:  
        Basic—as reported     ($0.07 )   ($2.70 )
        Basic—pro forma     ($0.08 )   ($2.71 )
 
        Diluted—as reported     ($0.07 )   ($2.70 )
        Diluted—pro forma     ($0.08 )   ($2.71 )

2. Effect of New Accounting Standards

          In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” effective for fiscal years beginning after June 15, 2002. The rule requires businesses to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. It has been determined that SFAS 143 applies to environmental disposal fees related to tractor and trailer tires. As a result of its adoption of SFAS No. 143 in the first quarter of 2003, the Company established a liability of $212,000 for the fair value of tire disposal fees. In addition, the Company recorded a prepaid asset related to tire disposal fees of $106,000 and a charge of $64,000, net of a tax benefit of $42,000, representing the cumulative effect of change in accounting principle.


8



          In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities”. This interpretation is effective in the first fiscal year or interim period beginning after June 15, 2003. Accordingly, the Company will apply the provisions of Interpretation No. 46 for initial recognition and measurement provisions to variable interest entities for the quarter ending September 30, 2003, as required. In 1999, the Company entered into a lease arrangement for its corporate office facility, which has been financed by a special purpose entity (“SPE”) sponsored by a bank. The SPE is not consolidated in the Company’s financial statements and the Company has accounted for this arrangement as an operating lease in accordance with SFAS No. 13, “Accounting for Leases.” The Company continues to evaluate the treatment of this leasing arrangement under Interpretation No. 46, but currently believes the pronouncement may require the Company to record the asset and related liability in its financial statements. At March 31, 2003, the amount of the carrying value of the asset is approximately $11.4 million and the related debt is $13.0 million. The Company anticipates electing the prospective application provisions of Interpretation No. 46 which require a cumulative-effect adjustment as of the date on which it is first applied.


9



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


  Three Months Ended March 31, 2003 and 2002

          Operating revenues, including fuel surcharges, were $67.1 million for the quarter ended March 31, 2003, compared to $66.0 million for the same quarter of 2002. Excluding fuel surcharges, revenues decreased 3.2% when compared to the same period of 2002. Fuel surcharges were $3.5 million and $0.3 million, for the first quarters of 2003 and 2002, respectively, reflecting the effect of higher fuel costs in 2003. Primarily as a result of lower deadhead miles, partially offset by competitive pricing pressure in the market, revenues per mile, excluding fuel surcharges, were $1.25 per mile for the first quarter of 2003, compared to $1.24 for the same quarter of 2002. Excluding the effect of lower fuel surcharge revenues, equipment utilization, as measured by average revenues per tractor per week, was $2,688 during the first quarter of 2003, compared to $2,594 for the same quarter of 2002. The improved equipment utilization in 2003 reflects reduced deadhead miles and increased miles per tractor when compared to the same period of 2002.

          At March 31, 2003 and 2002, respectively, the Company’s fleet included 1,004 and 1,245 Company-owned tractors, and 865 and 756 tractors owned by independent contractors.

          Salaries, wages, and benefits, as a percentage of operating revenues, were 27.8% for the first quarter of 2003, compared to 31.0% for the same quarter of 2002. The percentage decrease is a reflection of a lower proportion of miles driven by employee drivers and reduced shop wages, partially offset by higher workers compensation expense, when compared to the same period of 2002. Efficiency, as measured by average annualized revenues per non-driver employee, was $632,000 for the first quarter of 2003, compared to $561,000 for the same quarter of 2002. The increase reflects reductions of non-driver personnel primarily as a result of closing two service centers in February 2003.

          Fuel, maintenance, and other expenses, as a percentage of operating revenues, were 16.2%, compared to 14.1% for the same quarter of 2002. The increase in 2003 primarily reflects higher fuel costs and increased costs of repairs, partially offset by a lower proportion of miles driven by employee drivers, when compared to the same period of 2002.

          Purchased transportation, as a percentage of operating revenues, was 35.4% for the first quarter of 2003, compared to 31.1% for the same quarter of 2002. The increase in 2003 reflects a higher proportion of miles driven by independent contractors and a higher pass-through of fuel surcharge revenues to independent contractors as a reflection of higher fuel costs.


10



          Revenue equipment leases, as a percentage of operating revenues, was 0.4% for the first quarter of 2003, compared to 0.1% for the same quarter of 2002. The increase reflects the Company’s use of operating leases for certain tractors acquired in 2002.

          Depreciation and amortization, as a percentage of operating revenues, was 9.4% of operating revenues for the first quarter of 2003, compared to 10.9% for the same quarter of 2002. The decrease is primarily a result of fewer Company- owned tractors and trailers during the first quarter 2003 when compared to 2002.

          Insurance, claims and damage expense, as a percentage of operating revenues, was 4.4% for the first quarter of 2003, compared to 5.0% for the same quarter of 2002. The decrease is primarily a result of lower accident and claims expense partially offset by higher liability insurance premiums in 2003.

          Taxes and licenses, as a percentage of operating revenues, was 1.8% for the first quarter of 2003, compared to 2.1% for the same quarter of 2002. The decrease is primarily a result of the lower proportion of miles driven by company drivers in 2003 when compared to the same period of 2002.

          Communications expense, as a percentage of operating revenues, was 0.8% for 2003, compared to 1.0% for 2002.

          Other general and administrative expense, as a percentage of operating revenues, was 3.7% for the first quarter of 2003, compared to 3.0% for the same quarter of 2002. The increase is primarily a result of higher facility maintenance and heating costs in 2003.

          Impairment of revenue equipment was a credit to income of $278,000 or 0.4% of operating revenue in the first quarter of 2003, compared to an expense of $4.7 million, or 7.2% of operating revenues, in the first quarter of 2002. During March 2002 the Company initiated a plan to accelerate the disposal of approximately 260 tractors and 500 trailers. As a result of the change in utilization period and related estimated cash flows, the Company recorded a pre-tax $4.7 million impairment charge under Statement of Financial Accounting Standards (“SFAS”) No. 144 related to this disposition of revenue equipment. The estimated fair value of the revenue equipment was based on a combination of market quotes and independent appraisals of the equipment. The tractors identified for accelerated disposition represent over-the-road units not covered by manufacturer guaranteed residual value programs. The trailers to be disposed have been identified as being in excess of the Company’s needs. This initial impairment program was substantially completed during the first quarter 2003. An analysis of this initial impairment reserve demonstrated that the ultimate impairment on this disposal programs was less than originally estimated and the reserve was reduced by $1.0 million in the fourth quarter of 2002 and a further $278,000 in the first quarter of 2003.


11



          Loss on the disposition of equipment was $7,000 for the first quarter of 2003, compared to a loss of $1,000 for the same quarter of 2002, reflecting minor equipment dispositions in 2003.

          Net interest expense, as a percentage of operating revenues, was 1.6% for the first quarter of 2003, compared to 2.3% for the same quarter of 2002. The decrease reflects lower debt balances in 2003 and interest income from the lease-to-own program.

          The effective tax rate as a percentage of operating revenues was 40.0% for the first quarter of 2003, compared to 45.8% for the same quarter of 2002. The lower effective rate in 2003, compared to 2002, primarily reflects the effect of non-deductible items for tax purposes in relation to a lower pre-tax loss.

          As a result of the items discussed above, the Company’s operating ratio (operating expenses as a percentage of operating revenues) was 99.5% for the first quarter of 2003, compared to 105.6% for the same quarter of 2002. Loss before the effect of a change of accounting principle was $454,000 for the first quarter of 2003, compared to a net loss of $2.8 million, or 4.3% of operating revenues, for the first quarter of 2002.

          In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” effective for fiscal years beginning after June 15, 2002. The rule requires businesses to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. It has been determined that SFAS 143 applies to environmental disposal fees related to tractor and trailer tires. As a result of its adoption of SFAS No. 143 in the first quarter of 2003, the Company established a liability of $212,000 for the fair value of tire disposal fees. In addition, the Company recorded a prepaid asset related to tire disposal fees of $106,000 and a charge of $64,000, net of a tax benefit of $42,000, representing the cumulative effect of change in accounting principle.

          In 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. As a result of its adoption of SFAS No. 142 on January 1, 2002, the Company recorded a $16.7 million impairment charge for goodwill, net of tax benefit of $7.7 million, which has been reported as a cumulative effect of change in accounting principle.


12



          Net loss in the first quarter of 2003 was $454,000, compared to a net loss, including the cumulative effect of a change in accounting principle, of $19.5 million for the same quarter of 2002.

  Liquidity and Capital Resources

          Net cash provided by operating activities for the first quarter of 2003 was $2.9 million. The net change of operating assets and liabilities consumed $2.4 million, including $1.9 million for increased trade receivables, $2.8 million increase for seasonal payments of annual operating license fees and prepaid insurance, $1.0 million increase in amounts due to owner operators, $0.8 million net impact of lease financing arrangements, and $0.4 million increase in trade accounts payable.

          Investing activities for the first quarter of 2003 used net cash of $0.4 million. Expenditures for revenue and other equipment exceeded proceeds from sales of equipment during the first quarter of 2003.

          Financing activities for the first quarter of 2003 consumed $2.5 million, including net borrowings against the Company’s credit facility of $750,000 and scheduled principal payments on long-term debt of $4.2 million. At March 31, 2003, the Company had outstanding non-cancelable commitments of approximately $18.9 million for the purchase of revenue equipment, which will be partially offset by estimated proceeds of $7.0 million from used equipment trade-ins.

          Working capital was negative $5.7 million at March 31, 2003, compared to negative $8.2 million at December 31, 2002. The Company relies primarily on its operating cash flows and available borrowings under its credit facility to satisfy its short-term capital and debt-service requirements. At March 31, 2003, the Company had additional amounts available under its credit facility of $23.8 million.

          The Company has a credit agreement for a secured credit facility with maximum combined borrowings and letters of credit of $40 million. Amounts actually available under the credit facility are limited by the Company’s accounts receivable and certain unencumbered revenue equipment. The credit facility is used to meet working capital needs, purchase revenue equipment and other assets, and to satisfy letter of credit requirements associated with the Company’s self-insured retention arrangements. At March 31, 2003, there were outstanding borrowings and letters of credit of $3.3 million and $3.5 million, respectively, and the Company was in compliance with the financial covenants under the credit facility. The Company expects to continue to fund its liquidity needs and anticipated capital expenditures with cash flows from operations, the credit facility, and other financing arrangements related to revenue equipment purchases.


13



  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) the impact of environmental standards and regulations on new revenue equipments, (5) changes in governmental regulations applicable to the Company’s operations, (6) adverse weather conditions, (7) accidents, (8) the market for used revenue equipment, (9) changes in interest rates, (10) cost of liability insurance coverage, and (11) 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk


          The Company is exposed to certain market risks with its $40 million credit agreement, of which $6.8 million was outstanding at March 31, 2003. The agreement bears interest at a variable rate, which was 5.25% at March 31, 2003. Consequently, the Company is exposed to the risk of greater borrowing costs if interest rates increase. Although the Company does not currently 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.


14



Item 4. Controls and Procedures


          The Company’s management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”) within 90 days prior to the filing date of this annual report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

          There have been no significant changes in internal controls, or in other factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

Item 5. Other Events


          Subsequent to reporting first quarter 2003 results in a press release dated April 17, 2003, it was determined that SFAS 143 applies to environmental disposal fees related to tractor and trailer tires. Accordingly, the Company adopted SFAS No. 143 in the first quarter of 2003, and established a liability of $212,000 for the fair value of tire disposal fees. In addition, the Company recorded a prepaid asset related to tire disposal fees of $106,000 and a charge of $64,000, net of a tax benefit of $42,000, representing the cumulative effect of change in accounting principle.


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PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K:


(a) Exhibits:
  Exhibit
Number 		   Description
 

11.1 Statement re: Computation of Net Earnings per Share

99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

  No reports on Form 8-K were filed during the three months ended March 31, 2002.


SIGNATURES

Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





Date: May 12, 2003
          —————— 		TRANSPORT CORPORATION OF AMERICA, INC.


/s/ Michael J. Paxton
—————————————————————
Michael J. Paxton
President and Chief Executive Officer
(Principal Executive Officer)
     
/s/ Keith R. Klein
—————————————————————
Keith R. Klein
Chief Financial Officer and Chief Information Officer
(Principal Financial and Accounting Officer)


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CERTIFICATIONS

I, Michael J. Paxton, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Transport Corporation of America, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


  a)      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

  b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

  c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


  a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

  b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.      The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003



/s/ Michael J. Paxton
————————————————————
Michael J. Paxton
Chairman, President and Chief Executive Officer


18



CERTIFICATIONS

I, Keith R. Klein, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Transport Corporation of America, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)     evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003



/s/ Keith R. Klein
————————————————————
Keith R. Klein
Chief Financial Officer and Chief Information Officer


19